Court File and Parties

Court File No.: CV-16-566198 Date: 2018-10-01 Ontario Superior Court of Justice

Between: Groia & Company Professional Corporation, Plaintiffs – and – John Robert Cardillo and MedCap Real Estate Holdings Inc., Defendants

Counsel: Bonnie Roberts Jones, for the Plaintiffs F. Scott Turton, for the Defendants

Heard: June 18, 20, 21 & 22, 2018

Before: Madam Justice Darla A. Wilson

[1] In this action, the Plaintiff law firm (“Groia & Co.”) sues to recover outstanding fees and disbursements for legal services rendered between April and November 2016 on four different matters. The Defendant Medcap Real Estate Holdings Inc. (“Medcap”) is a company wholly owned and controlled by the Defendant John Robert Cardillo (“Cardillo”). I will refer to the Defendants collectively as Cardillo.

Background

[2] There is no dispute that Cardillo retained Groia & Co. in April 2016 on the recommendation of his real estate lawyer, David Chong (“Chong”). The retainer was signed jointly by Cardillo and Medcap and the Defendants agreed to pay the Plaintiff for work done on an hourly basis. There were four pieces of litigation on which the Plaintiff acted for the Defendants and sent invoices for services rendered.

[3] The main reason Cardillo sought out Joseph Groia (“Groia”) was that Cardillo had a company, 1860331 Ontario Inc., which operated a fitness club in Mississauga, which was being run by John Harrison (“Harrison”). I will refer to this matter as the Harrison case. Cardillo had not been receiving payments from the company nor any information.

[4] Cardillo was also involved in litigation with his ex-wife, Giselle Briden (“Briden”), which included two matters that shall be referred to as the Kings Cross case and the Equirex case. Later, Cardillo needed legal representation on a receivership application in which the Bank of China sought to have a receiver appointed over a property that was owned by Medcap. I shall refer to this matter as the Bank of China case.

[5] Certain facts are not in dispute. The retainer set out the hourly rates for Groia and for Sischy at $800 and $425 respectively and no issue was taken at trial with these hourly rates.

[6] Eight invoices were rendered by Groia & Company to the Defendants as follows:

• May 9, 2016, $21,563.23
• June 2, 2016, $17,818.29
• July 19, 2016, $20,636.40
• August 17, 2016, $10,269.55
• September 1, 2016, $81,523.75
• September 15, 2016, $35,565.22
• October 7, 2016, $17,385.06
• November 2, 2016, $16,693.10

[7] The total of the eight accounts is $221,454.60 inclusive of fees, disbursements and taxes. Cardillo paid $36,563.23, leaving a balance outstanding of $184,891.39. No payments have been made since July 18, 2016. Four lawyers at the Groia firm worked on the various Cardillo files: Groia, the principal of the firm, who was called to the Bar in 1981; David Sischy (“Sischy”), who was called to the Bar in 2009; Martin Mendelzon (“Mendelzon”), who was called to the Bar in 2012; and Kevin Richard (“Richard”), who was called to the Bar in 2000. All of these lawyers specialize in the area of commercial and securities litigation.

[8] Since the invoices remained unpaid, the law firm issued a Statement of Claim on December 16, 2016 and the Defendants filed a Statement of Defence. Cardillo brought an application for an order for an assessment of the accounts of Groia & Company. Pursuant to a settlement agreement executed June 29, 2017, and incorporated into the order of Justice Penny of the same date, the parties agreed that the “fairness and reasonableness of the fees billed…will be decided as if the determination was an assessment under the Solicitors Act”. The Defendants maintained the right to argue at trial that special circumstances existed to enable them to assess the accounts already paid. It was agreed that the action would be converted into a Simplified Procedure case and a summary trial would be held pursuant to Rule 76.12 of the Rules of Civil Procedure. The trial proceeded before me for 4 days; a mid-trial pre-trial did not effect a resolution of the matter.

Positions of the Parties

Plaintiff

[9] The Plaintiff submits that it was retained to deal with several pieces of litigation under urgent time frames and in difficult circumstances. Cardillo was a sophisticated businessman with a great deal of experience with litigation. At his examination for discovery, Cardillo’s counsel stated that he had acted for Cardillo in “hundreds of lawsuits”. Cardillo has assessed the accounts of numerous solicitors who have acted for him. Cardillo was a demanding client, an experienced litigant and was sent the bills in a timely fashion. He knew the hourly rates of the counsel working on his files and he had been advised that the litigation with Harrison would be expensive. Furthermore, it is submitted that when Cardillo stopped paying the accounts in July 2016, Groia and Sischy met with him and Cardillo promised to pay the accounts in full in the fall, once he had sold his property. He failed to make payment and now alleges that the work done was substandard and too many hours were docketed. He was a difficult and abusive client, which added to the amount of time required to do the work and his conduct ought not to be sanctioned by the court.

The Defendants

[10] Cardillo argues that he retained Groia & Co. to deal with the Harrison situation, where as a shareholder, he was being oppressed. It is usual for these types of cases to have an urgency to them but that is not a reason for fees to be exorbitant. It is submitted that these cases were not overly complex, and while Cardillo was a sophisticated businessman, he was looking to Groia & Co. to give him advice and the legal services that he received were not of a high calibre. In fact, in the Bank of China action, the advice he received actually placed him in a more difficult situation. When one looks at the factors that govern the assessments of fees, it is clear that the amounts billed by the Plaintiff for the work done are neither fair nor reasonable.

Analysis

[11] Cardillo met with Groia and Sischy on April 12, 2016 and the retainer agreement was executed by Cardillo personally and on behalf of MedCap on April 21, 2016. The agreement specifies that Groia & Company was retained “with respect to potential litigation with John Harrison … and potential and ongoing litigation with Giselle Briden and her company Premier Medical Spa Inc., and any related matters”. The retainer specified that an initial retainer of $10,000 was to be provided and that the time spent would be billed by Groia at a rate of $800 per hour and Sischy at $425 per hour and the student or an associate at $150 per hour.

[12] The law is well settled that the factors to be taken into account when assessing a solicitor’s account are the time expended by the solicitor, the legal complexity of the matters to be dealt with, the degree of responsibility assumed by the solicitor, the monetary value of the matters in issue, the importance of the matter to the client, the degree of skill and competence demonstrated by the solicitor, the results achieved, the ability of the client to pay and the client’s expectation as to the amount of the fee. Cohen v. Kealey and Blaney (1985), 10 O.A.C. 344 (C.A.), at para. 11.

[13] The onus rests with the solicitor to prove that the bills are fair and reasonable. As Boswell J. noted, “Once the solicitor leads sufficient evidence to prove the accounts on a balance of probabilities, the onus shifts to the clients to tender evidence in response. If they fail to adduce any evidence, then it will inevitably follow that the solicitor will succeed.” Starkman Barristers v. Cardillo, 2017 ONSC 5530, at para. 57.

The Evidence at Trial

[14] Because this was a Simplified Rules trial, counsel for the Plaintiff filed the affidavits of Joseph Groia sworn February 28, 2018 and May 14, 2018, David Sischy sworn February 28, 2018 and May 14, 2018, Martin Mendelzon sworn February 28, 2018, and Kevin Richard sworn February 28, 2018. The Defendants filed the affidavit of John Cardillo sworn April 17, 2018. All of the deponents testified at trial.

The Harrison Matter

[15] This was the main reason that Cardillo retained Groia & Co. and it is the case that has the largest amount of time docketed and therefore, the largest account. Fees of $134,873.75 were billed plus disbursements of $7,614.43 plus taxes of $18,448.06 for a total sum of $160,936.24. There was no evidence nor any submissions by the Defendants challenging the amount of disbursements.

[16] At the initial meeting held April 12, 2016, Groia testified that he and Sischy met with Cardillo for approximately two hours. Sischy made notes. Cardillo’s main reason for the retainer stemmed from problems arising from the Premier Fitness location in Mississauga. As Cardillo testified, he wanted Groia “to fight to get my company back.”

[17] Briefly put, Cardillo rented premises where Premier Fitness operated with John Harrison as manager of the club. Premier Fitness had gone into receivership in 2012. Cardillo and Harrison agreed that the fitness club would continue to operate under a different name with Harrison running it. Harrison would be a minor shareholder in the company and Cardillo would be a 75 percent shareholder. Cardillo had appointed his wife as his nominee to hold the shares in trust for him but after the separation, Briden asserted she owned the shares and Harrison allegedly ceased making payments to Cardillo. As a result, Cardillo retained Groia to establish his entitlement to his share of the profits.

[18] I accept the evidence that Cardillo instructed Groia that he wanted an aggressive stance to be mounted with Harrison who would likely “cave” after being served with an application. I also accept Groia’s evidence that he advised Cardillo that if Harrison did not “cave”, the litigation would be expensive, in the six figures. It was both reasonable and cost effective to have Sischy do the day to day work on the files, under the supervision of Groia.

[19] The Plaintiff brought an application on the Harrison matter seeking an oppression remedy under the Business Corporations Act, R.S.O. 1990, c. B.16, which was issued June 16, 2016, returnable July 21. That date was eventually adjourned to August 4 due to opposing counsel’s unavailability. The application record was voluminous, approximately 350 pages. Clearly, it was necessary for Sischy to review many documents including lease agreements, financial statements, and ledgers showing payments and other documentation in order to prepare the application materials.

[20] On July 25, a Notice of Return of Application was filed in order to secure interim relief against the Harrisons. That motion was returnable August 4; in advance of the hearing of the motion, Harrison delivered almost 400 pages of responding materials. Further affidavits from the Applicants needed to be served and filed and cross examinations of the various deponents were undertaken in various locations.

[21] Groia argued the application and the presiding judge found that Cardillo was a 75 percent shareholder in the company. She also accepted Groia’s argument on oppression and she removed Harrison as a director and appointed Cardillo or his designate as the sole director with access to the books and records of the business. Finally, the judge ordered an accounting of monies paid to Harrison. The balance of the application was reserved.

[22] I have no doubt that the application involved complex issues and was of great importance to Cardillo. Despite his attempts to minimize the success of Groia and Sischy on the application, the order of Justice McSweeney of September 12, 2016 was clearly a victory for Cardillo. On this point, I accept the evidence of Sischy that Cardillo was pleased with the outcome of the application. The fact Groia encouraged Cardillo to settle with Harrison and he declined to do so does not mean that the outcome of the application was of little or no value to him.

[23] The invoice dated May 9, 2016 has 38.5 hours of time for Sischy and 3.4 hours of time for Groia. The June 2 invoice has 39.5 hours of time for Sischy and .5 for Groia. The July 19 invoice has $4,192.50 worth of time. As the application date approached, and the cross examinations were undertaken, the amount of time increased. The account of September 1 has 137.5 hours of time for Sischy and 8 hours of time for Groia. The September 15 invoice following the arguing of the application has 20 hours of time for Groia and 5.6 for Sischy. It is appropriate that the junior on the file, Sischy, drafted the materials and did the preparation for the application while Groia came in shortly before the return date and did the preparation to argue the matter. While Cardillo criticizes the actions of Sischy, I do not find any basis for this in the evidence. The bills for October 7 and November 2 include time for Groia and Sischy totalling less than $10,000. Most of this work was attempting to negotiate a settlement of the action.

[24] As I have noted, the total amount claimed for work on the Harrison matter is $134,873.75 plus disbursements and applicable taxes.

[25] Once Harrison did not simply collapse when served with the application, Groia’s prediction that it would become expensive was borne out. It was not a simple, straightforward application and Cardillo was a demanding client who was fond of sending emails to his counsel.

[26] The evidence in the form of emails and notes to file, in addition to the viva voce evidence at trial, persuades me that Cardillo was kept apprised of what Groia and Company were doing on his bahelf and he was aware that the amount of the legal fees was accumulating. I accept the evidence from Sischy and Groia that the outstanding accounts were brought to Cardillo’s attention and he promised to make payment. That did not happen.

[27] Groia and Sischy testified that they met with Cardillo on July 8, 2016 and advised him of the unacceptable state of his accounts. Groia followed up with him and he stated that during a meeting held July 13, 2016, Cardillo said that he was selling properties in September 2016 and he would pay the legal accounts in full from the proceeds of those sales. I accept this evidence as accurate; in the circumstances, the lawyers would not have continued to work on Cardillo’s matters without some assurance of payment.

[28] Pursuant to the agreement reached between the parties, I am to determine whether the fees of the Plaintiff are fair and reasonable. It is not my job to determine if the legal advice given to Cardillo by Groia & Co. was the best advice in the circumstances; nor is it appropriate to approach this case as if it were a solicitor’s negligence action.

[29] Cardillo retained Groia because of his reputation as an aggressive litigator in the area of shareholder disputes. He wanted to regain control of the corporation from Harrison; this was extremely important to him and a great deal of money was at stake. He was embroiled in numerous acrimonious lawsuits with his ex-wife Briden. Cardillo was no stranger to litigation or to the costs associated with litigation. Groia and Sischy did what Cardillo instructed them to do: bring an oppression application to prevent Harrison from excluding him from the fitness company in Mississauga. That application required significant amounts of time to prepare and numerous cross examinations of deponents, which were labour intensive. In my view, the number of hours claimed is not excessive for the work done. In particular, I note that the amount of time claimed by Groia is modest in the circumstances; this is due to the fact that Sischy was doing the vast majority of the preparatory work at a much reduced hourly rate. The evidence indicates that the legal work that was done was skilful and what one would expect from a firm specializing in shareholder disputes and other types of commercial litigation.

[30] The interim relief that was obtained while Groia & Co. were his counsel was advantageous to Cardillo. While Cardillo asserts that the Groia firm “accomplished nothing” in the Harrison matter, I do not agree. It was necessary to bring the application, which was responded to by Harrison. The fact that Harrison did not oppose some of the relief sought on the return date of the application does not mean the work done was worthless or did not result in Harrison changing his position. Clearly, Cardillo had not been successful in his negotiations with Harrison and that is why he retained Groia to launch legal proceedings.

[31] While Cardillo now complains that the leasing company ended up being worthless, it is important to note that after the hearing of the application and before the judge released her decision, time was spent attempting to settle the entire matter. Cardillo did not wish to follow his lawyers’s recommendations on settlement, which was his prerogative. By November, the relationship between Groia & Co. and Cardillo had deteriorated to the point where both sides agreed Cardillo should retain new counsel. What happened with the company after the retainer of Groia & Co. ceased is not a factor for my consideration when determining whether the fees charged are fair and reasonable.

[32] Cardillo cannot be heard to assert that he was surprised by the quantum of the legal fees, given that he was told it would be expensive and he was sent invoices on a regular basis. In my view, looking at the accounts in their entirety, I do not find the docketed time is excessive, given the nature of the mandate and its complexity. Considering the factors set out in Cohen v. Kealey I am of the view the accounts of the Plaintiff on the Harrison matter are both fair and reasonable.

The Bank of China Matter

[33] Fees of $28,815 plus disbursements of $318.45 plus taxes of $3,774.11 for a total amount of $32,907.56 were billed.

[34] In this matter, the bank brought an application against Cardillo’s company MedCap to have a receiver appointed as the mortgage was in default. Cardillo wished to refinance the property but Briden had a charge on it as well. When Cardillo contacted Sischy, it was June 2 and the application for the appointment of a receiver was June 7. Cardillo’s real estate lawyer had sent a letter to the bank’s lawyer asking to hold off on the receivership application but the request was refused. Thus, it was an urgent matter that required Sischy to draft an affidavit setting out the attempts to cure the default, to demonstrate that the appointment of a receiver was unnecessary. It was a complicated matter because there was another proceeding in which Briden was involved and there were related companies which had a charge over the Fairview Property for debts owed by Medcap. There were numerous counsel involved in the negotiations. Sischy attended court and was able to negotiate a resolution of the application, with an adjournment until September to enable Cardillo to arrange the refinancing. Sischy testified that Cardillo was pleased with the outcome.

[35] The docketed time on this matter is comprised of preparing materials for the receivership application and attending court. The time in June for that work was $9,062.50. Later, when the return date of the application approached, there was a further $8,797.50 billed. In September, there were two court attendances docketed: September 15 and September 26. The time docketed in September was $7,662.50.

[36] This was an urgent matter of great importance to Cardillo. Whether Sischy should have negotiated an agreement or simply opposed the receivership application is of no significance to me. He was contacted by Cardillo who needed his assistance on an urgent basis as he had been unsuccessful in his attempts to “buy time” with the bank and so had Mr. Chong, who acted for him on his non-litigation matters. Sischy was successful in accomplishing the objective of Cardillo. I reject Cardillo’s evidence that Sischy gave him poor advice and it cost him in excess of $100,000. I prefer the evidence from Sischy that Cardillo did not want a receiver appointed and he needed time to arrange financing. I note that Cardillo’s real estate lawyer, Mr. Chong, was of the view that the outcome was a “great result”. I reject Cardillo’s contention that the legal services provided were worthless. In my view, the time spent was reasonable and necessary and I see no reason to reduce the quantum of the bill.

The Equirex Matter

[37] Fees of $11,347.50 plus disbursements of $253.27 plus taxes of $1,506.50 for a total of $13,107.27 were billed.

[38] Equirex Leasing Corportaion had obtained an order for payment of money into court related to properties held by Briden in trust for Cardillo and MedCap. Cardillo and Briden had an agreement on terms concerning the money that had been paid into court; Cardillo negotiated an agreement with Equirex concerning the disposition of the funds in court. Briden then refused to agree with the disposition and Equirex served a motion returnable June 16, 2016 for an order for payment out of the funds in court.

[39] Again, Cardillo complains that Sischy’s involvement added nothing to the outcome. I do not agree. Sischy was obligated to protect Cardillo’s interest in the funds in court; Briden initially refused to consent to the payment out of court of these monies. Eventually, Cardillo received a payment of $46,000 out of the funds in court, which was a good result for him. It is not my task to second guess Sischy’s decisions on the motion. It is clear that Cardillo needed legal counsel in order to obtain payment out of the monies in court; his relationship with Briden was vitriolic and their properties and finances were interwoven so it was not an easy task to negotiate resolution.

[40] In my view, the amounts charged are both fair and reasonable for the work done on the Equirex matter.

The Kings Cross Matter

[41] Fees of $12,835 were billed plus taxes of $1,668.55 for a total of $14,503.55.

[42] The Kings Cross property was property in Brampton where one of the fitness clubs and rental units were located; it was owned by Medcap. Cardillo negotiated an agreement with Briden concerning payment to her of the proceeds of the sale of this property. Cardillo contacted Sischy on October 11, 2016 and advised it might be necessary to attend court on an emergency basis as the sale of the property was scheduled to close for approximately $14 million in the next few days. However, there were Notices to Pay from Canada Revenue Agency (“CRA”) and a court order provided that certain proceeds from the sale be paid to Briden through her solicitors. Sischy testified that he had to negotiate with several sets of counsel and he attended court on two occasions. Eventually, Sischy obtained consent orders, which ensured compliance with the CRA Notices to Pay and the court order in the other action; thus, Cardillo was able to sell the property.

[43] While Cardillo asserts that the orders went on consent and the time charged is excessive and should have been no more than ten hours, I do not agree. Sischy had to review the file, the prior court orders and he had to ensure Cardillo’s interests were protected and, more importantly, he had to ensure that the sale of the property went ahead. All of the work was done on an urgent basis. The fact that the orders went on a consent basis does not mean that the time spent was excessive. I find the amount billed for the work done is fair and reasonable.

Conclusion

[44] The evidence that I accept makes it clear that Cardillo benefited from the legal work done by Groia and Sischy. He failed to make payment in a timely fashion but I accept the evidence that he agreed to pay the invoices after selling property in the fall of 2016. He failed to do so and it was only after the breakdown in the relationship between the parties that Cardillo became abusive and critical of Groia and Sischy. He seemingly blamed them for his own financial situation.

[45] I have considered the well-established principles set out in the case law governing the assessment of the accounts of solicitors. The Court must look at the amount of time being claimed, the legal complexity of the matters, the monetary value of the matters, their importance to the client, the degree of skill and competence demonstrated by counsel, the results achieved and the client’s expectation of the quantum of the fees to be charged as well as the ability to pay.

[46] Mr. Turton’s submission that these were straightforward matters, without complexity, is not borne out in the evidence. I do not accept this characterization of the pieces of litigation that Cardillo retained the Plaintiff to handle. Nor do I accept that the work done by the Groia firm was of no value to Cardillo. The firm gave Cardillo discounts on the invoices as a courtesy. The dockets of the lawyers who worked on the files were entered into evidence and the lawyers testified on what work was done pursuant to the retainer. In my view, it was appropriate for Groia to supervise Sichy and other lawyers with less experience; that resulted in lower fees to Cardillo. While counsel for the Defendant submits that the various matters ought to have been handled differently, this is not a solicitor’s negligence case. Rather, it is an assessment of whether the accounts rendered were fair and reasonable in the circumstances.

[47] I am persuaded on the evidence that the fees billed were fair and reasonable and that Cardillo was apprised on an ongoing basis of the quantum of the outstanding fees.

Order

[48] The Plaintiff shall have judgment in the sum of $184,891.39 plus interest. If the parties cannot agree on costs, I may be contacted.

D. A. Wilson J. Released: October 1, 2018

COURT FILE NO.: CV-16-566198 DATE: 20181001 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Groia & Company Professional Corporation Plaintiffs – and – John Robert Cardillo and MedCap Real Estate Holdings Inc. Defendants REASONS FOR JUDGMENT D.A. Wilson J. Released: October 1, 2018