Court File and Parties

CITATION: Bieberstein v. Kirchberger et al., 2015 ONSC 6136

COURT FILE NO.: CV-12-9746-00 CL

DATE: 2015-10-05

SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

BETWEEN:

HARRY BIEBERSTEIN Plaintiff

• and -

MARTIN KIRCHBERGER in his personal capacity and as a beneficiary of the KIRCHBERGER FAMILY TRUST and the KIRCHBERGER FIXED INCOME TRUST, CHRISTINE FRAZER (also known as CHRISTINE KIRCHBERGER) in her personal capacity and as a beneficiary of the KIRCHBERGER FAMILY TRUST and the KIRCHBERGER FIXED INCOME TRUST, GERRY CECILE in his personal capacity and as trustee of the KIRCHBERGER FAMILY TRUST and as a trustee of the KIRCHBERGER FIXED INCOME TRUST, BERNIE KORFMAN in his personal capacity and as trustee of the KIRCHBERGER FAMILY TRUST, ANDREAS KIRCHBERGER in his personal capacity and as a beneficiary of the KIRCHBERGER FAMILY TRUST and the KIRCHBERGER FIXED INCOME TRUST and the KIRCHBERGER FIXED INCOME TRUST, NICHOLAS KIRCHBERGER (also known as NICLAS-XAVER KIRCHBERGER) in his personal capacity and as a beneficiary of the KIRCHBERGER FAMILY TRUST and KIRCHBERGER FIXED INCOME TRUST, NOMEN FITNESS INC., THE BRANDING COMPANY, AMCK CAPITAL INVESTMENTS INC., 487223 ONTARIO LIMITED, HENRY WILMOT, 1171852 ONTARIO LIMITED carrying on business as G.K. YORK MANAGEMENT SERVICE, 2199036 ONTARIO INC., SOUTHERN SHORES ENTERPRISES, LLC, WEST REAL GRUNDSTUECKSEVERWALTUNG UND BESITZ GMBH, HILDEGARD KENDLINGER (formerly KIRCHBERGER), SUSANNE VIKTORIA SCHMIDT, CAROL ANNE DE VILLE, RICK FRAZER, CATHY ODEN, KATHY FOERG, KENNETH JOHN SHELLEY, DAVID WAYNE SHELLEY, MARIANNE C. JONES, MARIA BREM, AULFES-STEINMUELLER, CHRISTINE A. ADAM, MILLARD, ROUSE & ROSERUGH LLP (C.A.), GERRY CECILE & ASSOCIATES INC., STEPHEN C. FROST, MARY WELSH Defendants

BEFORE: Newbould J.

COUNSEL: Morris Cooper, for the plaintiff John F. Evans, Q.C., for the defendant Stephen C. Frost Aaron Postelnik, for the defendant Henry E. Wilmot John C. Teal, for the defendant Millard, Rouse & Rosebrugh LLP Jonathan L. Rosenstein, for the defendants Martin Kirchberger and Christine Frazer

HEARD: October 1, 2015

ENDORSEMENT

[1] On April 24, 2015 a motion to strike the fresh as amended statement of claim was set to be heard. Unfortunately, Mr. Cooper, the new lawyer for plaintiff, had not been given notice of that date by his client. Mr. Cooper was telephoned and he came down to the court. After discussion in court in which I made my preliminary views known about the pleading, and after a recess, a consent order was made dismissing the action against several parties, striking the fresh as amended statement of claim and granting leave to issue a fresh statement of claim against two parties.

[2] Mr. Cooper contends that his lack of notice was not an accidental slip but a deliberate decision collectively made by the moving parties’ counsel. That is an unfortunate contention and one that should not have been made. There is no basis whatsoever to suggest that Mr. Evans, a past president of the Advocates’ Society with a sterling reputation, or the other counsel, would have done such a thing. Nothing would be gained by bringing on a motion without giving notice to the opposing party as the motion would not be able to proceed. In fact, the problem lay with the failure of Mr. Dewart, the lawyer acting for Mr. Manning who wanted to get off the record against Mr. Bieberstein’s wishes, to advise anyone, including apparently Mr. Cooper after he was retained in early March, of the return date of the motion that had been set two months previously. Mr. Evans had advised Mr. Dewart of the April 24^th date by letter of February 20, 2015.

[3] Mr. Cooper says in hindsight he should not have come down that day to court when called, as he says nothing would have occurred that day. Apart from ignoring a request from me that he be called, it would have just put off the inevitable that would have taken place at another date.

[4] The fresh as amended statement of claim under attack was a dreadful pleading that stood no chance of standing up to a motion to strike it. It was amended following a decision of Justice Mesbur striking it with leave to amend, but it in no way complied with her order. When I pointed out my view to Mr. Cooper when he arrived, he did not argue that it was a proper pleading. I suggested that it be struck with leave to amend one more time and that serious consideration be given to narrowing the claims and reducing the number of defendants. Defence counsel were concerned that any further leave be given to deliver a fresh claim. After a break during which counsel arrived at a consensus, a draft order heavily amended in handwriting was handed up. It contained an order that the action be dismissed against the defendants Henry Wilmot, Stephen C. Frost and Millard Rouse & Rosebrugh LLP with costs of the action to be agreed or fixed, that the fresh as amended statement of claim be struck and that a fresh statement of claim could be issued as against the defendants Martin Kirchberger and Christine Frazer.

[5] I will deal first the costs claimed on behalf of Mr. Frost. He claims costs of the action on a full indemnity basis of $89,441.50 for fees, and with disbursements and HST, a total of $101,271.94. The basis for this scale is that claims of fraud, breach of fiduciary duty and trust were made against Mr. Frost, a lawyer. These kinds of claims are deserving of costs on the highest scale when made against an experienced person whose reputation is of the utmost importance. I reject completely the contention of Mr. Cooper that he was “sucker punched” by Mr. Evans in his now seeking these costs on behalf of Mr. Frost. Mr. Cooper, and more importantly Mr. Bieberstein, had to know that when the action against Mr. Frost was dismissed, the costs of the action would be high, particularly with the type of allegations made. I see no reason to set aside the consent to the order dismissing the action with costs, as Mr. Cooper argues should be the case. It was inevitable that substantial costs of the action would be ordered, and the decision to agree to a dismissal of the action against Mr. Frost was made by the plaintiff in consultation with Mr. Cooper. The costs incurred were the result of all of the machinations of Mr. Manning on behalf of the plaintiff and the history of this action does no credit to the plaintiff. The rates charged by Mr. Evans and others in his firm were modest rates charged to LawPro.

[6] No argument is made by the plaintiff that too much time was spent by counsel for Mr. Frost. That is a telling matter. Any suggestion that too much time was spent would be an attack in the air. See: Risorto v. State Farm Mutual (2003), 2003 CanLII 43566 (ON SC), 64 O.R. 3d 135 per Winkler J. (as he then was). The lack of information from the plaintiff as to the amount of time spent by plaintiff’s counsel on the action leads to an inference that at least as much time was spent as by the successful party’s lawyer. See: Frazer v. Haukioja. 2010 ONCA 249 per LaForme J.A.

[7] This was a very large claim made against a lawyer with allegations of fraud and breach of fiduciary duty. The plaintiff had to know that a full and spirited defence would be advanced and that it would be expensive. In my view a fair and reasonable amount on a full indemnity basis to be paid by the plaintiff to Mr. Frost is the amount incurred of $101,271.94. The plaintiff is to pay this amount to Mr. Frost forthwith.

[8] Mr. Wilmot seeks costs of $24,634. It is argued on behalf of the plaintiff that as the original statement of claim had been struck by Mesbur J. as against Mr. Wilmot and no reference in the additional paragraphs in the fresh as amended statement of claim was made to Mr. Wilmot, there was no need for Mr. Wilmot to bring his further motion to strike. I do not agree. In the fresh as amended statement of claim, the allegations against Mr. Wilmot were repeated. Mr. Wilmot was required to bring his further motion.

[9] The rate charged to Mr. Wilmot by Mr. Postelnik, called to the bar in 1991, of $350 per hour, was modest for Toronto standards. It is no more than he would have been entitled to if the rates suggested by the rules subcommittee on costs were used, rates which I and now the Court of Appeal have said are much too low by today’s standards. See Stetson Oil & Gas Ltd. v. Stifel Nicolaus Canada Inc, 2013 ONSC 5213 and Inter-Leasing, Inc. v. Ontario (Revenue), 2014 ONCA 683. The fact that there is little or no difference between partial indemnity rates and the low rate charged by Mr. Postelnik does not make the claim unreasonable. I agree with Justice Corbett who stated in Mantella v. Mantella, [2006] O.J. No. 2085:

In this case, because of the rates at which counsel undertook Ms. Murray's defence, there is little difference between partial indemnity and full recovery costs. The actual fees charged by counsel are not the starting point of a costs analysis. Costs are an indemnity, and thus may not exceed the client's total liability to her solicitor; the client may not gain a windfall as a result of a costs award. However, in fixing partial indemnity costs, the court does not look at the actual fee arrangement between solicitor and client and discount that arrangement to ensure that recovery is "partial". Rather, the court considers the pertinent factors laid down in the rules in fixing the amount of recovery appropriate on a partial indemnity basis. So long as the amount is equal to or less than the actual fees and disbursements charged, then the amount arrived at by reference to the factors listed in the rules will be the amount of the award - whether that represents 50% of actual fees, 75% of actual fees, or even 100% of actual fees. If counsel is prepared to work at rates approximating partial recovery costs, that is counsel's choice. There is no reason why the client's fee recovery ought to be reduced because she has negotiated a favourable rate with counsel, so long as the total of the indemnity does not exceed the fees actually charged.

[10] The allegations against Mr. Wilmot contained the same allegations of fraud that were made against all of the defendants. Mr. Wilmot could have claimed costs on a full indemnity basis because of that pleading, in which case the fact that his claim is based on a rate equating to his hourly rate charged would not have been an issue.

[11] Mr. Cooper contends that if costs are to be awarded, they should be less than the costs of $2,500 ordered against the plaintiff by Mesbur J. in striking the first statement of claim. Why that should be the case is not apparent. The modest cost order make by Mesbur J. was for the motion to strike, not for the entire action. Counsel for Mr. Wilmot, like all counsel, had work to do before bringing the first motion to strike, and had more work to do after when the improper fresh as amended statement of claim was delivered. Regarding the second motion to strike which the plaintiff faced, in light of the completely improper way in which the claim was amended after the order of Mesbur J., the plaintiff or his counsel should have recognized that the cost award made by Mesbur J. that was generous to the plaintiff would likely not occur again.

[12] In the circumstances, taking into account the factors in rule 57.01 and what the plaintiff could reasonably expect to pay for the action, I fix the cost of Mr. Wilmot at $24,500 inclusive of disbursements and HST, to be paid forthwith by the plaintiff.

[13] Millard, Rouse & Rosebrugh LLP seek fees on a partial indemnity scale of $38,322.70 which together with disbursements and HST amounts to $40,323.60.

[14] It is contended on behalf of Mr. Bieberstein that no costs should be awarded because after the first statement of claim was delivered, Millard delivered a statement of defence and it is said that it is a condition precedent to a defendant bringing a rule 21 motion to strike that a defendant has not pleaded to the statement of claim. I do not agree in this case. Rule 21 does not expressly state that, and while normally filing a statement of defence would be considered to be a fresh step precluding a motion to strike the statement of claim, in this case there are other circumstances. First, the defendant delivered its statement of defence “without prejudice” to its position regarding the statement of claim. Whether or not the rules provide for such a thing, the first motion by Millard to strike the statement of claim was heard by Mesbur J. and she did not dismiss the motion by Millard on the basis that a statement of defence had been delivered before the motion. Second, since the fresh as amended statement of claim was delivered, no further defence to that pleading was filed by Millard. In these circumstances I see no basis to deny Millard its costs.

[15] The allegations against Millard, a firm of chartered accountants, included claims of fraud, civil conspiracy, breach of fiduciary duty and falsifying documents. These allegations went to the heard of Millard’s reputation earned over nearly 100 years. While Millard has not requested costs on a higher scale because of these allegations, it could have. The plaintiff had to expect that Millard would vigorously defend this action.

[16] Millard points out that companies related to Gabriel Kirchberger and potentially touched by claims made in the action have been clients of Millard for many years and that the volume of documents in the possession of Millard was in excess of 500,000 pages. The defence obviously involved a significant amount of work.

[17] The rates charged by the lawyers on Millard’s behalf were modest. Mr. Burns called in 1994 charged $395 per hour. Mr. Teal called to the bar in 2004 charged $250 per hour. They claim 75% of those rates. While 60% of rates charged by lawyers is now the norm, see Stetson and Inter-Leasing, supra, in this case it is reasonable to claim 75% as the rates were modest and the claim involving fraud was made against a professional firm. In my view, a reasonable amount in these circumstances for costs is $40,000 inclusive of disbursements and HST, which the plaintiff is ordered to pay forthwith to Millard.

[18] Mr. Rosenstein submits that his clients Martin Kirchberger and Christine Frazer should have their costs of the motion to strike the fresh as amended statement of claim. The consent order provided that it be struck. The order made no mention of costs, either that there be costs or there be no costs. Mr. Rosenstein says that because of the way the order was made and handed up in the form that it was, it was a mistake on his part that it did not provide costs to his clients. Mr. Cooper says that there is no basis to change a consent order.

[19] In this case, the fresh as amended statement of claim could not stand and Mr. Cooper had to know that. It was a completely improper attempt at remedying what had previously been struck by Mesbur J. The court order that was signed regarding Martin Kirchberger and Christine Frazer does not speak to costs at all, one way or the other. Mr. Cooper does not state in his submissions that he and Mr. Rosenstein agreed there would be no costs. Mr. Cooper’s statement in his brief is that no hint or reference in the order or in any submissions made by anyone in court could lead to an inference that the plaintiff consented to costs. The fact that the plaintiff did not consent to the costs does not mean that an order cannot now be made.

[20] I accept Mr. Rosenstein’s explanation that it was a slip that led to what happened. There was no reason for Mr. Bieberstein to expect not to pay the costs of the defendants Martin Kirchberger and Christine Frazer. The pleading had no chance of standing, and the plaintiff was facing a strong argument that no further leave should be given to have a third try at it. Mr. Rosenstein on behalf of his clients agreed to the order that a fresh statement of claim could be delivered by the plaintiff, but I cannot find any agreement on his part not to claim costs of the motion to strike.

[21] The total fees and disbursements claimed by Mr. Rosenstein on behalf of the Kirchberger defendants are $6,763.05. This is a modest amount and no argument is made against that amount. I assess the costs all inclusive of disbursements and HST at $6,500, to be paid within 30 days.

Newbould J.

Date: October 5, 2015