SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: York University, Plaintiff

AND:

Michael Markicevic, Janet Fleming, Mima Veronica Markicevic, Aleeyah Apparel Inc. operating as A-Tech Construction and Design Inc., Aleeyah Inc., AFC Inc. operating as Arsenal Facility Consulting Inc., Toronto Engineering Company, Guga’s International, Canadian & American Concrete Renovation & Drain-Layer Ltd., Roman Ritacca, Luigi Lato, Phil Brown, Riaz Jadavji, Helen Saoulli, Guram Sekhniashvili, Gia Sekhniashvili, John Doe #1, John Doe #2, John Doe #3, Jane Doe #1, Jane Doe #2 and Jane Doe #3, Defendants

BEFORE: D. M. Brown J.

COUNSEL:
W. McDowell, D. Varah and B. Kolenda, for the Plaintiff

B. Shiller, for the Defendant, Michael Markicevic

L. Caylor and M. Paris, for the Defendants, Janet Fleming and Mima Veronica Markicevic

HEARD: Written submissions dated February 5, 7, 8 and 11, 2013.

supplementary REASONS FOR DECISION – allocation of legal fees

I. Issue

[1] In paragraphs 148 to 151 of my Reasons released January 21, 2013 (2013 ONSC 378), I wrote:

Request by Janet and Mima to access funds to pay their legal fees

[148] As observed, the Consent Order of Newbould J. permitted Janet and Mima to borrow against the two residences in order to finance their legal fees, but no funds could be released without the consent of York or the order of this Court. Janet and Mima now seek such an order so that the funds held in trust by their counsel, Bennett Jones, can be released to pay that firm’s accounts.

[149] They are entitled to such an order, but York raises an objection as to the amount, contending that the work product filed on these motions revealed that Markicevic, Fleming and Mima Markicevic are running joint defences and it would not be appropriate for Markicevic to “run his legal defence through the properties that allegedly belong to Fleming and Mima”.

[150] There is merit to York’s submission. The Consent Order permitted encumbrances on the two properties for the benefit of Mima and Janet’s legal defence, not that of Markicevic. The three family members filed joint materials on these motions. While co-operation between their counsel may well reduce their overall legal costs, Janet and Mima have to be able to demonstrate that the funds whose release they seek will only benefit them.

[151] The materials filed on these motions do not enable me to figure out how much, if any, of the amounts billed by Bennett Jones covered work which benefited Markicevic. I would ask counsel to see whether they can reach an agreement on the amount of the Bennett Jones fees which benefited only Mima and Janet. If they can agree on an amount, that amount may be released to the law firm from the funds it presently holds in trust. If the parties cannot agree, then I would ask them to book a 9:30 appointment before me within the next 7 days so that I can determine how much to release. This matter must be dealt with this month.

[2] In my 9:30 appointment endorsement dated January 31, 2013, I wrote:

(1) Wife/daughter – 2 bills – fees total ̴ $388,000 – I order that 15% of that amount be released from BJ trust account to cover that work which counsel says was solely for the benefit of wife-daughter.

(2) Counsel says 15% work for benefit of Michael Markicevic; 70% joint.

I set a timetable for the delivery of submissions on the issue of the apportionment of the fees for legal work performed by the Bennett Jones firm as between Michael Markicevic, on the one hand, and the defendants, Janet Fleming and Mima Markicevic, on the other. The parties have filed their submissions.

[3] In their February 7, 2013 submissions Janet and Mima clarified that the total amount of the Bennett Jones fees was $379,253, not $388,000.

II. Positions of the Parties

[4] Janet and Mima submitted that 70% of the total fees of their counsel ($265,477.10) related to work for the mutual benefit to all of the defendants, 15% ($56,887.95) reflected work primarily for themselves, and 15% ($56,887.95) primarily benefitted Michael Markicevic. Janet and Mima contended that the 70% ($265,477.10) should be split into thirds, with two-thirds paid to Bennett Jones in payment of their legal fees, with taxes and disbursements similarly allocated. That would result in the further release of $111,761.93 in fees, taxes and disbursements to Bennett Jones.

[5] York took the position that Janet and Mima should not be permitted to access any further funds held in trust by Bennett Jones, which originated in the encumbrancing of the Duntroon Residence, since they already had accessed $158,200 of the equity of that property: $100,000 pursuant to the order of Newbould J. made August 15, 2012 and $58,200 under my January 31 endorsement. In addition, York submitted that the record revealed that both Janet and Mima owned other assets, either directly or indirectly in the case of Direct Signal Inc.’s ownership of the plane, and that both Janet and Mima should look to those funds before seeking to make a claim on the trust account funds. Alternatively, York argued that Janet and Mima should be entitled to trust account funds to cover no more than 50% of the Bennett Jones fees, taxes and disbursements.

III. Analysis

[6] No perfect answer exists to the allocation of legal fees issue; one can only try to fashion an allocation which is fair and reasonable in the specific circumstances of this case. In trying to fashion such a result I have reviewed the factors concerning the payment of legal fees from assets subject to a proprietary injunction set out in three cases: Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business and Technology, 2003 12916 (ON SC), [2003] O.J. No. 40 (S.C.J.), paras. 25 and 26; Waxman v. Waxman, 2007 ONCA 326, paras. 38 and 39; Royal Bank of Canada v. Welton, [2009] O.J. No. 3675 (S.C.J.), paras. 22 to 26, and 42 to 47.

[7] A singular feature of this case is that the funds held in trust by Bennett Jones originated in the encumbrancing of the Duntroon Residence permitted by the Consent Order of Newbould J. made June 14, 2012. While York acknowledged that that fact distinguished the present case from the typical one involving an injunction to protect a proprietary claim, York argued that the order I made a few weeks ago effectively created a proprietary injunction through the granting of CPLs against the Duntroon and Vaughan Residences and restraining the further dissipation of the Residences without court approval.

[8] In light of the mechanism created by the Consent Order to encumber the Residences to fund the legal fees of Janet and Mima, I think it would be unfair to go back and subject the legal fees they incurred prior to the release of my Reasons to a proprietary/non-proprietary injunction type of analysis.

[9] That said, I do accept the arguments made by York on pages 5 and 6 of its February 8, 2013 submissions regarding the appropriate method for allocating the Bennett Jones legal fees. Paragraph 8 of the Consent Order entitled Janet and Mima to encumber the two Residences “in connection with borrowing to pay for legal advice and representation”. I accept York’s argument that the basic premise of the Consent Order was that any encumbrance on the Residences was only to be for the benefit of Janet and Mima. In the result, Janet and Mima entered into a written joint defence agreement with Markicevic and the fees billed by their lawyers ($379,253) significantly exceeded those billed by Markicevic’s lawyer (about $80,000). In light of the issues at play on the motions, I accept York’s submission that had Bennett Jones and Markicevic truly shared the workload, Markicevic would have borne significantly more of the upfront cost of the litigation.

[10] That leads me to conclude that the fairest and most reasonable way in which to allocate the Bennett Jones legal fees is to order that Janet and Mima are entitled to receive from the trust account funds an amount equal to 50% of the total fees, taxes and disbursements billed by Bennett Jones – i.e. 15% based on work done solely for the benefit of Janet and Mima, plus 35% (50% of the joint 70%) based on an allocation of the joint benefit work, for a total of 50% of the amount billed by Bennett Jones. The amount billed by Bennett Jones consisted of fees of $379,253, together with taxes and disbursements which brought the total to $440,200.94. One-half of that amount is $220,100.47. To date, out of the $350,000 in trust account funds the sum of $158,200 has been released to satisfy the Bennett Jones accounts. If my math is correct, that means that Bennett Jones may release from their trust account a further $61,900.47 to pay their accounts, and I so order.

D. M. Brown J.

Date: February 14, 2013