Cerson et al. v. McCarney Greenwood and Others, 2015 ONSC 3461

COURT FILE NO.: CV-08-00355856-0000

DATE: 20150603

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BRIAN T. CERSON, THE CERSON FAMILY TRUST and 1359904 ONTARIO INC., Plaintiffs

AND:

McCARNEY GREENWOOD LLP, EMGEE MANAGEMENT SERICES, 1360901 ONTARIO INC., REPORTECH COMPUTER SERVICES INC., MG FORENSIC ACCOUNTING & INVESTIGATIONS LP, MG FORENSIC ACCOUNTING AND INVESTIGATIONS INC., MG VALUATIONS LP and MG VALUATIONS INC., Defendants

BEFORE: STEWART J.

COUNSEL: Frank Bowman, for the Plaintiffs

Edward Babin and Cynthia Spry, for the Defendants

HEARD: In Writing

costs ENDORSEMENT

[1] In my reasons for decision following trial and subsequent supplementary reasons with respect to additional outstanding issues, I invited counsel for the parties to provide written submissions on costs and interest if those issues could not be resolved.

[2] I now have received and reviewed lengthy and detailed submissions from the parties with respect to both costs and interest.

Costs

[3] Cerson succeeded in recovering relief by way of an award of damages in this action, even though he did not prevail on each and every argument pursued.

[4] Cerson takes the position that his total recovery amounts to $685,126.29. He seeks his costs on a partial indemnity basis in the amount of $342,472.53, inclusive of disbursements.

[5] I refer collectively to the Defendants as McCarney Greenwood. McCarney Greenwood does not appear to dispute Cerson’s calculation of recovery, but asserts that Cerson’s unsuccessful claims for entitlement to an order dissolving the firm and payment for the alleged value of his share of goodwill in the firm took up the bulk of time spent at trial. Because these issues were resolved in its favour, McCarney Greenwood characterizes itself as the successful party and claims its costs on a partial indemnity basis in the amount of $495,631.16

[6] As was noted in my reasons for decision, most of the issues in dispute in this action arose due to the absence of a comprehensive written partnership agreement among the parties. It might fairly be observed that there were so many individual items in dispute such that the parties could be fairly described as being unable to agree on the time of day. In my view, each side bears some responsibility for the length of trial time devoted to determining what might otherwise have been a simple arithmetical calculation of the payment entitlement owing to a partner departing from a firm of professionals. Cerson was not paid anything, and was forced to launch this action.

[7] Although Cerson did not succeed in his effort to dissolve the firm, I observe that he did not pursue this remedy with any great vigour at trial. Rather, his principal objective was to obtain a judgment reflecting what he considered his many years at the firm and his partnership agreement entitled him to, with a prime and ultimately unsuccessful focus on a calculated payout of goodwill value as the proper measure of his entitlement.

[8] As it turned out, it was determined that he had no legal entitlement to such payout on account of goodwill. However, the negative effect of that finding was offset somewhat by a conclusion that he was instead entitled to receive from his remaining partners who continued to constitute the firm a form of pension payments pursuant to its then-existing retirement scheme (NRF) for partners.

[9] In addition, Cerson successfully defended the counterclaim advanced against him. I note as well, however, that comparatively little of the evidence adduced over the fifteen days of trial was devoted to substantiating the counterclaim, despite Cerson’s argument that it was pursued aggressively through trial.

[10] Although Offers to Settle were exchanged by the parties during the course of the litigation, Cerson never delivered an offer pursuant to the rules upon which he relies. Indeed, McCarney Greenwood argues that Cerson never delivered an offer for any amount even close to the final result, pointing to the fact that his offer made just prior to trial was for $950,000.00.

[11] McCarney Greenwood relies on an offer made by it on September 14, 2009 for $500,000.00, to be paid in equal monthly instalments over 60 months, beginning on January 31, 2010. That offer was outstanding through to the trial and purportedly increased at mediation in October 2012. No other formal written offer pursuant to the Rules has been produced or is relied upon by McCarney Greenwood.

[12] Although McCarney Greenwood argues that had Cerson accepted that offer he would have been much better off than he was following trial, I cannot agree. The amount offered by it was to be paid over 5 years, with no provision for interest. It is not characterized as any head of damages that might receive favourable tax treatment. There was no amount included for Cerson’s legal costs or a method of their assessment and payment. Rather, the amount offered was to decrease progressively as defence costs increased. In my view, that offer should not operate to deprive Cerson of his costs or to justify an award of costs to the Defendants.

[13] It may be observed, however, that the settlement position of the defence was closer to the ultimate result than that which was maintained by Cerson.

[14] Nevertheless, I am of the view that Cerson is entitled to an award of costs. The principal question relates to the amount of those costs to be calculated on a partial indemnity basis.

[15] In exercising discretion with respect to costs, I am guided by the considerations set forth in Rule 57.01(1) as well as the overriding principle of proportionality.

[16] This trial proceeded over three weeks and required additional written submissions and attendances. The issues raised at trial were obviously of vital importance to the parties. Although Cerson succeeded at trial, he failed in his bid for a dissolution of the partnership or a share of goodwill value. The latter issue, in particular, absorbed much trial time and was the subject of expert evidence. Further, the preponderance of issues which were the subject of additional submissions were resolved in McCarney Greenwood’s favour.

[17] Taking all of these considerations into account, I am of the view that a fair and reasonable amount to award Cerson for his costs of the action is $200,000.00, inclusive of disbursements and applicable taxes.

Interest

[18] I have received lengthy submissions from the parties on the subject of interest.

[19] I see no reason to depart from the approach that interest on that part of the judgment that reflects the amount to which Cerson was entitled to receive when he left the firm should be calculated in accordance with s. 127(1) of the Courts of Justice Act from the date of his departure, when his cause of action arose. Counsel advise that the applicable rate is therefore 4.3%.

[20] Excepted from that approach, however, should be that part of the judgment reflecting Cerson’s entitlement to NRF payment. That part of his recovery should attract no interest component as it represents an entitlement to a future payment. In addition, the interest rate to attach to payout of his capital which would have been over a period of three years should be adjusted to 3% to reflect the timing of such payments.

STEWART J.

Date: June 3, 2015