SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Siskinds LLP, Plaintiff

AND:
Canadian Imperial Bank of Commerce, Defendant

BEFORE: D. M. Brown J.

COUNSEL:
E. Cherniak, Q.C. and J. Squire, for the Plaintiff
P. LeVay and J. Safayeni, for the Defendant

HEARD: January 22, 2014

REASONS FOR DECISION

I. Competing motions for summary judgment on the interpretation of a contract

[1] From 1999 until 2011 Siskinds LLP performed certain debt collection services for the Canadian Imperial Bank of Commerce, with the last period of the relationship governed by an October 15, 2008 Business Agreement (the “2008 Business Agreement”). In November, 2010 the CIBC gave Siskinds notice that it intended to terminate the 2008 Business Agreement in accordance with its early termination provisions. A dispute then arose about the amount of compensation to which Siskinds was entitled upon that termination.

[2] Siskinds moved for partial summary judgment declaring that upon CIBC’s termination of the 2008 Business Agreement, Siskinds was entitled to invoice the CIBC “for services performed up to July 1, 2011, the date of termination”. Siskinds argued that it was entitled to receive compensation on receipts arising after the date of termination on files upon which the firm had worked prior to the date of termination. On the motion Siskinds did not seek a determination of the quantum of CIBC’s liability, leaving that to further adjudication following oral examinations for discovery.

[3] The CIBC brought its own cross-motion for “full” summary judgment for a declaration that it had paid Siskinds in full “in respect of all monies owed to it” under the 2008 Business Agreement, together with an order dismissing this action.

[4] For the reasons set out below, I dismiss the motion for partial summary judgment brought by Siskinds and I grant the motion of the CIBC, with the result that I dismiss this action.

II. Fact evidence

A. Overview of the business relationship and the last contract

[5] Siskinds LLP is a 70-lawyer law firm based in London, Ontario. The CIBC is a Canadian bank.

[6] Starting in 1999 Siskinds performed collection work for the CIBC administering (i) proposals filed under the Bankruptcy and Insolvency Act and (ii) informal repayment arrangements negotiated through credit counselling services (“CCS”) and other orderly payment of debt (“OPD”) arrangements. In brief, Siskinds would act as the bank’s agent for purposes of managing BIA proposals and CCS/OPD arrangements. Siskinds would prepare relevant documents, receive, deposit and transmit dividends and payments to CIBC from trustees or estate administrators on behalf of debtors. As compensation for its services, Siskinds would receive a commission of 10%, plus GST/HST (but inclusive of disbursements) applied to all dividends and payments received.

[7] Trustees or estate administrators initially would contact CIBC on a file regarding any debts due to the bank, and CIBC would then out-source the files to several service providers, one of which was Siskinds, who prepared proofs of claim and other documents and who monitored and collected dividends or payments. In the latter years of the arrangement Siskinds used CIBC’s proprietary software to prepare most documents, track and manage files, and to post payments as received. I will deal later with the mechanics of payment receipts under this arrangement.

[8] The first contract for collections work was entered into by Siskinds and the CIBC in June, 1999. In 2003 the CIBC issued new Bankruptcy Directives and CCS/ Consumer Proposal Directives for retail products, the provisions of which formed the back-drop against which the parties negotiated a May 25, 2004 Business Agreement, the terms of which substantially resembled those in the 2008 agreement. A further agreement was entered into on April 25, 2006, with the final agreement being the 2008 Business Agreement.

[9] In addition to performing work for the CIBC on BIA proposals and CCS/OPD arrangements, Siskinds also worked on “opposition files”, essentially files on which an opposition to a BIA discharge had been filed and which might require court attendances. CIBC paid Siskinds a contingency fee on “opposition files”, ranging from 30% all inclusive to 35% plus costs plus taxes, depending upon the file.

[10] Most of the work performed by Siskinds under the 2008 Business Agreement was standardized, highly routine in nature and undertaken by firm staff who were not lawyers. In November, 2010, when the CIBC gave notice of its intention to terminate the 2008 Business Agreement, 21 people at Siskinds were working on the Bank’s collection matters, only one of whom was a lawyer.

[11] It was not controverted that on the majority of the referred files, Siskinds performed most of its work in the files’ early stages, and often recoveries would not be made for more than a year after file opening - in some cases, up to three years later. The timing of the payments depended upon the proposal, arrangement or court orders made in the particular case.

B. The 2008 Business Agreement

[12] The last contract in force between the parties was the 2008 Business Agreement dated October 15, 2008. It was to run for a three-year term ending on October 15, 2011. Section 2(a) of the 2008 Business Agreement described the services to be provided by Siskinds in the following terms:

2. GENERAL

(a) [Siskinds] shall provide the services as set out in the DirectivesProgram and any subsequent updates that the Bank may make from time to time ("Services"). The Directives will be supplied by the Bank upon execution of this Agreement.

The DirectivesProgram was an April, 2009 document entitled, “Recovery Operations, Secured/Unsecured Portfolio, CCS and Consumer Proposal Directives (Retail Products), Version 3.1”.

[13] Section 14 of the 2008 Business Agreement dealt with the compensation the CIBC was to pay Siskinds:

14. COMPENSATION

[Siskind’s] compensation and incentives shall be governed by specific business programs in which the Organization participates and as detailed in the attached "Program".

Siskinds acknowledged that throughout the business relationship, CIBC had compensated it for BIA proposals, CCS proposals and orderly payment of debt arrangements on the basis of 10% of the amounts collected and received from debtors.[^1]

[14] The version of the Program in force at the time of termination was a January, 2007 “Consumer Proposal/CCS/OPD Directive Update”, the “Fees” section of which read as follows:

Fees

The fees chargeable by the Business Partners are based on the current commission rate of 10.0 % applied to all dividends and payments received inclusive of all disbursements. The commission charged will be subject to the Goods and Services Tax.[^2]

[15] Section 15 of the 2008 Business Agreement addressed the issue of termination and provided, in full, as follows:

15. TERMINATION

(a) The Bank may at any time upon five (5) business days' notice (or such longer period as may be required by statute), in its absolute discretion terminate the Agreement.

(b) Notwithstanding subsection 15(a), the Bank may terminate this Agreement immediately upon delivery of written notice for the reasons set out in subsection 5(b) or in the event the Organization's license to operate is revoked, lapses or the Organization is under investigation by applicable provincial authorities, or the Organization is responsible for a breach of the Bank's customer's privacy or the provisions contained in this Agreement (including the Directives and Program).

(c) The Organization shall use reasonable efforts within a reasonable period of time after the due date of any invoice submitted to the Bank to provide the Bank notice of all overdue payments. The Organization may, at its option, terminate this Agreement in the event the Bank fails to pay invoices in thirty (30) to sixty (60) days, except with respect to that portion of invoices which has been disputed by the Bank. The Organization will provide sixty (60) days prior written notice of its intent to terminate this Agreement if such default has not been cured.

(d) All information, records, and documents relating to the Bank and the Bank customers remains the property of the Bank. If the Agreement is terminated, the Organization will deliver to the Bank all such Bank related materials then in its possession or control. If such documents are in machine-readable form, they must be returned in machine-readable form. Upon Termination, the Organization may invoice the Bank for Services performed up to the date of termination of the Agreement. (emphasis added)[^3]

That form of termination clause dated back to the 2004 agreement between the parties. Siskinds had attempted to negotiate changes to the termination clause in the 2008 Business Agreement, but CIBC had not agreed to them.

[16] One other provision of the 2008 Business Agreement came into play on these motions – Section 18 which dealt with the “Recall” of files:

18. (a) The Bank shall have the right to recall, at any time, any accounts referred to the Organization, with or without cause. In the event of any such recall, the Organization will cease all activity. The Bank will not be liable to the Organization for compensation on fees, accrued or lost interest, costs (including legal costs) or charges incurred after the recall date. The Organization shall immediately return to the Bank all applicable documentation and information (written or electronic) that is in the possession of the Organization with respect to the accounts.

(b) The Organization may likewise return to the Bank at any time and without cause any account referred to it, provided five (5) Business Days prior written notice of such recall has been provided to the Bank. At the time of recall, the Organization shall immediately return to the Bank all applicable documentation and other related material that are in the possession of the Organization.

(c) In the event the Bank recalls an account with cause, as a result of the Organization failing to comply with the terms of this Agreement, including the Directives, the Organization shall be liable to pay to the Bank, all reasonable costs incurred to transition files to another service provider, or other reasonable costs the Bank determines are necessary to close or remedy an account.[^4]

According to the Bank, from December, 2008 onward it had recalled approximately 1,800 files from Siskinds, with 1,600 of them being recalled more than two days after their assignment to the firm. Siskinds disputed those numbers based upon documents produced by CIBC. In my view, that dispute was not relevant to the material issues requiring determination on these motions.

[17] CIBC stated that its position on the issue of the recall clause had been consistent. The Bank was not relying on the recall clause to justify its refusal to pay the invoice rendered by Siskinds following termination because the CIBC had terminated the 2008 Business Agreement, not recalled all the files in the possession of Siskinds; rather, the CIBC contended that the recall provision formed a useful part of the contractual matrix in which to interpret Section 15(d).

[18] The dispute between the parties can be simply stated. Siskinds contended that upon the Bank’s termination of the 2008 Business Agreement, it was entitled to invoice the CIBC for all services performed on the files on which it had been working up until the date of termination, even in respect of payments made by debtors after the agreement’s termination date, and it intended to rely on expert evidence to quantify that amount. CIBC took the position that Siskinds was only entitled to fees on recovery payments received up until the date of termination on the various files upon which it had been working.

(continued verbatim…)

[^1]: Transcript of the cross-examination of Barbara VanBunderen conducted December 3, 2013, QQ. 14 to 16.
[^2]: Section B of the April, 2009 CIBC, Recovery Operations, CCS and CCP Program, contained similar language about compensation.
[^3]: The earlier 1999 Collection Account Agreement did not specify how the Bank would pay Siskinds in the event of a termination.
[^4]: The evidence disclosed that in 2003 the parties had discussed the issue of compensation upon the recall of a file. The Bank made it clear, and in the result Siskinds accepted, that no contingency or other fee would be paid in the event the Bank recalled a file.