Court File and Parties

Court File No.: CV-96-MU013657 Date: April 12, 2019 Superior Court of Justice – Ontario

Re: Murray Teitel, Newman, Weinstock; and Green and Spiegel/Solicitors, Appellant And: Mary Serniak, Client, Respondent

Before: Justice Spies

Counsel: Murray Teitel, for the Solicitors/Appellant Bryan McPhadden, for the Client/Respondent

Heard: December 10, 2018

Endorsement

Overview

[1] The solicitor Murray Teitel (the “solicitor”) through Newman, Weinstock and subsequently Green and Spiegel, appeals from the assessment of 21 accounts for legal services performed more than 24 years ago for North York Community Credit Union (“NYCCU”). NYCCU instructed Mr. Teitel to obtain default judgment and register writs of seizure and sale against properties owned by Mary Serniak, because three mortgages held by NYCCU on some of her properties were in default. She was able to sell one of the properties and two were sold by NYCCU. Mr. Teitel’s accounts were paid from the proceeds of sale and hence for the purpose of this appeal, Ms. Serniak is the client. She had the right to assess these accounts pursuant to s. 43 of the Mortgages Act.

[2] The accounts for services rendered by the solicitors and paid, totaled $24,992.55 inclusive of fees, disbursements and GST. Of that amount, Assessment Officer Brough (the “Assessment Officer”) determined that Ms. Serniak is entitled to a refund of $2,166.57. The Assessment Officer did not award costs of the assessment to either side.

[3] The solicitors appeal the order of Assessment Officer and seek to have it set aside and in its place ask that an order be made that the solicitors owe no money to the client and that the client pay the solicitor Murray Teitel the sum of $118,652.53 for the costs of the assessment, which I note is almost four times the total amount of the accounts. This includes $2,000 for the costs of an attendance before Lax J. on March 2, 2001, the costs of which she left to the Assessment Officer. Mr. Teitel also seeks costs of this appeal in the amount of $13,791.

[4] As submitted by Mr. McPhadden, counsel for Ms. Serniak, the assessment in this case is likely the longest assessment of legal accounts in Canada. This proceeding has gone on for so long that the client recently died at the age of 88. I certainly can’t imagine that in any case more would have been spent on an assessment of accounts totaling just under $25,000. The assessment began on June 5, 1998 with a different assessment officer (the “original assessment officer”) and ended with the report under appeal on August 19, 2016 – more than 18 years from start to finish.

[5] On the assessment, Mr. Teitel acted on behalf of the solicitors and the client was represented by Mr. S. Vano. The amount in issue was confirmed at the outset of the assessment by the original assessment officer as the amount billed of $24,992.55. This was primarily for work done by Mr. Teitel. The original assessment officer also confirmed that it was anticipated that the assessment would take two days, which in my view was still an excessive amount of time to spend on accounts totaling under $25,000, even in 1998 dollars. In fact assessments of solicitor-client accounts in an amount less than $25,000 would and should generally only take a half day or less.

[6] What unfolded however is 25 hearing days before the original assessment officer, which finished on April 29, 2011. Apparently there was an additional six days spent on motions and appeals. Submissions to the original assessment officer were completed in 2012 and the assessment decision was reserved. For reasons that are not germane to this appeal, the original assessment officer did not release a decision and then retired. The assessment was then assigned to a second assessment officer who left the employ of the court without rendering a decision. The assessment was then assigned to a third assessment officer, Assessment Officer Brough, who rendered his decision on August 19, 2016. The delay in the hearing of the appeal was largely due to the fact that Mr. Teitel pursued his appeal by way of motion dated September 7, 2016 rather than a notice of appeal.

The Issues

[7] The issues are twofold; did the Assessment Officer err in principle or make a palpable and overriding error in a) determining that the solicitors’ accounts should be reduced by $2,166.57 and/or b) in deciding that there should be no award of costs to either party for the assessment.

The Decision of the Assessment Officer

[8] The Assessment Officer based his decision on a review of the transcripts of the 25 days of hearing. He analyzed the accounts by considering the nine factors enumerated by the Court of Appeal in Cohan v. Kealey & Blaney, [1985] O.J. No. 160. Although the Assessment Officer found that overall the time spent by Mr. Teitel was reasonable and appropriate for the work accomplished, and that his hourly rates were reasonable for his years of experience and the level of complexity of the matter, he found one “significant exception” and he decided that $1,781.95 inclusive of GST should be deducted from the solicitors’ accounts. He did so essentially because he determined that some of the time spent by Mr. Teitel was excessive and unnecessary; that being the amount of time recorded and charged for during the first round of negotiations with Ms. Serniak from approximately October 1993 and continuing through November 1994, namely dockets for 54 entries of telephone calls and meetings specifically connected to these negotiations as well as 22 letters when Ms. Serniak was trying to refinance the properties with a wraparound mortgage.

[9] The issue is described in detail in the decision of the Assessment Officer starting at p. 5.; Essentially the Assessment Officer found that eight hours of time billed by Mr. Teitel:

… in negotiation when the Solicitor was not prepared to alter his position (whether directed or not) was excessive. If it was the Solicitor acting on his own volition or if the Solicitor had been so directed, one short phone call and/or written communication would have been sufficient to convey the intransigent position of ‘We are not, under any circumstances, willing to temporarily withdraw the Writs of Execution.’(At p. 7)

[10] The Assessment Officer deducted a further two hours; $385.022 inclusive of GST, for work that the solicitor could have delegated for a total reduction $2,166.57. Since the fees had all been paid, he directed that this amount be refunded to Ms. Serniak.

[11] As for costs of the assessment, the Assessment Officer gave detailed reasons for his decision that there be no order as to costs. He referred to Re Solicitor, [1969] 2 O.R. 823-828, a decision of Taxing Officer McBride and he found, following the criteria established in that decision, that given the amount that he assessed the solicitors’ accounts at “it could reasonably be argued that the bills of cost are ‘patently reasonable’” (at p. 14), which would mean that he would ordinarily consider awarding costs in favour of the solicitor (at p. 16). He found however that

… this assessment of the bills of cost of less than $25,000.00 took on a ‘life of its own’. Both parties in this assessment went … well beyond any reasonable level of action to determine the ‘fairness and reasonableness’ of a solicitor’s bill. (At p. 14)

[12] The Assessment Officer then went on to note that Mr. Teitel had brought multiple motions and he referred to two in particular which he noted that a solicitor of this level of experience ought reasonably to have known that there was little chance of success or need. He also found that Ms. Serniak was not flawless in this process, referring to a motion she brought as an example. He concluded that:

These are but three examples of actions taken by both parties to cause delay and extensive work beyond the assessment. ….

Beyond the inordinate number of motions and cross-emotions raised during this assessment process, I also look at the amount of hearing time and what relevance (with respect to proportionality) much of that time represented. I use as an example the witness Ms. G. Daoust, a witness for the Client. The evidence in chief of this witness (originally) was less than one day in total, the cross-examination of this witness by the Solicitor on the other hand went on for over one full day. This witness was then recalled for another two days of testimony at the insistence of the Solicitor. Additionally, the Solicitor required extensive testimony from a representative of the Ukrainian Credit Union in an effort to (by the Solicitor’s own admission) “discredit” Ms. G. Daoust. This represented six days of testimony in the hearing. To put that into perspective with reference to proportionality, the time billed on the Solicitor’s accounts associated with Ms. G. Daoust represented approximately thirty minutes or a total of $85.00 from a total bill of $24,992.55. I find that this type of aggressive examination to be extensive in the extreme. While I have cited one example, a complete review of the transcripts of the hearings identifies a pattern of behaviour practices by the Solicitor during cross-examination that clearly served to confound the normal process and lengthen the hearing abnormally.

For these reasons, I find that it would be impossible to fairly identify who is entitled to costs as I find that both parties contributed equally to the doubtlessly extreme costs of this assessment.

As such, although normally for a reduction of this magnitude I would consider awarding costs in favour of the Solicitor, I find that the Solicitor over-reached extensively the appropriate amount of activity to defend his bills of cost and caused exorbitantly high legal fees associated with this assessment for both himself and the Client. Therefore, I find it appropriate that no costs be awarded to either party for this assessment. (At pp. 15-16, emphasis added)

Test on Appeal

[13] The law is settled that in reviewing an assessment officer’s decision, I am only concerned with questions of principle, not mere questions of amount or the manner in which the assessment officer exercised his discretion, unless the amounts are so inappropriate or the assessment officer’s decision is so unreasonable that it suggests an error in principle; Billman Investments Ltd. v. Toronto (City), [2005] O.J. No. 3150 (SCJ); see also Samuel Eng & Associates v. Ho, 2009 ONCA 150 and Waxman v. Waxman, [2004] O.J. No. 1765 (SCJ).

Analysis

Did the Assessment Officer err in principle or make a palpable and overriding error in determining that the solicitor’s accounts should be reduced by $2,166.57?

[14] Mr. Teitel has raised a number of issues that are not relevant to whether or not the Assessment Officer erred in making the deduction that he did. Nowhere in his factum does Mr. Teitel take issue with the finding of the Assessment Officer that time was spent on “doomed negotiations”. In fact at para. 77 of his factum Mr. Teitel states that “[o]bviously, it would have been gross negligence on the part of Teitel and his client … to simply have lifted writs which were its protection, in order to assist Ukrainian, for no consideration whatsoever”.

[15] I agree with the position of the client that the Assessment Officer considered and applied the appropriate principles. The Assessment Officer perhaps stated his reasons best in the first paragraph of his decision on page 7 when he noted that the client offered different possible resolutions that would have enabled her to keep the three properties but all involved the lifting of the NYCCU Writs. The Assessment Officer effectively accepted Mr. Teitel’s evidence that he and NYCCU were never willing to compromise their Writs. As the Assessment Officer found, rather than spending eight hours in “negotiations” that were never going to result in what the client was asking for “a single letter indicating that there was no intention to temporarily withdraw the Writs of Execution would have sufficed to communicate this position.” (At p. 7)

[16] In my view this was a reasonable conclusion by the Assessment Officer. Mr. Teitel did not need to engage in all of the calls and letters that he did to protect NYCCU’s interests. The Assessment Officer committed no error in principle. Accordingly the appeal with respect to the conclusion of the Assessment Officer that the solicitors are to return $2,166.57 to the client is dismissed.

Did the Assessment Officer err in principle or make a palpable and overriding error in deciding that there should be no award of costs to either party for the assessment?

[17] Given the decades of litigating the assessment, the costs of the assessment emerged as the most significant issue between the parties. The solicitor suggests various errors were made by the Assessment Officer in denying him costs of the assessment. He argues that it was in fact the client that was responsible for the delays and for the assessment “going off the rails”.

[18] In his factum Mr. Teitel argued that it was in fact Ms. Serniak who behaved improperly in the bringing of various motions and that in fact he was the one who argued before L. Roberts J., as she then was, and before the Court of Appeal, that certain allegations made by Ms. Serniak were not properly before the assessment officer. As the Court of Appeal stated the only issues properly raised on the assessment hearing are the propriety of the costs charged by the solicitor to his client, the mortgagee; Teitel v. Serniak, 2010 ONCA 436.

[19] One of the difficulties I have with this submission is that the Assessment Officer did not conclude that it was only Mr. Teitel that drove this assessment off the rails. He reviewed the 24 days of transcripts and concluded that both parties were responsible. As Ms. Teitel correctly asserted on the first day of the assessment; June 5, 1998, the issue was whether or not the accounts were fair and reasonable. Mr. Teitel also asserted that the material filed by Mr. Vano on behalf of the client, which contained lengthy affidavits asserting that what Mr. Teitel did was wrong, were irrelevant issues to be dealt with on the assessment. That is the position that Mr. Teitel should have maintained and had he done so I expect the client would have been ordered to pay costs for raising and pursuing irrelevant issues.

[20] Although the original assessment officer could have been more forceful on the first day of the assessment, making it clear that the issues raised by Mr. Vano were not relevant, she did so later in the proceedings. For example, on September 22, 1999, the original assessment officer expressed concerns about evidence Mr. Teitel was eliciting from a witness and she made it clear that she did not want to get bogged down on what NYCCU did or did not do. It was Mr. Teitel who persisted in having the CEO of NYCCU testify about what the NYCCU did and did not do. Mr. McPhadden has given further examples of occasions when the original assessment officer raised concerns about the delay and cost of the assessment, concerns which were directed at Mr. Teitel, in his factum commencing at para. 43. I will not repeat those here.

[21] Mr. Teitel also submits that the Assessment Officer erred in finding, at p. 15, that the motion he brought before Lax J. was unsuccessful. This motion was brought because Mr. Teitel issued a Summons to Witness to the manager of the Ukrainian Credit Union to appear at the hearing with their file. Mr. Vano objected to the production of the file and the original assessment officer ordered that if Mr. Teitel wanted the file he would have to apply for permission to a judge. Justice Lax found that no judicial order was necessary and directed that the summons bind the manager to attend on a particular date. Although I agree that arguably Mr. Teitel was successful on the motion, and in that respect the Assessment Officer misspoke, his argument that this file contained crucial evidence unfavourable to Ms. Serniak and is “but one example of her attempting to interfere with the administration of justice: at para. 10 of his factum is without merit. The point Mr. Teitel still seems to fail to appreciate is that it was not necessary to issue such a summons in the first place as any evidence from the manager of the Ukrainian Credit Union was completely irrelevant to the issues on the assessment.

[22] In fact in his factum at para. 25(b) Mr. Teitel still argues that the Assessment Officer “completely ignored the most prominent issue raised by the Solicitors, that Daoust, supported by Serniak, had perjured herself and that the two of them had utterly fabricated the testimony that Ukrainian [Credit Union] at the relevant time was prepared to give Serniak additional funding to give to NYCCU”. So what? This issue ought to have been ignored by the Assessment Officer as it was not relevant.

[23] In submissions before me Mr. Teitel suggested that he “had” to adduce substantial amounts of evidence at the assessment hearing because he was exposed on the assessment to $1.3 million in personal potential liability. For example he submitted that he “had” to go to the expense of preparing a “loss calculation” because the original assessment officer “made” him do so. In fact in his original factum (at para. 157), which was replaced with one that met the page limit of the rules, Mr. Teitel claimed that the client was seeking this sum in the assessment and that for him and his firm to have put themselves in “jeopardy for this amount by just leaving Daoust’s lies unchecked, would have been completely irresponsible” (emphasis added). In his reply factum at para. 21 Mr. Teitel asserts that he “was being sued for over $1.3 million in the assessment proceeding itself ” (emphasis added). In his submissions before me he said that “the whole assessment took place to refute a lie” and that most of the time spent on the assessment was to refute this lie – a reference to the alleged lies by Ms. Daoust and that he could not simply roll over and “play dead”.

[24] In my view for Mr. Teitel to suggest that the original assessment officer “made” Mr. Teitel incur these ridiculous costs is a preposterous submission. The most that was at stake in this proceeding was $25,000. The fact that an experienced civil litigation lawyer like Mr. Teitel decided to pursue issues that were completely irrelevant to the assessment and relevant only to a possible claim against him by the client can only be because he decided to treat the assessment as some sort of discovery process in the event that the client did in fact sue him. I can think of no other rationale reason. However, Mr. Teitel in fact submits that this was not the case and could not have been the case because Ms. Serniak had not in fact sued him and would have barred from doing so by virtue of the expiry of a limitation period. Mr. McPhadden advised however that Ms. Serniak did commence an action in 2000 against the NYCCU.

[25] If as Mr. McPhadden queried, Mr. Teitel felt that his professionalism was under attack that too does not justify his decision to incur these enormous costs. I do not agree with Mr. Teitel’s submission that solicitors have a right to maintain their reputation by running up costs on irrelevant issues. Furthermore, I do not agree that these costs can be justified on the basis that the position taken by Ms. Serniak was a “frontal assault on the administration of justice”.

[26] In my view the Assessment Officer rightly focused on what costs were necessary to issues relevant to the assessment and to proportionality. Mr. Teitel submits that his costs are proportional because even though he was there for a matter of less than $25,000 Ms. “Serniak was there for a matter which turned out to be $1,306,028.74” and that the costs he claimed which total about $117,500, which includes $2,000 on the motion before Lax J. “are not at all disproportionate to a claim of over $1,000,000”, factum at para. 144, emphasis added. That “claim” was never one that the original assessment officer could adjudicate on as Mr. Teitel must have known and in fact asserted at the outset of the hearing.

[27] Even if, as Mr. Teitel submits in his reply factum, at para. 6 that the main issue on the assessment was the claim by Ms. Serniak that she should not be liable for the accounts he rendered because Ukrainian Credit was willing to advance her funds to pay off or pay down the NYCCU mortgages, that would not have justified his going to this kind of expense to defend accounts totaling less than $25,000. Under no circumstances in my view could a solicitor justify spending more than $115,000 on the assessment of accounts totaling less than $25,000.

[28] Although the standard on this appeal is far below that of “correctness” in my view the Assessment Officer was clearly correct when he concluded that both sides caused delay and were responsible for the ridiculously high costs of this assessment and that neither party was entitled to costs.

Disposition

[29] For these reasons the appeal on the merits and on the issue of costs is dismissed.

Costs of the Appeal

[30] Ms. Serniak was successful on the appeal and is entitled to her costs. In assessing costs, rule 57.01(1) sets out the factors a court may consider. In addition, the principles that I must apply have been settled by our Court of Appeal and the Divisional Court. The fixing of costs is not a mechanical exercise of calculating hours times hourly rates. The quantum should reflect an amount the court considers to be fair and reasonable for the unsuccessful party to pay in the particular proceeding rather than any exact measure of the actual costs to the successful litigant. The overall objective is to fix an amount that is fair and reasonable. In doing so, I must stand back from the fee produced by the raw calculation of hours spent times hourly rates and assess the reasonableness of the counsel fee from the perspective of the reasonable expectations of the losing party; see Boucher v. Public Accountants Council (Ontario), 71 O.R. (3d) 291 (Ont. C.A.) at p. 302, Coldmatic Refrigeration of Canada Ltd. v. Leveltek, [2005] 75 O.R. (3d) 638 (Ont. C.A.) at para. 8, Andersen v. St. Jude Medical, Inc., 264 D.L.R. (4th) 557 (Ont. Div. Ct.), aff'g (2004) 28 C.P.C. (6th) 199 (Ont. S.C.) at para. 22, Greenhalgh v. Douro-Dummer (Township), 2011 ONSC 2064, [2011] O.J. No. 1657 (Ont. C.A.) at para. 7.

[31] Mr. Teitel’s Costs Outline totals $13,791 on a partial indemnity basis. Mr. McPhadden’s Costs Outline includes costs on a substantial indemnity scale but there is no basis to award costs other than on a partial indemnity basis. On that basis Mr. McPhadden’s Costs Outline totals $41,596. Mr. McPhadden is a 1988 call and has claimed a partial indemnity rate of $455 based on an actual rate of $650. In my view those rates are too high. A partial indemnity rate closer to $300 would be appropriate.

[32] Mr. McPhadden claims for 81.4 hours for this appeal including attendance on the appeal and preparing costs submissions. I am not surprised by the hours spent even though Mr. Teitel’s hours total less than 30, because of course Mr. Teitel was very familiar with this matter having represented his old firms and himself on the assessment. Mr. McPhadden on the other hand was not the lawyer who represented Ms. Serniak on the assessment. Mr. Teitel’s factum and reply factum is very lengthy and detailed and essentially reargues the entire case before the Assessment Officer. I appreciate that Mr. McPhadden needed to respond to this however I do not believe he needed to do the entire review of the file personally. That review ought to have been delegated to a lawyer at a lower hourly rate; a more recent call.

[33] In my view given the amount of material to be reviewed and responded to and the factum prepared by Mr. McPhadden, which I found of great assistance, an order that Mr. Teitel pay costs of the appeal in the amount of $20,000 to Ms. Serniak is appropriate and reasonable.

Spies J. Date: April 12, 2019