Bayerische Landesbank v. Seiber, 2015 ONSC 1148

COURT FILE NO.: 04-CV-269165 CM3

DATE: 20150223

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Bayerische Landesbank Girozentrale, Plaintiff

– AND –

Grant Thornton Limited, Trustee of the Estate of Helmut Sieber, a bankrupt, Helga Sieber and H.J. Sieber Farms Ltd. and Rosen Ridge Farms Ltd., Defendants

BEFORE: Justice E.M. Morgan

COUNSEL: Benjamin Bathgate and Adrienne Boudreau, for the Plaintiff

Allen Wilford and Esra Samli, for the Defendant, Rosen Ridge Farms Ltd.

Howard Cohen, for Helmut Sieber

HEARD: January 27-31, May 5-6, June 6, and August 6, 2014, with written submissions on costs

COSTS ENDORSEMENT

[1] I issued my judgment in this action on January 5, 2015, after a 9 day trial. The Plaintiff was entirely successful against the Defendant, Rosen Ridge Farms Ltd. (“Rosen Ridge”). The action had previously settled as against the other Defendants and costs are not in issue as against those other Defendants.

[2] Helmut Sieber in his personal capacity had counsel present at the trial, but his counsel was a passive observer and did not actively participate in the trial. There are no costs to be paid by or to Mr. Sieber personally.

[3] The action has been litigated for the better part of a decade. The Plaintiff’s costs submissions cover the period of the action since April 2005 up to the end of trial in August 2014. The matter was relatively complex, which substantial pre-trial discovery and legal maneuvering. The trial itself involved eight days of evidence, including expert witnesses on both sides and witnesses from across Ontario as well as from Europe. Argument involved issues of trust law, fraudulent conveyances, as well as witness credibility and interpretation of contract and trust documents. Final submissions were a full day, and would have been substantially more had it not been for both sets of counsel submitting very thorough written submissions which summarized the evidence and analyzed the legal issues.

[4] Counsel for the Plaintiff has divided costs into three sequential stages. The first stage, or Tranche 1, as counsel has termed it, runs from April 19, 2005 to September 29, 2009. This represents the period from the outset of Plaintiff’s counsel’s retainer to settlement of the action with all of the Defendants other than Rosen Ridge. For Tranche 1, the Plaintiff seeks recovery of 50% of its fees on a partial indemnity scale and 50% of its disbursements. This comes to a total of just over $115,000 in fees and $17,372.01 in disbursements. The work done during this time includes, inter alia, the initial review of pleadings, preparation for and conducting of discoveries, answering undertakings, and preparing for and attending at mediation.

[5] The 50% discount for Tranche 1 reflects the fact that during this stage the Plaintiff was litigating the action against Rosen Ridge as well as other Defendants. Counsel for the Plaintiff points out that the other Defendants were, effectively, Helmut Sieber and his former spouse, Helga Sieber, and that both of these individuals testified at trial so that the discovery and other pre-trial dealings with them were also relevant to the case against Rosen Ridge. Moreover, the action concerned a property that had been conveyed to Rosen Ridge by the other Defendants, and so regardless of the position of the other Defendants the entire matter had to be litigated against Rosen Ridge as the registered titleholder of the property. Accordingly, a 50% reduction in partial indemnity costs for this stage of the action strikes me as entirely reasonable.

[6] The second stage, or Tranche 2, runs from September 30, 2009 to August 28, 2012. This represents the period from the settlement with the Defendants other than Rosen Ridge to the date of service by the Plaintiff of an Offer to Settle with Rosen Ridge. For Tranche 2, the Plaintiff seeks recovery of its fees on a partial indemnity scale and all of its disbursements. This comes to a total of just over $13,500 in fees and $6,367.96 in disbursements. The work done during this time includes, inter alia, legal research and property searches, communication and instruction of valuation experts, obtaining property appraisal, and reviewing answers to undertakings.

[7] The third stage, or Tranche 3, runs from August 29, 2012 to September 30, 2014. This represents the period from the date of the Plaintiff’s Offer to Settle with Rosen Ridge through the end of the trial. For Tranche 3, the Plaintiff seeks recovery of its fees on a substantial indemnity scale and all of its disbursements. This comes to a total of just under $500,000 in fees and $74,646.20 in disbursements. The work done during this time includes, inter alia, preparation for and attendance at pre-trial hearings, obtaining a certificate of pending litigation, preparing a chronology and agreed statement of facts, preparing documents briefs and compendium, review of legal issues, preparing for examination of fact and expert witnesses, preparing opening and closing submissions, drafting written argument and written reply argument, and reviewing Rosen Ridge’s written argument.

[8] The Plaintiff seeks costs on a substantial indemnity scale for Tranche 3 based on the fact that it served an Offer to Settle under Rule 49 of the Rules of Civil Procedure on Rosen Ridge months before the opening of trial. This offer was not accepted by Rosen Ridge and, in the result, the Plaintiff did the same or better than it would have done under the Offer. The Offer to Settle would have settled all outstanding issues in the proceeding; it required Rosen Ridge to either pay the Plaintiff $310,000 or to transfer title to the property at issue to the Plaintiff. In the result, my judgment ordered the property to be transferred to the Plaintiff. I did not come to a conclusion with respect to the current dollar value of the property; however, I reviewed the expert and other evidence with respect to the value of the property at the time of its transfer in September 2003, and found that the relevant opinions ranged from a low of $220,000 to a high of $489,000.

[9] Given that the order flowing from my judgment was one of the ways in which the Offer to Settle would have resolved the action, Rosen Ridge’s failure to accept the Offer ensured that the Plaintiff did at least as well at trial as it would have done had the Offer been accepted. Rule 49.10(1) provides:

Where an offer to settle,

(a) is made by a plaintiff at least seven days before the commencement of the hearing;

(b) is not withdrawn and does not expire before the commencement of the hearing; and

(c) is not accepted by the defendant,

and the plaintiff obtains a judgment as favourable as or more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer to settle was served and substantial indemnity costs from that date, unless the court orders otherwise.

[10] It is clear to me that, strictly speaking, the terms of Rule 49.10(1) have been met. The Plaintiff obtained a judgment precisely as favourable as the terms of its Offer. That means that it is entitled to substantial indemnity costs for Trenche 3 and partial indemnity costs for Trenches 1 and 2 (with a discount of 50% for Trenche 1, as explained in paragraph 5 above).

[11] While I do not know the present value of the property in issue, I can conclude from the decade-old valuations that were in evidence that the level of fees incurred by the Plaintiff was high but not disproportionate to what was at stake. I am cognizant of the fact that a Plaintiff may commence action to recover property of a certain value, and that the litigation then takes on a life of its own as the Defendant puts the Plaintiff through its paces.

[12] Rosen Ridge and its counsel defended the matter vigorously, as they were entitled to do. In addition to that, the maneuverings of Mr. Sieber with respect to the property were difficult to unwind. Plaintiff’s counsel invested the time that it took to be extremely well prepared for the trial. While Rosen Ridge’s counsel takes aim at certain details of Plaintiff’s counsel’s Bill of Costs and claims that various steps were unnecessary or repetitive, I am not willing to quibble with Plaintiff’s counsel’s success in that way; their level of preparation paid off with a successful result.

[13] The fixing of costs is subject to the trial judge’s discretion under section 131 of the Courts of Justice Act. That discretion is generally to be exercised in accordance with factors listed in Rule 57.01 of the Rules of Civil Procedure. These include, first and foremost, the principle of indemnity for the successful party (57.01(1)(0.a)). They also take into account the expectations of the unsuccessful party (57.01(1)(0.b)). Mr. Sieber, the directing mind of Rosen Ridge, is an experienced businessman who has engaged in litigation in the past; it was certainly within his contemplation that transferring his property while a judgment debtor and undischarged bankrupt would spawn some rather expensive litigation by creditors such as the Plaintiff. The complexity of the issues may also be taken into account (57.01(1)(c).

[14] I expressed my one concern about the conduct of the trial at paragraphs 9 to 11 of my judgment. Plaintiff’s counsel spent some pre-trial time preparing, and much of the first day of trial presenting, a maze of property transactions engaged in by Mr. Sieber that were not in issue in the action. Those transactions were not relevant to the specific property in issue, and it was certainly possible to prove the fraudulent conveyances without going into them. If anything, these superfluous transactions and the colour-coded chart that traced them were a distraction from the important issues that the Plaintiff ultimately managed to prove.

[15] I would therefore reduce the fees sought by the Plaintiff in Trenche 3 by one-ninth of the $500,000 sought, or $55,555. Using the rounded numbers set out above, that leaves costs in the amount of $444,445 for Trenche 3, $13,500 for Trenche 2, and $115,000 for Trenche 1, for a total claim of $572,945 in respect of fees. It also leaves disbursements of $74,646.20 for Trenche 3, $6,367.96 for Trenche 2, and $17,372.01 for Trenche 1, for a total claim of $98,386.17 in respect of disbursements.

[16] Overall, the court is to consider what is “fair and reasonable” in fixing costs: Boucher v Public Accountants Council (Ontario) (2004), 2004 14579 (ON CA), 71 OR (3d) 291 (Ont CA), at para 26. The Plaintiff has expended substantial resources in successfully pursuing the reversal of a transaction – a fraudulent conveyance – that the court condemns in a strenuous way. With the 1/9 reduction for fees in Trenche 3 as set out above, the Plaintiff’s costs request is fair and reasonable.

[17] Rosen Ridge shall pay the Plaintiff costs in the total amount of $671,331.17, inclusive of disbursements and HST.

Morgan J.

Date: February 23, 2015