CITATION: Bacic v. Millennium Educational & Research Charitable Foundation, 2015 ONSC 2247
Receivership Action COURT FILE NO.: 13-57904 DATE: 2015/04/10
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 101 OF THE
COURTS OF JUSTICE ACT, R.S.O. 1990, c. C.43, AS AMENDED
AND IN THE MATTER OF SECTION 248(3)(b) OF THE
ONTARIO BUSINESS CORPORATIONS ACT, R.S.O. 1990, CHAPTER B.16
AND IN THE MATTER OF SECTION 241(3)(b) OF THE
CANADA BUSINESS CORPORATIONS ACT, R.S.C. 1985, c. C-44
AND IN THE MATTER OF SECTION 253(3)(b) OF THE
CANADA NOT-FOR-PROFIT CORPORATIONS ACT, S.C. 2009, c.23
AND IN THE MATTER OF THE
BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3
BETWEEN:
LILY BACIC, RONALD AYOUB, SANDRA AYOUB, DONALD HUTCHINSON, GLORIA HUTCHINSON, KIM KRUK, DALE HEIN, PAMELA STONE, CAROLINE LEWANDOWSKY, LIM LEWANDOWSKY, ANNE LEFIER, GARY McGINN, DAVID HAMILTON, JAMES MILLER, HELENE LAMADLEINE, MARY LOU FISHER, ALLAN BRETT, RICHARD MELCER, STEPHEN CALDWELL, WENDY CALDWELL, BARRY DOUCETTE, COLLEEN MOORE, MICHELLE VEZEAU, DAVID KORNELSEN, KEVIN HARSH, LUC MALTAIS, COLLEEN MALTAIS, BOB MECH, A.A.N.T. SOFTWARE CORPORATION, TERRANCE FINNIGAN, JAMES JOSS, DAVID WISKOWSKI, MOE LITWACK, TOMY ISSA and GEORGE BOSZORMENY
Applicants
and
MILLENNIUM EDUCATIONAL & RESEARCH CHARITABLE FOUNDATION (formerly the THOMAS C. ASSALY CHARITABLE FOUNDATION), ASSALY INVESTMENT PROGRAM CORPORATION, ASSALY FINANCIAL CORPORATION, ACT 1 CORP. and MILLENNIUM SPRINGS DEVELOPMENT & CONSTRUCTION
CORP. (aka MILLENNIUM SPRINGS PROPERTIES LTD.) THOMAS G. ASSALY, KAREN FLOYD-ASSALY, and FRANK H. FEE, III
Respondents
AND
Bankruptcy Action COUrt File No: 33-165343
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF MILLENNIUM EDUCATIONAL &
RESEARCH CHARITABLE FOUNDATION (formerly the THOMAS C. ASSALY
CHARITABLE FOUNDATION) a registered charity carrying on business in the
City of Ottawa, in the Province of Ontario (the “Foundation”)
Court File Nos.: 33-165372; 33-165369; 33-165370 and 33-165371
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF ASSALY FINANCIAL CORPORATION, OF THE CITY OF OTTAWA, IN THE PROVINCE OF ONTARIO, ASSALY INVESTMENT PROGRAM CORPORATION, OF THE CITY OF OTTAWA, IN THE PROVINCE OF ONTARIO AND ACT 1 CORP., OF THE CITY OF OTTAWA, IN THE PROVINCE OF ONTARIO (collectively the “Bankrupt Respondent Corporations”)
BEFORE: Kane J.
Counsel:
Martin Black, counsel for the Estate of Thomas C. Assaly (the “Estate”)
Jason Dutrizac, counsel for Doyle Salewski Inc. (“DSI”) the court appointed Interim Receiver of the Foundation, the Receiver and Manager of the respondent corporations in the Receivership Action, other than the Millennium Educational & Research Charitable Foundation (“Foundation”), and the Trustee in the Bankruptcy of the Foundation (the “Trustee”)
Justin R. Fogarty, counsel for the Applicants in the Receivership Action and the Applicants in the Bankruptcy Action (the “Applicants”)
HEARD: By Written Submissions
COSTS ENDORSEMENT
[1] The Estate by its trustee Robert Assaly appealed the Notice of Disallowance by the Trustee dated May 8, 2014 of its Proof of Claim for an unsecured claim in the amount of $3,813,507 (the “Claim”) on the grounds that:
(a) The Estate had a first priority claim to the assets, funds and receipts of the Foundation to the extent of its claim of $3,813,507, ahead of the Applicants and other creditors of the Foundation.
(b) The Applicants and creditors of the Bankrupt Respondent Corporations in the Receivership Action and of the Bankrupt Respondent Corporations are not to share in the assets, funds and receipts of the Foundation by way of pooling or consolidation of assets, funds or receipts.
(c) Pursuant to s. 135 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (the “BIA”), the gifts and settlements made by the late Thomas C. Assaly (“TCA”) to create the Foundation had failed and must be returned in first priority to the Estate in priority to the Foundation’s creditors and other claimants.
(d) TCA if alive would have a claim as settlor to the assets under receivership on the basis that the purposes of his gift to the Foundation were subject to a condition subsequent that the monies be used for the express purposes of the Foundation. Non-fulfillment of the condition subsequent will terminate the gift whereupon the property reverts to the donor.
(e) In the alternative, the monies held in the Foundation as at the date of the Guardianship Order, namely $3,817,000, are trust property by virtue of the provisions of the Charities Accounting Act.
[2] The appeal on the above grounds by the Estate of the Receiver’s disallowance of the Proof of Claim was dismissed for the reasons given.
[3] DSI seek costs of this appeal consisting of:
(a) Fees on a full indemnity scale of $19,939 including HST, or
(b) Fees on a substantial indemnity scale of $17,945 including HST; and
(c) Disbursements of $300;
based on the hours and rates of:
(i) J. Dutrizac ‒ 56.6 hours at $300/hour, and
(ii) Law Clerk – 7.4 hours at $90/hour.
[4] The Applicants seek costs of this appeal consisting of:
(a) Fees on a full indemnity scale of $20,137 including HST, using hourly rates of $750 and $375, or
(b) Fees on a substantial indemnity scale of $18,677 including HST, using hourly rates of $650 and $200,
based on the hours of:
(i) J. Fogarty of 23.5; and
(ii) P. Masic of 6.7 hours.
[5] The court was not presented with time dockets or a breakdown, date and description of the work performed by the claimants for cost which limits the ability to analyze the same.
[6] The Estate speculates the hours of J. Dutrizac must include review and consideration of the Claim and its subsequent rejection by DSI prior to being served with this appeal. DSI responds that is not the case and all time claimed is subsequent to service of this appeal.
COST ENTITLEMENT
[7] DSI was successful in defeating the appeal of the disallowance of the Estate’s Proof of Claim and is therefore entitled to costs.
[8] As framed, the appeal directly impacted the interest of the Applicants, warranted their participation, was unsuccessful and entitle them to costs.
EXPERIENCE AND HOURLY RATES
[9] The court in its cost award dated October 16, 2013 in these proceedings determined the appropriate hourly rates for Messrs. Fogarty and Masic were $650 and $200 respectively. Those rates should apply here.
[10] The hourly rate of $300 for J. Dutrizac, called in 2004, is appropriate.
REASONABLE EXPECTATIONS
[11] This is an appeal of a rejection by a statutory and court appointed officer. It was not a trial. It was the equivalent of an application without oral evidence.
[12] The Estate presented multiple reasons to grant the appeal and thereby necessitating a corresponding level of work by DSI and the Applicants.
[13] Counsel for the Estate indicates he personally docketed some 22 hours on this appeal. The court does not have those time dockets, dates or descriptions nor whether anyone else in the office of Mr. Black docketed time in order to compare that to the 56 hours presented by J. Dutrizac.
AMOUNT CLAIMED
[14] The claim of priority of $3,813,507 is substantial. That quantum of claim warranted a fulsome response and hearing preparation which the Estate should have expected. That priority claim is to be compared to the Estate’s May 27, 2014 offer of settlement which combined, involved maximum consideration of some $109,000, and may be why the time expended by M. Black was only some 22 hours.
[15] The interests of DSI and the Applicants were the same with DSI taking the lead and the Applicants presenting a supporting position. The individual positions of DSI and the Applicants on the appeal did not necessitate separate preparation or consideration.
[16] The comparison and differences of the combined total hours of lawyers require consideration, namely:
(a) 30.7 hours for Messrs. Fogarty and Masic and 22 hours for M. Black, versus 56.6 hours for J. Dutrizac;
(b) 86.8 hours combined for DSI and the Applicants, versus 22 for M. Black.
[17] It is uncertain why comparatively, the hours of DSI are so high. The court concludes there should be some reduction in fees claimed representing DSI as the difference in hours is too high.
COMPLEXITY
[18] The issues on appeal were numerous but of moderate complexity.
IMPORTANCE
[19] The appeal was very important. Success of the Estate’s priority claim would have defeated the Applicants’ recovery and neutered the prior inspection, receivership and bankruptcy proceedings which the Estate observed from a distance.
CONDUCT LENGTHENING
[20] This is not a relevant consideration.
IMPROPER OR UNNECESSARY STEPS
[21] This is not a relevant consideration.
OFFERS
[22] As stated, the Estate submitted a written offer to settle this matter and two Small Claims Court actions against the Robert Assaly and G. Assaly, about which this court has no information. The Estate in any event did not obtain results equal to or in excess of the offer, which therefore is not material.
PERSONAL LIABILITY OF TRUSTEE
[23] DSI and the Applicants seek this cost award against the trustee of the Estate, Robert Assaly personally on the basis of Impact Tool & Mould Inc. (Re), 2008 ONCA 187, Salter v. Salter Estate, 2009 ONSC 28403 (ONSC), Duncan Estate v. Baddeley, (1995), 26 Alta. L.R. (3d) 403, 1995 ABQB 9010, Shafer v. Jones, 1950 ABKB 461, 1950 CarswellAlta 44, [1950] 2 W.W.R. 625 and Cresswell Estate v. Creswell Estate, 1976 AltaSCAD 56.
[24] Costs were awarded in Impact Tool, against the trustee in bankruptcy who acknowledged there were no assets in the bankrupt estate.
[25] DSI submits there are no assets in the Estate. While that would make sense given TCA died in 2007, the court has no evidence to that effect.
[26] The Estate denies this allegation but provides no evidence as to the existence or details of assets beyond the two creditor claims filed by Robert Assaly in the estate of Assaly Financial Corporation et al., totaling $117,234, of which some 22% recovery is anticipated, or $25,791.
[27] The Estate of Salter does not address the point directly.
[28] Boynton v. Boynton (1879), 4 App. Cas. 733 (H.L.), 16 Hals. (3d) at p. 480 and Duncan Estate, at paras. 11-13, stand for the principles that:
(a) Ordinarily, an executor or administrator who unsuccessfully sues a third party is personally liable for the costs of the action;
(b) Whether the executors are personally liable is at the discretion of the Court; and
(c) If the consent of the beneficiaries or the sanction of the Court as to bringing the proceeding is not obtained, the personal representative litigates at his own risk as to costs, in the sense that he may be deprived of his right to be indemnified out of the estate if the Court considers that he acted unreasonably in prosecuting or defending the action.
[29] The Estate presented no contrary jurisprudence.
[30] The Estate and therefore G. Assaly, spouse of the late TCA, Robert Assaly, his sister and Thomas G. Assaly stood to benefit had this appeal been successful. Robert Assaly states in these submissions he had the consent of all beneficiaries of TCA to bring this appeal other than his brother Thomas G. Assaly. There is no suggestion of a court order authorizing this appeal.
[31] Of the parties to this appeal, only Robert Assaly is aware whether there are current realizable assets within the Estate capable of paying a cost award against it.
[32] Estates of deceased, or a trustee of an estate without assets, should not be immune to the cost implications of civil litigation as to do so would encourage litigation by such parties to the disadvantage of their adversaries.
[33] Based on the above authorities, Robert Assaly should assume the risk a cost award will be defeated by the absence of estate assets of a deceased who passed away seven years ago.
[34] For these reasons, the costs award herein to DSI and the Applicants are awarded against the Estate of TCA and Robert Assaly, jointly and severally. To the extent such costs are recovered from Robert Assaly, he shall be entitled to full recovery thereof from the Estate without consent of other beneficiaries of TCA.
[35] DSI as Receiver and Trustee is permitted upon any distribution to creditors in those proceedings to offset any entitlement of the Estate or Robert Assaly therein against any unpaid portion of this cost award.
CONCLUSION
[36] The scale of costs awarded is:
(a) Full indemnity in the case of counsel for the court appointed Receiver DSI; and
(b) Partial indemnity to the Applicants.
[37] Costs, including HST and disbursements, are fixed and awarded as follows:
(a) $15,000 to DSI on a substantial indemnity scale; and
(b) $12,000 to the Applicants on a partial indemnity scale;
which are payable by the Estate and Robert Assaly jointly and severally within 30 days from the date hereof.
Kane J.
Released: April 10, 2015
CITATION: Bacic v. Millennium Educational & Research Charitable Foundation, 2015 ONSC 2247
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: LILY BACIC et al, Applicants
AND
MILLENNIUM EDUCATIONAL & RESEARCH CHARITABLE FOUNDATION, et al Respondents
BEFORE: Kane J.
COUNSEL: Martin Black, counsel for the Estate of Thomas C. Assaly
Jason Dutrizac, counsel for Doyle Salewski
Justin R. Fogarty, counsel for the Applicants
COSTS ENDORSEMENT
Kane J.
Released: April 10, 2015