COURT FILE NO.: CV-10-8563-00CL

DATE: 20130924

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: John Anthony Bennett, Applicant

• and -

Bennett Environmental Inc., Respondent

BEFORE: Wilton-Siegel J.

COUNSEL: Don H. Jack, for the Applicant

H. Douglas Hodgson, for the Respondent

HEARD: July 26, 2013

ENDORSEMENT

[1] The applicant John Anthony Bennett (“Bennett” or the “applicant”) seeks directions as to whether the respondent BENEV Capital Inc. (formerly Bennett Environmental Inc.) (“BEI” or the “respondent”) has failed to comply with the order of the Court dated December 29, 2010 (the “Order”), by failing to advance to the applicant, within 30 days of submission, monies in payment of his legal fees as contemplated by the Order. The legal fees pertain to Bennett’s defence of criminal charges in the United States and extradition proceedings in Canada relating to such charges.

Background

[2] The Order required BEI to advance funds to Bennett for legal fees in accordance with section 124(2) of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (the “CBCA”). The relevant provisions of the Order are paragraphs 3-6, which read as follows:

THIS COURT ORDERS that BEI shall advance funds to Bennett in accordance with section 124(2) of CBCA sufficient to cover all Legal Fees that have been reasonably incurred by Bennett since August 31, 2009 and will be reasonably incurred in the future by Bennett in connection with responding to and defending against the Criminal Charges;

THIS COURT ORDERS that the funds referred to in paragraph 3 above shall be advanced to Bennett within 30 days of Bennett submitting to BEI or BEI’s counsel invoices directed to Bennett in relation to the Legal Fees;

THIS COURT ORDERS that if BEI disputes the reasonableness of such Legal Fees submitted referred to in paragraph 4 above, then BEI shall nonetheless pay within 30 days of Bennett submitting to BEI or BEI’s counsel the invoices those amounts that BEI regards as reasonable for each invoice submitted and either party may bring a motion in court to determine the disposition of the remaining amounts claimed for by Bennett in each of the invoices so disputed, …;

THIS COURT ORDERS that for greater certainty, nothing in this order affects the obligation of Bennett under section 124(2) of the CBCA to repay any of the amounts advanced and paid by BEI to Bennett referred to in paragraph 3, 4 and 5 above.

[3] For the purposes of the Order, “Legal Fees” is defined to be “all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment” incurred or to be incurred by Bennett “in connection with responding to and defending against the criminal charges alleged against him in an indictment dated August 31, 2009” (the “Criminal Charges”).

[4] The relevant provisions of the CBCA for present purposes are sections 124(2) and (3), which read as follows:

(2) A corporation may advance moneys to a director, officer or other individual for the costs, charges and expenses of a proceeding referred to in subsection (1). The individual shall repay the moneys if the individual does not fulfill the conditions of subsection (3).

(3) A corporation may not indemnify an individual under subsection (1) unless the individual

(a) acted honestly and in good faith with a view to the best interests of the corporation, or, as the case may be, to the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the corporation's request; and

(b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that the individual's conduct was lawful.

[5] Bennett has been fighting extradition proceedings commenced against him in British Columbia. On February 15, 2012, an order for committal was made in those proceedings by a judge of the British Columbia Supreme Court: see United States v. Bennett, 2012 BCSC 524. Bennett’s counsel in that matter, Gregory DelBigio (“DelBigio”), has filed an appeal of that decision. On August 28, 2012, the Minister of Justice for Canada ordered the surrender of Bennett. DelBigio has filed a judicial review application in respect of this decision on behalf of Bennett. In addition, DelBigio made a further submission to the Minister of Justice arguing that the statutory time limit for charging Bennett in the United States had expired. The status of this further submission is unclear. However, Bennett’s appeal of the order of committal and his application for judicial review are scheduled to be heard by the Court of Appeal of British Columbia on December 6, 2013.

[6] This motion pertains to the following invoices for legal fees incurred by Bennett:

1. five invoices of Morvillo Abramowitz Grand Iason & Anello Professional Corporation (the “Anello Firm”) respecting the services of Robert Anello (“Anello”) and other lawyers in that firm, for the period October 1, 2012 to March 31, 2013, totaling $283,648.01;

2. an invoice of Plateau Investigations Inc. (“Plateau”), respecting the services of Jim Westman (“Westman”), totaling $51,744.87; and

3. an invoice of DelBigio Law Corporation, respecting the services of DelBigio, in the amount of $3,154.26.

[7] This hearing has been preceded by several case conferences in which the parties have attempted unsuccessfully to resolve the payment of the invoices in question on a consensual basis. It should be noted that BEI has paid substantial amounts in respect of other invoices submitted by Bennett, including certain invoices that were addressed in the case conferences. However, the parties were unable to reach agreement on the remaining invoices.

[8] The evidence in respect of these invoices is limited principally to an affidavit of Anello, sworn July 7, 2013 (the “Anello Affidavit”), and an affidavit of DelBigio, sworn June 27, 2013 (the “DelBigio Affidavit”).

[9] I have omitted a further invoice of Anello dated June 19, 2013, for the period April 1, 2013 to May 31, 2013, as it appears to have been delivered to BEI for the first time in the reply motion record of the applicant dated July 4, 2013 and therefore falls within the 30 day period for consideration by BEI under the terms of the Order.

Position of the Respondent

[10] The respondent seeks an order of the Court that Bennett: (1) must consult with the respondent prior to retaining legal or other services; (2) must obtain a work plan and a budget from each service provider; (3) must monitor the work of his service providers to ensure that they stay within the budget he has approved; (4) must disclose the purpose of the retainers of Anello, DelBigio and Westman; (5) must disclose whether DelBigio is instructed to pursue delay for the sake of delay; (6) must prevent Anello from preparing for trial until it is obvious that trial will be necessary; (7) must credit BEI with the duplication of effort between Akin Gump (defined below) and Anello; (8) must disclose the purpose of meetings with the United States Department of Justice (the “DOJ”); (9) must disclose the use to which the work product of Westman was put; and (10) must provide security to BEI for all future advances under the Order. The respondent also envisages a further order permitting Bennett to reapply to this Court for relief if BEI fails to pay the invoices of Anello, DelBigio and Westman after having received information adequate to enable BEI to make an informed judgment as to whether the amounts requested are costs reasonably incurred within the meaning of the Order.

[11] Broadly, the relief sought by BEI reflects BEI’s view that Bennett should furnish further information to BEI in order to enable it to reach a decision on the reasonableness of the expenses at issue. As mentioned, this hearing has been preceded by several case conferences. The relief sought by the respondent was an appropriate subject of discussion in those case conferences. However, for the reasons addressed below, I conclude that once a party resorts to the Court for directions, the Court must limit its inquiry to the reasonableness of the expenses at issue.

Applicable Law

[12] Apart from a general comment of Marrocco J. in Jolian Investments Ltd. v. Unique Broadband Systems Inc., 2011 ONSC 3241, 90 B.L.R. (4th) 188, at para. 146 [“Jolian”], there does not appear to be any judicial authority in Canada regarding the determination of reasonableness in the context of advancement. In that paragraph, Marrocco J. commented as follows:

The inquiry surrounding the reasonableness of the legal expenses incurred in this matter is broader than the typical assessment. Submitting the accounts for court-ordered assessment before advances are made will not adequately address the reasonableness of the legal expenses incurred in respect of the claim and counterclaim and will not be efficient because the payment of the interim accounts will not be timely.

[13] Bennett has, however, provided three decisions of the Delaware Court of Chancery, two of which are, to a certain extent, instructive, even if not binding on the Court.

[14] In Delphi Easter Partners Limited Partnership v. Spectacular Partners, Inc., 1993 Del Ch. LEXIS 159 [“Delphi”], Chancellor Allen considered that determining reasonableness in the context of advancement necessitates three inquiries: (1) were the expenses actually paid and incurred? (2) were the services that were rendered thought prudent and appropriate in the good faith professional judgment of competent counsel? and (3) were the charges for these services made at rates, or on a basis, charged to others for the same or comparable service under comparable circumstances?

[15] In Noam Danenberg v. Fitracks Inc., 58 A.3d 991 (Del. Ch. 2012) [“Danenberg”], Vice Chancellor Laster made a number of observations. First, he approached the determination of reasonableness by applying considerations similar to those set out in rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as amended. Second, on the other hand, he commented, in line with the observation of Marrocco J., that the nature of advancement counsels against a detailed review of expenses submitted by a party, given that the determination of the right to indemnification at the end of the proceeding is the appropriate context in which to address detailed issues of reasonableness. Third, from the foregoing, it follows that a court should not become involved in “needless and inefficient skirmishes in the sand box [over advancements]”. Fourth, he observed that a party’s uncertainty regarding indemnification for all of that party’s legal expenses at the end of legal proceedings provides sufficient incentive to monitor its counsel’s work and ensure that such counsel will not engage in excessive or unnecessary effort. Fifth, citing Delphi, he commented that the burden on the party seeking advancement is to demonstrate that the services rendered were thought prudent and appropriate in the good faith professional judgment of competent counsel. A court should not assess independently whether counsel appropriately pursued and charged for a particular motion, line of argument, area of discovery or other litigation tactic.

[16] In Danenburg, Laster V.C. also proposed a protocol for future advancement requests, in the process denying a request for the appointment of a special master to regulate future disputes. The protocol addressed time periods for the submission of, review of, and responses to, requests for advancement, a mechanism for paying undisputed and disputed amounts, and procedures for regulating the frequency and content of future submissions to court. In general, the protocol laid out a more detailed procedure than the procedure set out in the Order but addressed substantially the same issues. Of note, the protocol did not contain any provisions similar to the prospective provisions sought by BEI in its cross-motion in the present proceeding.

Approach to the Issues in this Application

[17] Before proceeding, I propose to set out certain conclusions regarding the role and authority of the Court on this application as it appears to be a matter of first instance, counsel having been unable to find any case law in Canada on a similar issue.

[18] First, the issue for the Court is whether the expenses for which Bennett seeks advancement of monies were “reasonably incurred”, i.e. were reasonable.

[19] Second, the onus of proving the reasonableness of any given invoice rests with the applicant, as it is the applicant who has access to the information necessary to demonstrate the reasonableness of any given invoice.

[20] Third, the Court must determine reasonableness on a probability standard. In doing so, it may draw reasonable inferences based on the evidence before it, also on a probability standard.

[21] Fourth, I agree with Marrocco J. that the test for reasonableness is necessarily broader than the test on a typical assessment: see Jolian, at para. 146.

[22] This raises the central issue dividing the parties on this application. The applicant argues, in effect, that the determination of reasonableness should be limited to an analysis of whether the particular expenses were considered appropriate by the professional counsel engaged by Bennett. The respondent argues that it should be entitled to examine the reasonableness of particular decisions and actions of the applicant’s counsel in considerably greater detail, for example the staffing in respect of pre-trial meetings with the DOJ and the meeting covered by the DelBigio invoice. This issue requires a balancing of these positions, which I conclude should be reconciled in the following manner.

[23] The point of departure is a distinction at a general level between a mandate or purpose for which legal counsel or other parties are engaged, and a tactic or other action taken by such party directed toward the achievement of such mandate or purpose. A court’s determination of the reasonableness of legal fees proceeds at the level of the mandate or purpose of legal counsel that has resulted in such fees. In order to determine the reasonableness of fees in the context of a claim for advancement, however, it is necessary to be able to identify with some precision the mandate of legal counsel or such other party. Otherwise, the issue of reasonableness is limited to a determination of the reasonableness of the selection of counsel, leaving the reasonableness of all fees of such counsel and any third parties engaged by such counsel to be an assumed consequence of such counsel’s application of professional judgment.

[24] Accordingly, a court should limit its determination of reasonableness to a consideration of the mandate of legal counsel. I agree with the applicant’s position that a court cannot second-guess legal counsel’s judgment on a hindsight basis. The qualification of the court’s role is, however, intended to be considerably broader. In the absence of compelling evidence that a particular tactic for achieving a mandate was unmeritorious, a court cannot, and should not, determine the reasonableness of expenses incurred in the pursuit of any particular tactic or line of reasoning, much less the particular actions taken in such regard. These are issues for the indemnification hearing to be held after the termination of the criminal proceedings. In this context, while not binding on the court, the standard articulated in Delphi at p. 12, per Allen C., is helpful – the party seeking advancement should be entitled to advancement of all expenses for which he can demonstrate that the services rendered were thought prudent and appropriate in the good faith judgment of professional counsel. I would add the qualification that, in the case of expenses of third parties, a payor is entitled to know that the appropriateness of the actions taken by the third party has been considered against this standard by legal counsel. Conversely, counsel who engage a third party should do so with the knowledge that a subsequent adverse determination on the merits could reduce or eliminate the applicant’s ultimate entitlement to indemnification.

[25] Fifth, to the extent that issues of privilege or confidentiality prevent the applicant from demonstrating the reasonableness of any particular invoice, it is the applicant’s responsibility to address the issue. It may be that, in certain circumstances, the applicant must choose to waive privilege in order to obtain an advancement. The Court cannot apply a different standard of proof in such circumstances. In particular, the Court cannot disregard the absence of evidence as to the nature of services provided and find nevertheless that the work was reasonable.

[26] Sixth, I am mindful of the potentially extreme circumstances in which BEI finds itself. The applicant is obligated to repay the advances if he is convicted and cannot fulfill the conditions of section 124(3) of the CBCA. In such circumstances, he might also have to pay a fine in the criminal proceedings in a non-negligible amount. In addition, he faces possible incarceration in the United States if he is convicted. There is no evidence before the Court that Bennett has the financial resources to repay all of the monies advanced by BEI in such circumstances. Bennett has an obligation to ensure that any expenses incurred are reasonable. As mentioned above, in the usual case, a party will be motivated to ensure that the expenses of its counsel are reasonable by the risk that those expenses will be deemed unreasonable, leaving the party to bear the cost personally. Such a constraint may not operate in this case.

[27] However, I am not persuaded that these circumstances grant the Court authority to deny, or reduce, expenses that are otherwise reasonable in accordance with the principles articulated above, on the grounds that there may be no realistic possibility of repayment. While the Court has authority to regulate the procedure for consideration of the applicant’s unresolved advancement claims, neither the provisions of section 124(2) of the CBCA nor the provisions of the Order grant the Court authority to impose substantive provisions upon the parties. Any such action would constitute, in effect, a re-writing of the terms of the relevant by-law and/or indemnification agreement of BEI in favour of the corporation. In this regard, I agree with the comment of Marrocco J. in Jolian, at para. 86, that such issues should be resolved via negotiation between a prospective director or officer and a corporation at the time of election or appointment, rather than imposed by a court at a litigious moment in the life of such parties. Indeed, the circumstances of this case invite a consideration of whether the policy of s. 124(2) prevents a corporation from imposing a requirement for security in a by-law or in indemnification agreements with its directors and officers. Such issue is, however, beyond the scope of this proceeding.

[28] Seventh, accordingly, I also conclude that the Court does not have authority to impose a requirement of security as a condition of receiving an advancement of funds. Although the respondent seeks such an order, it has not provided the Court with any basis at law for such relief. Neither the provisions of section 124(2) of the CBCA nor the provisions of the Order grant the Court authority to impose such a requirement.

[29] Similarly, I do not consider that the Court has authority to grant any of the further prospective relief sought by the respondent, namely the relief contemplated by items (1)-(3) and (6) under “Position of the Respondent” above. All of this relief presumes a role for the Court that is not contemplated by the CBCA, the Order or any case law of which I am aware.

[30] Lastly, I wish to add that, if I have erred in reaching the conclusion that the Court lacks authority to grant the relief sought by the respondent contemplated by items (1)-(3) and (6) above, I would refuse to grant such relief for the following reasons. First and most important, the purpose of such mechanisms is to monitor the reasonableness of particular tactics and proceedings taken by defence counsel. As indicated above, I consider that such an analysis is not appropriate in an advancement, as opposed to an indemnification, proceeding. Second, as a related matter, to grant such relief would increase the number of issues subject to potential legal proceedings when the appropriate issue for the Court on an advancement claim should be restricted to the reasonableness of expenses generally. Lastly, judicial imposition of such mechanisms in this case would result in the Court performing a managerial role in respect of expenses of a foreign criminal proceeding for which the Court is not qualified. However, I recommend agreement to one or more of the respondent’s suggested mechanisms on a consensual basis as a means of avoiding further legal proceedings in respect of future invoices.

Analysis and Conclusions

[31] I propose to address the invoices of each of the three parties in turn based on the application of the foregoing principles.

The Anello Firm Invoices

[32] The largest category of expenses that BEI challenges are the invoices of the Anello Firm for the period October 1, 2012, to March 31, 2013, which total $283,648.01.

[33] In the Anello Affidavit, Anello says broadly that the fees represented by these invoices relate primarily to the preparation of Bennett’s defence and to discussions with the DOJ respecting the criminal proceeding and extradition, which is understood to include bail conditions if Bennett surrenders to authorities in the United States. He also refers to reviewing documents, researching legal issues relating to the charges and bail, developing the facts and communicating with the attorneys of potential witnesses.

[34] With respect to the trial preparation, Anello says this is necessary because the Speedy Trial Act of 1974, 18 U.S.C. §§ 3161-3174 requires that Bennett’s trial commence within 70 days of his first appearance in the United States, excluding permissible delay, such as for pre-trial matters. He asserts that, in his experience, trial preparation at this stage of extradition proceedings, and the pre-trial discussions with the DOJ, are typical for this type of criminal case with pending extradition proceedings.

[35] Anello also says that, under applicable rules of criminal procedure, evidence and professional conduct, his discussions with the DOJ are confidential and he is restrained by his ethical obligations from disclosing the details of such communications. I would note in this regard that it is unclear whether Bennett could waive confidentiality for the purposes of advancement proceedings or whether the consent of the DOJ would also be required. I have proceeded on the basis of the former possibility, in the absence of any evidence or authority on this issue from Bennett.

[36] BEI has four principal objections to the Anello invoices. I will address each in turn. By way of overview, with the exception of the issue of duplication, I do not accept these objections. The evidence before the Court is that the services described in these invoices are consistent with the mandate of the Anello Firm and were thought prudent and appropriate in the good faith professional judgment of competent counsel. In the absence of evidence to the contrary, apart from the issue of duplication, I conclude that this is sufficient to satisfy the onus on Bennett to demonstrate the reasonableness of these expenses.

[37] BEI’s first, and most important, objection is that the preparation of Bennett’s defence is premature, even taking into consideration the Speedy Trial Act of 1974. It says that the probable date of Bennett’s trial in the United States is far off, given that the combined hearing on his appeal of the committal order and his judicial review application respecting the surrender order of the Minister of Justice will not take place until December 2013, and will undoubtedly continue for some period thereafter.

[38] While I have some sympathy for BEI’s position, it has failed to produce any compelling evidence, expert or otherwise, that the Anello Firm is acting unreasonably in preparing Bennett’s defence at this time. BEI has not shown that, given the complexity of Bennett’s case, it is unreasonable for the Anello Firm to prepare now in order to be able to act in a timely fashion if Bennett is extradited to the United States. Nor has it demonstrated that pre-trial discussions of the nature described by Anello are unusual at this stage in the criminal proceedings.

[39] I would note, however, that Bennett’s counsel acknowledged that the cost of trial preparation, which BEI says is averaging $60,000 per month, should necessarily reduce materially over the next few months and remain low once the preparation of Bennett’s defence is substantially complete. On this basis, continuing invoices of the order of magnitude of the invoices over the past six months would therefore require more explanation to satisfy the reasonableness standard. In this regard, I note that the most recent invoice for the period April 1, 2013 to May 31, 2013, reflects substantially reduced time on the part of the Anello Firm.

[40] Second, BEI argues that Bennett has inappropriately instructed DelBigio to pursue a strategy of “delay for the sake of delay”. As the issue of DelBigio’s legal fees to date is not at issue on this application, apart from one issue addressed below, this submission is principally relevant for the assessment of the reasonableness of the fees of the Anello Firm – the more DelBigio pursues delay, the more premature BEI says is the preparation of Bennett’s defence.

[41] I note, however, that, to the extent DelBigio is successful in setting aside the extradition order, the interests of Bennett and BEI are allied. I also note that Bennett is entitled to assert all reasonable means to seek such a result. In the absence of evidence that DelBigio is pursuing a result that has no reasonable chance of success, the Court must proceed on the basis that DelBigio’s actions are reasonable, leaving issues of the merits of particular tactics to be addressed at the indemnification hearing.

[42] Third, although BEI does not object to the rates charged by the Anello Firm, it does object to two aspects of that firm’s services that it says are unreasonable.

[43] The first issue is the extent of the involvement of two partners in the DOJ discussions, Anello and a junior partner. The respondent suggests that the Anello firm invoices reveal that the responsibility for establishing the facts and building Bennett’s defence has been left to an associate while the two partners on the matter have both been disproportionately involved in the pre-trial conferences with the DOJ.

[44] This is not an appropriate issue for a hearing on advancement claims. To the extent that the respondent extends its criticism of the allocation of work to include internal conferences, I would reach the same conclusion. Each issue goes to the tactics and organizational aspects of legal representation that are more appropriately dealt with at the indemnification hearing. In any event, on a cursory review I do not think that this view is borne out in the invoices. On balance, the amount of time involved in meetings with DOJ representatives does not appear to be a disproportionately large component of the Anello Firm invoices. I would also note that the Anello Firm has written off the time of the junior partner in respect of routine meetings and telephone calls in which both partners participated, and has undertaken to continue to do so.

[45] The second issue is the extent to which there is a duplication of effort in the criminal proceedings as a result of the retirement of Bennett’s previous counsel, Doug Maynard (“Maynard”) of the firm of Akin Gump, and the engagement of Anello. In response to a query regarding this issue in an earlier case conference, the Anello Firm revised certain invoices to remove a small amount of time. It submits that all other time was necessary to establish Bennett’s defence.

[46] In retrospect, I realize that the Anello Firm was not in a position to make any realistic estimation of the amount of time that was duplicated in “getting up to speed” on Bennett’s case, as there appears to have been no communication between the two law firms. However, it is clear from the record that Maynard was a criminal lawyer and that he represented Bennett both in his quasi-criminal proceedings before the Securities and Exchange Commission, the Ontario Securities Commission and in the early stages of the criminal case, including preliminary discussions with the DOJ.

[47] In the absence of evidence to the contrary, the Court must conclude that some knowledge of the case on the part of Maynard and others working with him at his firm was lost when Anello was engaged. Accordingly, I conclude that some of the time spent by Anello and others at the Anello Firm educating themselves on the facts and issues of Bennett’s case must represent a duplication of effort. It would be unreasonable for BEI to bear the cost of this duplication. In the absence of a more precise basis for arriving at a quantum for such duplication of effort, I have applied a discount to each of the first three invoices of the Anello Firm in descending amounts of 25%, 15% and 10%, respectively. This results in adjusted amounts of these invoices of $8,075.23, $18,258.80 and $4,041.21, respectively. On this basis, I conclude that Bennett is entitled to an advancement of monies in the adjusted amounts of these three invoices and the amount of the two remaining invoices, being $30,942.50 and $58,267.19.

The Plateau Invoices

[48] Bennett also claims invoices of Plateau totaling $51,744.87 respecting the services of Westman. This work breaks down into two categories. The majority of the costs, represented by five invoices totaling $45,334.89, are addressed to DelBigio and relate to work performed in 2012, ending November 16, 2012. The record includes a copy of a report dated August 1, 2012 (the “Plateau Report”), which is apparently the work product resulting from Westman’s investigations for DelBigio. The remaining invoice relates to work performed by Westman for Anello and others at the Anello Firm after November 16, 2012, pursuant to an engagement letter between the Anello Firm and Plateau dated November 26, 2012. I will deal with these engagements separately.

Engagement by DelBigio

[49] The respondent challenges the reasonableness of the Plateau Report. I concur. Although counsel for Bennett has suggested in correspondence that DelBigio relied upon the Plateau Report in making his further submission to the Minister of Justice, the DelBigio Affidavit suggests the contrary. There is no mention of any such reliance. Moreover, the basis of the further submission – expiration of a limitation period – would appear to be unrelated to the investigations conducted by Westman and the content of the Plateau Report. Instead, DelBigio states that the associate at the Anello Firm working on Bennett’s case has advised that the Plateau Report has assisted the Anello Firm. This is hearsay evidence that should be disregarded in favour of the evidence set out in the Anello Affidavit discussed below.

[50] Further, the Westman investigations commenced after the hearing on the committal order before the British Columbia Supreme Court had terminated. There is no suggestion that the evidence gathered by Westman would have been relevant to the outcome of that proceeding, which addressed the merits of the criminal proceeding against Bennett in the United States. There is therefore reason to question the significance of the evidence gathered by Westman. The DelBigio Affidavit fails to provide an answer.

[51] In summary, I conclude that the applicant has failed to demonstrate that the work performed by Plateau was reasonable in the absence of evidence from DelBigio that the Plateau Report was in some manner useful to either his mandate for the further submission to the Minister of Justice, or the hearing on the committal order before the British Columbia Supreme Court.

Engagement by the Anello Firm

[52] The information provided to the Court regarding Westman’s services to the Anello Firm is limited to the following two paragraphs in the Anello Affidavit:

The nature and purpose of Plateau Investigation Inc.’s work for the Firm

9. This firm retained Plateau Investigations Inc. (“Plateau”) to provide investigative services related to the preparation of Mr. Bennett’s defence. Plateau is working as the Firm’s agent and at our direction. Plateau has conducted document review, interviewed potential witnesses, and carried out other important investigative work. Retaining a Canadian Investigator to carry out investigative tasks is more cost effective and efficient than employing an attorney from this Firm because, among other things, most of the evidence and witnesses are located in Canada. In addition, the rate for an investigator is less than for an attorney.

Why Plateau’s work is necessary now (and not just for extradition)

10. Many of the witnesses Plateau interviewed and the reports Plateau created during the extradition proceeding directly relate to the issues in the criminal proceeding pending in New Jersey. When we retained Plateau in November 2012, however, investigative work important for Mr. Bennett’s defence and the Firm’s representation of Mr. Bennett remained outstanding. The investigative tasks Mr. Westman has conducted at our request have assisted us with our discussions with DOJ and are otherwise related to Mr. Bennett’s defence in the criminal proceeding, not just the extradition proceeding. This work is necessary at the present time not only because of our meetings with DOJ, but also because once Mr. Bennett appears in U.S. court, our attention will be on motions and trial preparations, and we will have less time for the background work Plateau is doing now.

[53] From this short statement, both the nature of Plateau’s work product that the Anello Firm says is useful to Bennett’s defence, as well as its relevance to that defence, are unclear.

[54] The Anello Affidavit describes the additional investigative work for the Anello Firm that Westman has conducted since his engagement in November 2012 as “background work”. It is unclear how such work is relevant to either Anello’s discussions with the DOJ, which are apparently related to bail arrangements, or otherwise to Bennett’s defence in the criminal proceeding.

[55] For the reasons stated above, I think the Court should also approach the relevance of the Plateau Report to Bennett’s defence in the criminal proceedings with some skepticism. If the investigations had been relevant, it would have been expected that they would have been conducted prior to the extradition hearing in British Columbia or, alternatively, would have found their way into the submissions to the Minister of Justice. In any event, to the extent that Plateau’s reports to DelBigio are relevant to his defence in the criminal proceedings, they are not addressed in the invoice under consideration in this section, which deals only with investigative work since November 2012.

[56] As mentioned, the onus of establishing reasonableness rests with Bennett. In this case, he must establish both that such charges fall within the definition of Legal Fees in the Order, i.e. are costs and charges that have been incurred in connection with responding to and defending against the criminal charges he faces and that such charges are reasonable for the services provided.

[57] I am not persuaded that Bennett has satisfied the onus on him in respect of the Plateau invoice dated February 18, 2013 for the reasons set out above. Moreover, this would appear to be information which is not privileged or subject to confidentiality concerns. Similarly, Anello has not explained how Westman’s “background work” will be relevant to Bennett’s defence. If the work is privileged then, as mentioned above, Bennett has the onus of establishing reasonableness and he must decide whether to waive privilege, find another means of establishing the reasonableness of these services, or withhold his account for those services until the indemnification hearing. Nothing in this Endorsement, however, is to be taken as preventing a further application with further information regarding the Plateau invoices that addresses the issues raised in this Endorsement if Bennett so chooses.

The DelBigio Invoice

[58] The respondent also challenges an invoice of DelBigio dated January 25, 2013, in the amount of $3,154.26. This invoice is in a modest amount and relates principally to email communications with the Anello Firm shortly after the Anello Firm became engaged in the criminal proceedings.

[59] In the ordinary course, it would be expected that there would need to be some communication between Canadian and United States counsel to inform the latter of the status of the extradition proceedings in Canada. It is understood that this was the purpose of these communications. To the extent that the exchange of information constituted a cost of the Anello Firm “getting up to speed” on the case, I consider that the adjustment described above in respect of the invoices of the Anello Firm includes such cost. Accordingly, as this service was provided by counsel in the course of his mandate and was thought prudent and appropriate in the good faith professional judgment of competent counsel, I conclude that Bennett is entitled to an advancement of monies in the amount of this invoice.

[60] BEI has raised an objection to certain fees of DelBigio that relate to a trip that he took to New York in April 2011 to meet with the DOJ together with Maynard. BEI says that the reasonableness of such fees cannot be determined without information regarding the purpose of the trip. The fees to which BEI objects are not, however, included in the DelBigio invoice dated January 25, 2013 and are therefore not before the Court on this application.

Additional Issue – The Aird & Berlis Invoices

[61] Bennett also seeks an order indemnifying him for the expenses of his counsel in this application. Bennett submits that he has been forced to incur these costs in order to obtain the advancement of funds contemplated by the Order and that these costs are therefore reimbursable under the Order.

[62] BEI did not address this matter in its factum or at the hearing of the application. I have proceeded on the basis that it therefore does not object to the principle that such expenses, provided they are reasonable, are reimbursable.

[63] I agree with the applicant that the expenses of enforcing a right to indemnification can be included within an indemnification claim. I also agree with the applicant’s submission that any legal fees incurred in this case to enforce Bennett’s right to indemnification of the legal fees of his defence to the criminal proceedings would be sufficiently connected to bring them within the definition of Legal Fees for purposes of the Order.

[64] There is, however, a subtle difference involved in this claim. The legal fees for which Bennett seeks reimbursement on this application are legal fees incurred in enforcing his right to an advancement of funds. This raises the issue of whether such funds should be treated as additional advancement funds, subject to the requirement of repayment in the event that Bennett cannot establish the requirements of section 124(3) of the CBCA, or as funds paid by way of indemnification that are not subject to any such requirement.

[65] I have concluded that the applicant’s right to payment of legal expenses incurred in enforcing his right to advancement should be treated as a right to indemnification which is not subject to the potential of repayment under section 124(3) for the following reason. Under section 124(2) of the CBCA, any right to an advancement of funds is separate from any right to indemnification determined to exist at a hearing held after the conclusion of the relevant proceedings. In particular, while a party’s entitlement to indemnification is subject to demonstration of the requirements in section 124(3) of the CBCA on a retroactive basis that can result in an obligation of repayment, the party’s right to advancement in the present circumstances is unqualified to the extent the party has demonstrated the fees are reasonable. This element of Bennett’s right to advancement is reinforced in the present case by the decision evidenced in the Order.

[66] Accordingly, I conclude that any legal fees incurred in order to enforce a right of advancement must be reimbursable to Bennett, regardless of whether any of the monies advanced as a result of the legal services are repayable after the conclusion of the criminal proceedings.

[67] This raises the issue of the quantum that should be payable. I do not think Bennett disputes the principle that any such fees should be reasonable. In this case, as mentioned, BEI has not raised any objection regarding the reasonableness of the Aird & Berlis fees. I note that there is no indication that any of the monies in respect of which Bennett’s advancement claim was made required disproportionate work on counsel’s part.

[68] In addition, however, the Court must consider the fact that, pursuant to this Endorsement, Bennett has had substantial, but not total, success on his advancement claim.

[69] In these circumstances, I conclude that the Court should apportion the legal expenses in accordance with the percentage of success. In this regard, I note that the amounts claimed in respect of advancement exceed those considered by the Court on this motion as certain claims were settled as a result of the case conferences or otherwise. Because this matter was not addressed in detail at the hearing of the application, I am reluctant to make a determination in this Endorsement. It is my hope that the parties will be able to establish the total claims addressed during the period covered by the Aird & Berlis invoices, as well as the total of monies advanced, without the need for further judicial involvement. If this proves not to be the case, they should schedule a 9:30am conference through the Commercial List Office.

The Respondent’s Cross-Motion

[70] As mentioned above, the respondent has also brought a cross-motion seeking 10 items of relief. This motion is dismissed for the reasons, and by virtue of the determinations, set out above. For the sake of clarity, I have collected these conclusions below, organized by reference to the individual items of relief set out under “Position of the Respondent”.

[71] The relief sought in item (10) (security) is denied on the basis that the Court lacks authority to fund such relief.

[72] The relief sought in items (1)-(3) and (6) is also denied on the grounds that the Court lacks authority to grant such relief or, alternatively, on the grounds that it would be inappropriate for the Court to exercise any inherent jurisdiction that may exist in respect of such matters for the reasons set out above.

[73] The relief sought in items (4), (5), (8) and (9) involves an order for compulsory disclosure by Bennett. In my view, this request proceeds on the basis of an incorrect approach to this application, given that the applicant bears the onus of proof and the Court determines the reasonableness only of the invoices brought before it. To the extent that the Court has found that the applicant has failed to demonstrate the reasonableness of certain invoices for lack of sufficient disclosure, the applicant is entitled to bring a further application if he chooses to make further disclosure. In such event, the procedure contemplated by the Order would be applicable to any such further claim. However, the decision as to whether or not to make further disclosure remains that of the applicant and is therefore not an appropriate subject of an order of this Court.

[74] Lastly, the relief sought in item (7) has been addressed in the context of the Court’s determination of the application and, in particular, the reasonableness of the fees for which advancement is sought.

Costs

[75] The issue of the applicant’s costs of this proceeding is subsumed in his claim for his legal fees incurred in the enforcement of his claim for advancement. Accordingly, it would appear that there is no basis for an award of costs of this application.

Wilton-Siegel J.

Date: September 24, 2013