CITATION: Gowling Lafleur Henderson LLP v. Transpharm Canada Inc., (Toronto Institute of Pharmaceutical Technology), 2015 ONSC 2316

COURT FILE NO.: 12-54168

DATE: 2015/04/15

ONTARIO

SUPERIOR COURT OF JUSTICE

IN THE MATTER OF the Solicitors Act, R.S.O. 1990, c. S.15

AND IN THE MATTER OF Gowling Lafleur Henderson LLP Solicitor

BETWEEN:

GOWLING LAFLEUR HENDERSON LLP

Applicant

– and –

TRANSPHARM CANADA INC. d.b.a. TORONTO INSTITUTE OF PHARMACEUTICAL TECHNOLOGY

Respondent

Jaimie Lickers and Guy Regimbald, for the Applicant

Bola Adetunji, for the Respondent

HEARD: September 22-25, 2014 (at Ottawa)

COSTS DECISION

kane j.

BACKGROUND

[1] This was an assessment by the Applicant law firm (“Gowlings”) of its unpaid accounts against the Respondent, Transpharm Canada Inc. (“Transpharm”).

[2] Transpharm disputed its retainer of Gowlings for legal services rendered as to patent matters. Transpharm alleged that the patent services rendered were at the request of and for the personal benefit of A. MacGregor who was the inventor, patent applicant and patent owner. Mr. MacGregor is also President, CEO and principal shareholder of Transpharm.

[3] Who retained and was the client of Gowlings as to these patent services is the central issue. Subject to that issue, Transpharm on the first day of the hearing accepted the appropriateness of the fees and disbursements charged to Gowlings by foreign patent agents totalling some $136,000 of the approximately $174,000 fees and disbursements being assessed. This admission shortened the hearing.

[4] Transpharm could have further narrowed the hearing in admitting without prejudice to the retainer issue, the appropriateness of Gowlings’ fees and disbursements of some $37,519, as Transpharm did not in its evidence or argument place the same in issue. The hearing was slightly extended without that admission by Gowlings leading evidence as to its accounts and years of call of the lawyers involved. Even with that admission however, Gowlings would still have been required to present Mr. Colton as their witness to address who retained that firm for the services rendered.

[5] Hindsight is a wonderful thing. This four-day hearing as to who was the client would not have been necessary had Gowlings obtained a retainer agreement from Transpharm, or at least issued an engagement letter to that corporation. This is particularly so because Mr. MacGregor, the President of Transpharm and patent inventor, instructed Gowlings he was to be shown as the patent applicant and registered owner upon issuance of patents.

[6] Gowlings in the past performed other legal work for Transpharm and a related business or corporation, Toronto Institute of Pharmaceutical Technology. It therefore knew it was dealing with several entities.

[7] Gowlings also had Mr. MacGregor in 2009 sign an engagement letter on behalf of Transpharm in a litigation matter in which Gowlings represented Transpharm and Mr. MacGregor as defendants.

[8] Transpharm did not argue that the absence of a retainer agreement or engagement letter was determinative of the issue as to who retained Gowlings. Transpharm in fact accepted some responsibility as it did not before 2012 advise Gowlings that Mr. MacGregor personally was their client.

[9] Transpharm at the commencement of the hearing sought leave to expand the assessment to include Gowlings’ accounts prior to the stated period of review, but then withdrew that request. This did not lengthen the hearing.

[10] Based on the evidence, this court determined that Transpharm had retained and was that law firm’s client in relation to the services rendered and that the fees and disbursements as invoiced and outstanding were owed together with interest.

POSITION OF THE PARTIES

[11] Gowlings seeks costs herein on a substantial indemnity, or alternatively a partial indemnity scale, in the amount of $105,684 and $71,944 respectively.

[12] It is submitted that substantial indemnity is the appropriate scale because the Respondent:

(a) Had no credible evidence to support its defence that the retainer was that of Mr. MacGregor. Transpharm should have been admitted under R. 57.01(1)(g) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, its retainer of Gowlings. That would have shortened the hearing under R. 57.01(1)(e) by three days and preparation time by Gowlings; and

(b) Caused additional preparation time to be expended unnecessarily by the Applicant in Transpharm’s initial request that the assessment be expanded to include accounts prior to the time period being assessed and then withdrew that request, which constitutes an unnecessary step under R. 57.01(1)(f)(i).

[13] Transpharm filed no reply to Gowlings’ cost submissions.

ANALYSIS

[14] The costs of a proceeding are in the discretion of the court: Courts of Justice Act, R.S.O. 1990 c. C.43, s. 131(1).

[15] Cost entitlement normally follows the outcome which supports Gowlings’ entitlement to a cost award: Isaacs v. MHG Int. Ltd. (1984), 1984 CanLII 1862 (ON CA), 45 O.R. (2d) 693 (C.A.).

PRINCIPLE OF INDEMNITY

[16] The hourly rates charged based on year of call are appropriate. More junior lawyers and a law clerk were appropriately used and limited cost.

[17] The hourly rates increased up to three times as this assessment period began in 2012. It was converted to a trial of the retainer issue, with Transpharm being substituted as the Respondent, in August, 2014. The hearing occurring in September, 2014.

TRANSFER OF ASSESSMENT TO SUPERIOR COURT

[18] Gowlings’ two lawyers docketed 17.2 hours, including 8.4 hours of a more senior lawyer. This relates to the transfer by motion of this assessment to Superior Court because Transpharm disputed the retainer. The resulting transfer due to the disputed retainer was inevitable. This amount of time seems a bit high.

CASE MANAGEMENT/CASE CONFERENCE

[19] 25.9 hours were docketed by three lawyers to obtain case management and participate in a case conference. The involvement of that many lawyers and the time required for that third lawyer to become current on the file resulted in increased hours. The Applicant has the right to select the lawyer who will have carriage however the use of a third out of town lawyer regarding work performed in Ottawa, and an Ottawa hearing, led to increased hours and travel and lodging disbursements.

RESEARCH

[20] The two more junior lawyers together docketed 24.5 hours research which is high.

[21] Some of that time was in response to Transpharm attempting to broaden the period of invoices to be assessed which it then withdrew after brief argument during day one of the hearing.

[22] Some of the research hours would not have been necessary if there had been a retainer agreement. Some of the “preparation of argument” belongs in the hearing section.

ASSESSMENT HEARING

[23] A total of 261 hours were docketed under this heading. That includes 28 hours by a law clerk which is fine.

[24] It includes preparation of an affidavit of documents which required broader document review and assembly because: (a) Transpharm was seeking leave to expand the period of invoices to be assessed and (b) Gowlings had to rely on past documentation to evidence who was the client as there was no retainer agreement.

[25] The time docketed was by the more junior lawyer from Hamilton and by the senior of the three lawyers who docketed 80.6 hours over three years and attended the four day hearing in a supporting role.

[26] The Applicant’s submission that this should have been a simple one day assessment hearing before the Master is accurate. That would have been the case if the firm had obtained a signed retainer agreement.

[27] The hearing and its preparation involved numerous historical documents beyond invoices to evidence who was the client, rather than the simple introduction of the invoices in issue, a signed retainer from the client and then argument as to the hours claimed and services rendered.

[28] The length of time to prepare for and conduct this hearing is due to the absence of a retainer agreement which the firm had obtained from this same client for other matters. The absence of this agreement should result in a decrease in the hours claimed. To not do so compensates a law firm for failing to obtain a standard retainer agreement which would have reduced preparation and hearing time, based on the Applicant’s submission, by up to 75%.

REASONABLE EXPECTATION

[29] The losing party with some justification might argue that $105,000 on a substantial indemnity scale, or $72,000 on a partial indemnity scale, exceeds normal expectations for an assessment of fees and disbursements totalling $174,000, the vast majority of which are disbursements from foreign patent firms which were consented to.

[30] The Respondent would also normally argue that the 261 hours docketed for preparation and attending the four day hearing of a single issue, being the equivalent of 32 eight hour days, or 16 days for each of the two lawyers, exceeds normal expectations given the limited scope of the hearing.

[31] The court concludes the time in the Assessment Hearing section is too high, particularly as 80 of those preparation and hearing hours are by a more senior lawyer called in 2002, with regular billing rate in 2014 of $370 per hour and not lead counsel in the hearing. By comparison, that same lawyer in the Transfer of Assessment and the Case Management Conference sections, docketed 8 hours and .8 hours respectively.

[32] The 142 hours docketed in this section by the more junior counsel who presented the Applicant’s case in the hearing, demonstrates she performed the hearing preparation.

[33] Two counsel attending the hearing was not excessive had they been two junior lawyers, or had junior hourly rates been claimed.

LEVEL OF SUCCESS

[34] The Applicant was fully successful.

COMPLEXITY

[35] The Applicant agrees the hearing issue was not overly complex. The quantity of documentation necessitated and relied upon again relates to the absence of a retainer agreement.

IMPORTANCE

[36] Collection of a firm’s legal fees is important and necessary.

CONDUCT SHORTENING OR LENGTHENING

[37] The Applicant argues that Transpharm should have admitted its retainer since it had no credible evidence and but for this defence, this would have been a one day assessment hearing before the Master. This it is submitted justifies substantial scale requested.

[38] Mr. MacGregor testified however he told Mr. Colton and his predecessor at Gowlings on several occasions that the patent work was for himself and not the corporation, as reflected in he being the applicant and owner in each case.

[39] This submission by the Applicant if correct would justify the substantial indemnity scale every time an opposing claim or defence was unsuccessful, making substantial indemnity the norm and not an exception. This submission is not accepted.

IMPROPER OR UNNECESSARY STEPS

[40] This issue is dealt with above.

DENIAL OR REFUSAL TO ADMIT

[41] This issue is dealt with above.

PARTIAL OR SUBSTANTIAL INDEMNITY SCALE

[42] An increase to the scale of substantial indemnity is warranted in cases such as:

(a) Those involving reprehensible conduct: Wallace Sign-Crafters West Ltd. v. 466126 Ontario Ltd. (1994), 28 C.P.C. (3d) 75 (Div. Ct.);

(b) Where the position of a party is presented in an abusive manner or is wholly devoid of merit unnecessarily increasing the cost of litigation: Standard Life Assurance Co. v. Elliott (2007), 2007 CanLII 18579 (ON SC), 86 O.R. (3d) 221 (S.C.J.);

(c) Involving unfounded allegations of fraud, dishonesty or other improper conduct seriously prejudicial to the character or reputation of a party: DiBattista v. Wawanesa Mutual Insurance Co. (2005), 2005 CanLII 41985 (ON SC), 78 O.R. (3d) 445 (S.C.J.); affirmed 2006 CarswellOnt 6011, (C.A.) and Murano v. Bank of Montreal (1995), 41 C.P.C. (3d) 143 (Ont. Gen. Div.) (Commercial List), or

(d) Where oppressive conduct is pleaded, but later abandoned: Isaacs.

[43] On the evidence, the court preferred and accepted the evidence of the Applicant that Transpharm retained Gowlings regarding these services. Transpharm however presented an arguable defence to the contrary.

[44] There is an absence of objectionable conduct sufficient to warrant costs on the scale of substantial indemnity. The absence of a signed retainer and the confusion as to who was the client was the responsibility of both parties.

[45] Partial indemnity is the appropriate scale.

QUANTUM

[46] The docketed hours for the above reasons are reduced by 115 hours from 328 to 213 hours. That is a reduction of 3 hours, 100 hours and 12 hours under sections 1, 3 and 4 respectively, to reflect equal responsibility for the retainer issue and a lower hourly rate for the senior lawyer at the hearing. The remaining hours still exceed a one day assessment.

[47] The hours deleted are deducted at an average partial indemnity rate of $170 per hour.

[48] The disbursement claim is reduced by deletion of travel and accommodation costs of the Hamilton lawyer, as those are expenses the firm voluntarily incurred.

[49] In the result, fees and disbursements are fixed and payable by Transpharm Canada Inc. within 30 days as follows:

(a) Fees on a scale of partial indemnity - $45,388, including HST, plus

(b) Disbursements of - $2,363, including HST,

for a total of - $47,751.

Kane J.

Released: April 15, 2015