2020 NLSC 149, 2020 NLSC 149

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION In Bankruptcy and Insolvency Citation : Great North Data Ltd. (Re) , 2020 NLSC 149 Date : December 08, 2020 Docket : 20190123048 In The Matter of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 , as amended (the “ BIA ”); And In The Matter of the Bankruptcy of Great North Data Ltd. Before: Justice Garrett A. Handrigan Place of Hearing: St. John’s, Newfoundland and Labrador Date(

s) of Hearing: December 1, 2020

Summary: Benson Buffett are legal counsel to PricewaterhouseCoopers, receivers of Great North Data Ltd., appointed under the Bankruptcy and Insolvency Act . Benson Buffett submitted two interim statements of account to PWC for legal services. A taxing master disallowed an administration charge Benson Buffett added as disbursements to both accounts. Benson Buffett appealed the taxations, claiming that the taxing master acted on a wrong principle when he disallowed the charges. The Court dismissed the appeals and made no order as to costs.

Overall, it found that the taxing master acted appropriately, complying with the principles either stated or implied in the governing legislation. Appearances: Sean M. Pittman Appearing on behalf of PricewaterhouseCoopers Inc., Receiver of Great North Data Ltd.

Authorities Cited: CASES CONSIDERED: Hall v. Watton (1975), 48 Nfld. & P.E.I.R. 221, 142 A.P.R. 221 (Nfld. T.D.); Mercer, Orsborn, Benson, Mylesv. Lundrigan (1991), (NL SC), 89 Nfld. & P.E.I.R. 330, 278 A.P.R. 330 (Nfld. S.C. (T.D.)); Cohen v. Kealey &Blaney (1985), 10 O.A.C. 344, 31 A.C.W.S. (2d) 436 (C.A.) STATUTES CONSIDERED: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 RULES CONSIDERED: Bankruptcy and Insolvency General Rules, C.R.C, c. 368 TEXTS CONSIDERED: Mark M.

Orkin, The Law of Costs, 2nd ed. (Aurora, Ont.: Canada Law Book, 1987) (loose-leaf) REASONS FOR JUDGMENT Handrigan, J.: INTRODUCTION [1] PricewaterhouseCoopers Inc., LIT (“PWC”) is the receiver of the bankrupt estate of Great North Data Ltd. (“GND”). BensonBuffett PLC Inc. (“Benson Buffett”) are PWC’s legal counsel on the bankruptcy. Benson Buffett submitted two interim statements ofaccount for its legal services to PWC, the first dated December 31, 2019 and the other dated February 1, 2020. Each account included as“Taxable Disbursements” an “Administration Charge” calculated at 5% of the total legal fees billed.

In support of the “Charges”, BensonBuffett specified that they might be for “Telephone/fax/Photocopy/Delivery/Postage/Printing Charges”, but it did not itemize thosecharges. On the December 31, 2019 statement, the administration charge totaled $625; it was $117.90 on the subsequent statement. [2] Benson Buffett appeared for the taxations before a taxing master on May 11, 2020. The master disallowed the administrationcharges on each account. At Buffett Benson’s request, the master filed on May 29, 2020, written reasons for disallowing the charges.

Hefound that they were “not properly chargeable as a disbursement, as it [the 5% levy] reflects an arbitrary percentage amount of the legalservices rendered, to be added on top of those services”. Benson Buffett appealed the taxations. I heard the appeal on December 1, 2020and reserved my decision until now. The Issue [3] Did the taxing master act on a wrong principle when he disallowed the administration charges? The Law Statute - Rules [4]

Section 18 of the Bankruptcy and Insolvency General Rules, C.R.C, c. 368, says that “[a]ll bills of costs for legal services –other than those that do not exceed $2,500 in aggregate, excluding applicable federal and provincial taxes – must be taxed by the taxingofficer”.

Section 25(1) of the same Rules says that “[a] decision of a taxing officer on the taxation of a bill of costs may be appealed tothe court if a notice stating the grounds of appeal is given to the opposite party and the Division Office within 10 days after the day ofthe decision”; and section 25(2) provides that “[t]he judge who hears the appeal may retax the bill of costs as if it were being taxed forthe first time”. Case Law [5] In Hall v. Watton (1975), 48 Nfld. & P.E.I.R. 221, 142 A.P.R. 221 (Nfld.

T.D.), Morgan J. of this Court, at paragraph 8, statedthe “established principle” for appeals from taxations of accounts : … [T]he court will not, as a general rule, interfere with a decision made by the taxing master in the exercise of his discretionary powerson taxation, unless it can be shown that he acted upon a wrong principle. The situation may arise, however, where the amount allowed isso excessive, that, from the very fact of the amount, the court will conclude the master must have acted on a wrong principle.

The sameapplies where the amount awarded is inordinately low. [6] In Mercer, Orsborn, Benson, Myles v. Lundrigan (1991), (NL SC), 89 Nfld. & P.E.I.R. 330, 278 A.P.R. 330(Nfld. S.C. (T.D.)), at paragraph 7, Cameron J., also then of this Court, listed the factors to consider when deciding whether a taxingmaster acted on a wrong principle: (

a) the time expended by the solicitor; (

b) the legal complexity of the matters to be dealt with;

(

c) the degree of responsibility assumed by the solicitor; (

d) the monetary value of the matters in issue; (

e) the importance of the matter to the client; (

f) the degree of skill and competence demonstrated by the solicitor; (

g) the results achieved; (

h) the ability of the client to pay; and (

i) the client’s expectation as to the amount of the fee. [ 7 ] The learned justice relied on Cohen v. Kealey & Blaney (1985), 10 O.A.C. 344, 31 A.C.W.S. (2d) 436 (C.A.) , for her statement of the law. Counsel for Benson Buffett submits that only the last factor is relevant on this appeal. [ 8 ] This is the law I will apply to the issue I stated above. I turn now to analyze that issue, starting with the background to it. Analysis Background [ 9 ] When PWC retained Benson Buffett as its counsel on GND’s bankruptcy, it provided PWC with its “Schedule Of Hourly Rates & Engagement Terms”. The

schedule governed the solicitor-client relationship during the time relevant to this appeal. The

schedule provided this statement, amongst other terms: Administration Charge In most matters, excluding real estate transactions, and unless otherwise specifically agreed to with a client, we will charge an additional administration charge equal to five percent (5%) of our invoiced fees to cover internal expenses associated with courier services, long distance telephone and facsimile charges, photocopying, duplication, printing, and binding of materials for filing or presentation to you. [ 10 ] As I noted earlier, Benson Buffett included the charge on both interim statements of account that it submitted to PWC and then to the taxing master, who disallowed them. [ 11 ] In each instance, PWC certified the statements of account with the following endorsement, before PWC submitted them to the taxing master: That we have examined the bill, the services have been duly authorized and rendered and in our opinion the charges of [$15,282.06 or $2,808.90] are fair and reasonable.

PricewaterhouseCoopers Inc., Trustee. [ 12 ] Each certificate is signed by an authorized representative of PWC. Discussion [ 13 ] Benson Buffett challenges the taxing master’s decision to disallow the administration charges for several reasons. Principally, it says that the taxing master proceeded on a wrong principle, in that he ignored the “contractual relationship” between itself and the receiver. In effect, Benson Buffett says that it contracted to provide legal services to PWC; that it set out the terms of its contract with PWC in its “Schedule Of Hourly Rates & Engagement Terms; that the

schedule stated its practice of applying administration charges; and that PWC agreed to pay the charges by certifying each of its statements of account. [ 14 ] Benson Buffett says that the taxing master was wrong in principle to ignore their contractual relationship because: • PWC accepted their terms, so it follows implicitly that the fees and disbursements they charge PWC are fair and reasonable; • they and PWC are “sophisticated entities whose freedom to agree to reasonable contractual terms must be recognized and protected” (Applicant’s Memorandum of Fact and Law, paragraph 22); and • while each of the “…listed services can be tracked and attributed to a file from the outset of the retainer and are properly disbursements” (Memorandum, paragraph 19), that is not what the parties agreed to. [ 15 ] Overall, as is apparent, Benson Buffett relies on the agreement it says it had with PWC.

Then it harkens to the last factor Cameron J. stated in Mercer and says that it simply charged its client what PWC expected to pay. Benson Buffett also relies on the result the client achieved in Mercer to support its argument that the taxing master should accept the “contract” it had with PWC. [ 16 ] Patricia Lundrigan hired Mercer, Q.C. of the law firm Mercer, Orsborn, Benson, Myles to assist her to distrain for rent. Mercer, Q.C. estimated that her fee would be $75 when he met with her. Ultimately, the firm billed Mrs. Lundrigan for eight times the amount

that Mercer, Q.C. had estimated. Mrs. Lundrigan objected to the bill and asked for it to be taxed. The taxing master found that Mercer, Q.C. should have informed Mrs. Lundrigan his charge had increased significantly, and he taxed the account at $75, the original estimate Mercer, Q.C. provided his client. Mercer, Orsborn, Benson, Myles appealed the taxation. [ 17 ] Cameron J. in Mercer stated that “[t]he real issue in this case is what part should the clients’ [sic] expectations play in determination of costs” (paragraph 17). She dismissed the appeal, offering this rationale (paragraph 18): 18 Mrs.

Lundrigan agreed to pay $75, and she acknowledged she was told her fee might go “a little” beyond that but the fee she was charged was over 8 times larger than the estimated $75. Even with an estimate of fees the solicitor is obliged to advise the client without delay of any developments that are likely to increase the fee beyond the estimates ( Cohen v. Kealey & Blaney , supra). By Mrs. Lundrigan’s evidence that was not done in this case. I accept Mrs. Lundrigan’s position that she was entitled to be told about the fee going beyond the $75 so she might determine if she wished to spend that amount of money.

In the circumstances the appellant’s fee is limited to $75. [ 18 ] In Cohen , to which Cameron J. referred, the Ontario Court of Appeal reduced the solicitor’s bill of costs by $15,000 “to reflect properly the agreement to which the solicitor committed himself at the time he was retained” (paragraph 15). [ 19 ] In both Mercer and Cohen , the “contract” on which the courts relied either to confirm the taxing master’s ruling or to reduce the legal fees, existed between the law firms and individual clients.

While PWC is a corporate entity and well able to contract for its own part, it stands in a different relationship to Benson Buffett here than did Mrs. Lundrigan to Mercer, Q.C. or Ms. Cohen to her solicitor. Let me explain. [ 20 ] This Court appointed PWC as receiver of the bankrupt estate of Great North Data Ltd. on February 25, 2020.

In the Order appointing PWC, this appears as paragraph 22: Prior to passing of its accounts, the Receiver shall be at liberty from time to time to apply reasonable amounts, out of the monies in its hands, against its fees, expenses and disbursements, including legal fees and disbursements, incurred at the normal rates and charges of the Receiver or its counsel and such amounts shall constitute advances against its remuneration and disbursements, incurred at the normal rates and charges of the Receiver or its counsel, and such amounts shall constitute against its remuneration and disbursements when and as approved by this Court. [ 21 ] Thus, it is clear then that PWC had the authority to engage Benson Buffett, that PWC could incur fees, expenses and disbursements on its account with Benson Buffett, and then pay those charges, both on an interim basis, as well as ultimately.

But it is equally clear from

section 18 of the Rules that it is the taxing master, an officer of the Court, and not PWC who will determine the propriety of those charges. [ 22 ] PWC may certify Benson Buffett’s accounts as it did and it may also contract with Benson Buffett to provide those services according to the law firm’s “Schedule Of Hourly Rates & Engagement Terms”. But

section 18 of the Rules , which provides that “[a]ll bills of costs for legal services – other than those that do not exceed $2,500 in aggregate, excluding applicable federal and provincial taxes – must be taxed by the taxing officer”, ensures that what Benson Buffett and PWC agree upon does not bind a taxing master to its acceptance. [ 23 ] Other sections of the Rules support my belief. For example,

section 20 says that the bill of costs may not be taxed “… unless the trustee is represented at the taxation or the bill of costs has attached to it a declaration, signed by the trustee, stating that … (

b) the services have been duly authorized and duly rendered; and (

c) the charges are reasonable in the trustee’s opinion”; both of which PWC did in this matter. [ 24 ]

Section 21 requires the taxing master to “… determine whether (

a) the legal services have been rendered; (

b) the charges are reasonable and, if applicable, are in accordance with the tariff; (

c) the legal services rendered are accounted for and are not services that should have been rendered by the trustee; and (

d) the legal services have been authorized and approved with the Act, if the Act so requires”. [ 25 ] Aside from taxing the bills of costs for the legal services that law firms provide to it, section 58(1) of the Rules compels PWC to submit its own accounts for the services it provides to the bankrupt estate to the Court for taxation; and notably, by section 58(3), “[a] trustee’s disbursements do not include the indirect costs of the trustee’s facilities or premises”.

The obvious extrapolation from the preceding is that the taxing master who reviewed Benson Buffett’s bill for the legal services it provided to PWC was not bound by any apparent agreement between the two that Benson Buffett could add an administration charge of 5% of its legal fees to the bill. [ 26 ] It may be self-evident but there is a simple reason for the close scrutiny that all accounts which are rendered to receivers appointed under the BIA receive: Unlike Mrs. Lundrigan in Mercer and Ms.

Cohen in Cohen , receivers do not own the property and goods they receive and the funds they draw on to pay for legal services. That property belongs to the bankrupt estates of which they are receivers, and they are simply custodians of that property and are obliged by law to manage and dispose of it in the best interests of those entitled to the estate. [ 27 ] It is evident to me that the taxing master who dealt with Benson Buffett’s accounts shared those views and that he acted on them. For example, in paragraph 6 of his written reasons, the taxing master stated: 6.

The request [from Benson Buffett] for written reasons implies that, if a charge such as the Administration Fee in question is agreed to by the Trustee, and if the Trustee approves the account, then I, as Taxing Officer, have no discretion to disallow such a charge. With respect, I do not concur with this position”. [ 28 ] Elsewhere, in paragraph 14, the taxing master, stated: 14. In my opinion, if I am to determine that “charges are reasonable”, I am required to actually consider the charges sought to be paid,

and their relation to the matter for which the charges are being billed. I am not permitted, nor am I prepared, to simply act as a “rubber stamp” for an account that has been previously approved by a Trustee. To do so would, in my mind, make a Taxation under the Act meaningless.

I was provided with no authority or legislated provision indicating anything to the contrary. [ 29 ] Ultimately, the taxing master disallowed the administration charge because it “was not properly chargeable as a disbursement, as it reflects an arbitrary percentage amount of the legal services rendered, to be added on top of the charges for those services”.

He noted that “several of those items [such as telephone, fax, photocopy, delivery, postage, and printing charges] more properly represent fixed charges attributable to the running of a law practice and are not disbursements incurred with respect to a specific file”.

Finally, he noted that he had actually approved “some disbursements charged [by Benson Buffett on their accounts] … based on invoices or other documentation supporting those disbursements” (Taxing Master’s Written Reasons, paragraph 12). [ 30 ] Some of the costs Benson Buffett says are covered by its administration charge may actually be allowable disbursements, depending, of course, on how they were incurred, how much they are, and if it can be said they contributed to the “furtherance of an individual file” (Mark M.

Orkin, The Law of Costs , 2nd ed. (Aurora, Ont.: Canada Law Book, 1987) (loose-leaf), page 2-284, paragraph 219). Charges under the rubric of “overhead” are especially vexing to taxing masters, particularly where, as here, they are unspecified. [ 31 ] I recognize the challenges that law firms may encounter in tracking, billing, and recovering individual expenditures like some that Benson Buffett may have incurred on behalf of PWC.

In its written brief, it noted that providing: “an itemized disbursement list would necessitate an investment and upgrade in [our] information technology system or additional professional time spent tracking the various external expenses listed above. It could be argued that in and of itself is not an efficient use of client resources” (Applicant’s Memorandum of Fact and Law, paragraph 24). However, it is clear that all accounts rendered under the BIA and Rules must be taxed and are liable to the close scrutiny that the taxing master gave to Benson Buffett’s accounts in this instance.

That is especially so when unspecified disbursements are billed. [ 32 ] Overall, I find that the taxing master did not act on a wrong principle when he disallowed Benson Buffett’s claim for administration charges on the two accounts that it submitted to him for review. In fact, he acted according to the principles stated or implied in the governing legislation and according to his mandate. I dismiss the appeal. Costs [ 33 ] No one appeared on this matter except counsel for Benson Buffett. I follow the usual rule that costs follow the cause and make no order as to costs.

Summary and Disposition [ 34 ] Benson Buffett PLC Inc. are legal counsel to PricewaterhouseCoopers Inc., receivers of Great North Data Ltd., appointed under the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 . Benson Buffett submitted two interim statements of account to PWC for legal services. A taxing master disallowed an administration charge Benson Buffett added as disbursements to both accounts. Benson Buffett appealed the taxations, claiming that the taxing master acted on a wrong principle when he disallowed the charges. [ 35 ] The Court dismissed the appeals and made no order as to costs.

Overall, it found that the taxing master acted appropriately, complying with the principles either stated or implied in the governing legislation. Order [ 36 ] In the result, I order that:

(1) The appeal is dismissed; and

(2) No costs may be recovered. _____________________________ Garrett A. Handrigan Justice