ONTARIO
SUPERIOR COURT OF JUSTICE
CITATIO N : Children’s Lawyer v. O’Donovan et al, 2012 ONSC 7552
RE: The Children’s Lawyer, Applicant
- and -
Sheila Anne O’Donovan, Steven O’Donovan aka Stephen O’Donovan, Christopher O’Donovan, Simon Paul O’Donovan, Brian O’Donovan, Patrick O’Donovan, Tyler O’Donovan, Gerry O’Donovan, Fuyuko O’Donovan, Loretta O’Donovan aka Lori O’Donovan, Edward Kalkstein, Zeifman & Company LLP, Cosimo Fiorenza, Brans Lehun Baldwin LLP, Bennett Jones LLP, The Denova Foundation, Lisaard House, MVO Investments Ltd., 1213756 Ontario Limited, 1228101 Ontario Limited, 1253939 Ontario Limited, 1327478 Ontario Limited , 1327479 Ontario Limited , 1341993 Ontario Limited, Com Dev Atlantic Ltd. (formerly 3293076 Canada Limited ) , Com Dev Satellite Communications Inc. , Com Dev International Ltd., 1001338 Ontario Limited, 1407199 Ontario Limited, 1403627 Ontario Limited, 1431298 Ontario Limited , 1431248 Ontario Limited, 1181526 Ontario Limited, 3373312 Canada Inc., Technology Horizons Ltd., Paul Ross, KPMG LLP, BDO Dunwoody LLP, Rae & Lipskie Investment Counsel Inc., Caroline Peplar aka Caroline O’Donovan, Rudolf Rivero and Ron Donovan aka Aaron Donovan , Respondents
BEFORE: The Honourable Mr. Justice D.J. Gordon
COUNSEL:
T. Walsh, for Wayne Rudson, the Court Appointed Expert
M. Rodenburg, for The Children’s Lawyer
R. S. Harrison & V. Toppings, for Steven O’Donovan & Christopher O’Donovan
P. Amey for Sheila O’Donovan
S. Dawe for Edward Kalkstein and Zeifman & Company
The Honourable Mr. Justice D. J. Gordon
ENDORSEMENT
1The court appointed forensic accountant, Wayne Rudson, returns to court seeking a further order or payment of his accounts and for other matters.
BACKGROUND
2A number of actions were commenced following the death of Michael Valentine O’Donovan on February 5, 2005. Several family trusts, previously established by Mr. O’Donovan and his spouse, Sheila O’Donovan, are the primary subject-matter of ongoing disputes. Accounting issues were identified early on in the litigation process.
3On March 28, 2008, I granted an order, on consent or unopposed, appointing Mr. Rudson as a forensic accountant to investigate and report to the court. The order provided direction as to payment of Mr. Rudson’s accounts, up to $65,000.00, and required additional amounts to be approved by the court.
4Mr. Rudson was not involved in establishing the $65,000.00 benchmark, having only provided counsel with hourly rates. After his preliminary review of material, he advised counsel the cost would be considerably higher. Indeed, the final invoice puts the total expense at approximately $1,350,000.00.
6In June, 2010, I heard a motion from Mr. Rudson who was then seeking payment of outstanding invoices of $519,000.00. In my endorsement, released July 27, 2010, I directed Steven O’Donovan and Christopher O’Donovan to pay this amount, on a without prejudice basis, and to deposit $100,000.00 pending completion of Mr. Rudson’s reports.
7In January 2011, Mr. Rudson delivered his final reports along with an invoice for $388,000.00. The $100,000.00 was applied, leaving a balance of $288,000.00 approximately. This is the amount Mr. Rudson now claims. Requests were presented by other parties, namely:
a) production of Mr. Rudson’s working papers; and
b) payment of the costs for Edward Kalkstein and Zeifman & Company regarding their co-operation in the investigation as directed in the March 28, 2008 order.
ANALYSIS
8My prior endorsement addressed all invoices other than the final one. Pre-payment of $100,000.00 was directed to avoid the very problem that has arisen.
9Although some parties continue to complain about the work of Mr. Rudson, or the manner in which it was done, only the final invoice is at stake.
10As the now former case management judge, it is necessary and appropriate it identify certain concerns regarding the litigation process pertaining to the court appointed expert, namely:
i) the parties have, collectively, incurred significant legal expense in their dispute with Mr. Rudson, likely equivalent to his invoices, despite having initially chosen him as the forensic accountant; and,
ii) Mr. Rudson’s ability to assist the court at trial, given the conflict that has developed with some of the parties.
THE FINAL INVOICE
11Mr. Rudson, in his prior motion, provided an estimate of $100,000.00 to complete his mandate. This representation was relied on by the parties and the court. The ruling on July 27, 2010 may well have been different had the present amount then been put forward.
12Of all professionals, I would expect a forensic accountant to be best able to estimate the time and cost to complete a task. This is particularly so given Mr. Rudson’s involvement in this case.
13Mr. Rudson’s explanation for exceeding the estimate is set out at paragraph’s 37 and 85 of his counsel’s factum as follows:
“RVG’s costs for completing the Final Reports exceeded the estimate provided 20 months earlier, due in part to delays and contentious court proceedings related to RVG’s outstanding invoices. The number and complexity of the reports added to overall costs. Further, as no drafts were first circulated, the Final Reports were prepared in the absence of any guidance or other helpful comments by the Parties.” Supplementary Rudson Affidavit, Motion Record, Volume 1, Tab 2, page 24, paragraph 40.
In responding to a question from counsel for Sheila O’Donovan as to whether he was “shocked” by RVG’s final invoice. Mr. Rudson’s answer properly takes into account the circumstances surrounding the Mandate.
Q. So then in January of 2011 when you sent your final account, and you had – at that time you had 327,000 dollars for your fee component, were you surprised or shocked by the amount of the time that you had incurred?
A. Well, possibly not at that point but we were very concerned about the facts that this mandate had taken so long, had cost so much, had been so difficult with respect to interruptions and challenges and litigation and so on. And it was a very unpleasant experience unfortunately, but we were bound by the order and by Justice Gordon’s endorsement and we think we had done an excellent job. The costs flow from the work that was done. Nobody has said a single comment about the draft reports or any inaccuracies or anything incorrect at all about one word of those thousands of pages comprising 11 reports. The time was spent. People have been at my office. They’ve reviewed the files. They’ve seen the hours have been spent.
Now it’s very nice, or very easy I suppose, for people to challenge, why did it take so long to do this, why did it take so long to do that. Why didn’t you inform everybody every minute of the way. As I’ve explained to you, we did what we thought was appropriate under the order with guidance of counsel and with respect of the original order and the subsequent endorsement.” Rudson Cross-Exam Transcript, pages 116-117, question 359.
14The explanation is not persuasive. Mr. Rudson, in my view, was well aware, or should have been, of these matters. Having received complaints from some of the parties previously, I would have thought Mr. Rudson would take extreme care in being accurate with his representation to the court. Indeed, I would have expected the estimate to be high so as to allow for contingencies.
15Rule 52.03 is silent as to the methodology in determining the compensation for a court appointed export. Case law referred to by counsel, from comparable situations, simply identifies the standard as being “fair and reasonable”. Time spent and hourly rates are not determinative.
16The parties have not presented evidence, as is often done in like motions, to challenge the invoice. However, there is a starting or reference point, namely the $100,000.00 estimate. The onus, therefore, remains on Mr. Rudson.
17It may well be the estimate was innocently understated. Mr. Rudson reported the amount was arrived at by discussion with colleagues. I expect a more detailed analysis and had assumed such had taken place prior to the last motion.
18In these circumstances, Mr. Rudson must abide by his representation. Accordingly, his motion is dismissed.
ii) Production of Documents
19Stephen O’Donovan and Christopher O’Donovan seek production of the working papers of or in the possession of Mr. Rudson. Mr. Rudson takes no position, save to say an order is required.
20Edward Kalkstein and Zeifman & Company oppose the request. Some of the documents were prepared by them. They are concerned as to the reason for this request, particularly given prior complaints from the brothers. They are also concerned with having to deal with further claims.
21The documents in question were required to be delivered to Mr. Rudson by my order of March 28, 2008. That does not automatically entitle other parties to production. There may be privilege issues.
22Counsel for Stephen O’Donovan and Christopher O’Donovan has not yet reviewed all of the documents previously provided, specifically in relation to Mr. Kalkstein’s affidavit of documents.
23The request, in my view, is premature. A production order may be sought at some future point when circumstances warrant and on better material.
iii) Costs of Kalkstein and Zeifman’s
24Mr. Kalkstein and Zeifman & Company were required to co-operate with Mr. Rudson as set out in the March 28, 2008 order. The order also provided for payment of their costs in so doing, either as agreed to by the parties or as determined by the court.
25They now seek payment of $102,578.43 on the basis the process is complete. A motion was not served although notice was provided in the responding affidavit.
26Reimbursement is dependent on compliance with the order. Hence, a threshold ruling must be made. Further, the order does not specify who would be liable for these costs. That requires a determination.
27I am not prepared to deal with the request in this manner. Given my comments in the paragraph above, the first requirement is to determine the appropriate procedure. Accordingly, I direct counsel to raise the issue with the next case management judge.
iv) Summary
28An order is granted on the terms herein. If there are any cost issues, written submissions are to be delivered to my chambers in Cayuga within 30 days.
Gordon, J
Released: 10 September 2012