COURT FILE NO.: CV-19-1475
DATE: 2021 04 27
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Crawford Chondon & Partners LLP
Plaintiff (Defendant by Counterclaim)
- and -
Karen L. Fields
Defendant (Plaintiff by Counterclaim)
John L. O’Kane, for the Plaintiff, Defendant by Counterclaim
Ian St. John and Kim Nusbaum, for the Defendant, Plaintiff by Counterclaim
HEARD: January 27th, 2021
DECISION
LEMAY J
[1] The Plaintiff is a labour and employment law firm. The Defendant is one of the firm’s former partners who left the firm at the end of 2018. I released reasons in this matter in February of this year (see 2021 ONSC 1052) in which I dismissed the Plaintiff’s claim for the enforcement of a liquidated damages clause and provided the Defendant with some, but not all, of the consequential relief she was seeking. Part of that relief required the repayment of a portion of the Defendant’s capital loan out of the Defendant’s capital account that the Plaintiff was holding.
[2] The parties returned before me on April 8th, 2021 to address two issues relating to my reasons:
a) The quantum of interest to be paid by the Plaintiff to the Defendant on account of the Plaintiff’s withholding of Defendant’s capital account amounts for a period of more than two years.
b) The costs associated with the removal of the Defendant from the Plaintiff’s partnership and corporate registers.
[3] I heard submissions from each counsel on these issues and will now provide my directions.
Issue #1 – Interest
[4] The Plaintiff takes the position that no interest at all should be payable on the monies that it was holding in the Defendant’s capital account. The Plaintiff advances two submissions in support of this position:
a) There is neither a claim for, nor evidence of, the interest that the Defendant would have had to pay under the loan from BMO in the motion materials before me.
b) My order resulted in an acceleration of the payments of capital to the Defendant in that she has received the money faster than the partnership agreement would have required. Therefore, no interest should be payable in any event.
[5] The Defendant opposes this argument and says that there should be payment of interest on the monies in the capital account because the Plaintiff had the use of the Defendant’s money, and the Defendant was obligated to pay the carrying costs of that money.
[6] I start with the record before me. The Plaintiff is correct in its assertion that there is no evidence of the amount of interest that the Defendant had to pay under the BMO loan. However, that does not end the inquiry. The Plaintiff has had the use of the money for a period of two years. Even when there is no specific claim for interest, the Court has the ability to award pre-judgment interest on the amounts owing. Section 128 Courts of Justice Act R.S.O. 1990 c. C.43.
[7] Further, under section 130 of the CJA, the Court has discretion to either award no interest, adjust the interest rate up or down from the rate set out in the CJA or adjust the period on which interest is to be paid. Subsection (2) provides the Court with a broad basis to exercise its discretion under section 130. See Apotex Inc. v. Nordion (Canada) Inc. 2019 ONCA 23 at para. 128.
[8] As a result, even in the absence of a specific claim or evidence, the Court has jurisdiction to provide an award of interest. The Court’s discretion flows, in part, from the fact that the goal of any Court-ordered payment of money is to make the person receiving the monies whole. There is an opportunity cost to money being held by one party when it should have been given to another party. The party who held the money should be required to compensate for the use of the money through the payment of interest.
[9] However, this case has a complication associated with it. I found that the Defendant withdrew from the partnership under Article 22 of the partnership agreement. Paragraph 22(b) of this agreement states, in part:
Upon the voluntary withdrawal of a partner and subject to any other agreement of the partners, the withdrawing partner shall be entitled to receipt of the balance of his or her capital that exceeds any borrowing or other obligations, at the rate of Two Thousand Dollars ($2,000) per month commencing one month following the date of withdrawal, or as otherwise agreed between the withdrawing partner and the remaining partners. The unpaid balance of capital of any withdrawing partner shall not bear interest.
[10] Under this provision of the agreement, the Plaintiff had the right to return the capital over time. In this case, given the value of the capital account, the payments would have been made over approximately forty-two months. My judgment was released twenty-six months after the Defendant retired from the Plaintiff law firm. As a result, $52,000.00 should have already been repaid by the time my decision was released with the remaining approximately $30,000.00 due over the next fifteen months. Some of that money would already have become due and payable by the Plaintiff at this point.
[11] When the facts in the previous paragraph are considered, the Defendant has been deprived of some interest even if paragraph 22(b) is applied because she has been denied the timely return of more than half of the money. Therefore, something should be paid by the Plaintiff on account of interest. The question is what amount?
[12] There was no evidence before me on the motion as to what rate BMO was charging for the credit facility that funded the Defendant’s capital account. The interest rate was something that was ascertainable in advance and, therefore, should have been part of the record. In the absence of this evidence, the appropriate interest rate to be applied is the rate from the CJA. For the quarter in which this action was commenced, the interest rate is 2.0%. If interest were paid on the whole amount for the whole time period, it would amount to $3,588.60. This amount was calculated by taking the value of the credit line (from paragraph 69 of my judgment) and multiplying it by 2%. I then divided the number by 12 to obtain a monthly interest rate and multiplied it by twenty-six to obtain the total interest potentially owing on the whole amount.
[13] However, that amount must be reduced to take into account both the fact that the whole debt was not payable under the terms of the agreement and the fact that the Plaintiff has been ordered to pay back some amounts early. The calculation of the precise amount of interest that would be owing is a complex task and one that neither party has undertaken. Given that the claim for interest lies somewhere between $0 and $3,588.60, it is understandable that the time has not been spent on this calculation.
[14] As I noted above, there is a broad discretion under section 130 to set the interest rate and the amount of interest owing. That discretion allows me to consider, inter alia, the fact that an advance payment is being made. Some of this money that has been paid on the Defendant’s behalf is not due yet. I also consider the fact that some interest should be paid on the amounts that should have been paid to the Defendant but were not. At the time that my judgment was given, twenty-six of forty-one payments should have been made. In addition, those payments would have been spread out evenly over the time period, which would result in a further reduction in the interest owing. For example, there would be almost no interest owing on the January 2021 payment while full interest is owing on the January 2019 payment.
[15] Therefore, a reasonable amount of interest to award would be approximately one-quarter of the total interest that would have been payable if the entire debt had come due on January 1st, 2019. I therefore set the interest owing in this case at $897.15.
[16] Finally, I should note that, in exercising discretion, the Court is required to consider all the factors set out in section 130 and balance those factors. See Pilon v. Janveaux, 2006 CanLII 6190 (Ont. C.A.) at paras 29-31. I have reviewed the remaining factors under section 130. Medical reports are not an issue in this case, the amount claimed and recovered is factored into the judgment on interest, and there is nothing in the conduct of the parties that would cause me to deviate from the calculation I have set out above.
Issue #2 – Costs Associated with the Removal of the Defendant from the Plaintiff’s Registers
[17] On this issue, counsel for the Plaintiff seeks to have the Defendant pay $2,500.00 on account of her removal from the Corporate and Partnership registers. The Plaintiff suggests that this is the appropriate amount to be paid because that was the cost the last time that the records had to be changed when a previous partner departed. David Chondon, one of the partners of the Plaintiff, swore an Affidavit on the summary judgment motion. In that Affidavit (at paragraph 46), Mr. Chondon states that the legal expenses to amend the partnership records and the corporate records are “estimated at $15,000.00”. The sum the Plaintiff seeks is the Defendant’s portion of these costs.
[18] The Defendant asserts that she should be charged her portion of the actual fees that are to be paid to amend the partnership and corporate records. I agree.
[19] The fact that an estimate was made for the purposes of the motion does not mean that this is the actual cost of removing the Defendant from the Plaintiff’s registers. Unlike the interest expense, which was something that could have been ascertained in advance of the motion, the cost of removing the Defendant from the Plaintiff’s registers is something that is not yet known as it has not yet been done.
[20] The Plaintiff is entitled to have the Defendant’s portion of the actual costs paid by her. However, those costs should be paid once the amount is actually known and should not be based on an “estimate”. To that end, I am ordering as follows:
a) The Plaintiff shall retain a lawyer to effect the removal of the Defendant from the Plaintiff’s registers forthwith.
b) All parties shall cooperate with the retained counsel to ensure that the removal of the Defendant from the Plaintiff’s registers is effected promptly.
c) The Defendant shall pay her portion of the account from the lawyer who is retained pursuant to paragraph (a) within ten (10) days of the receipt of the bill from the Plaintiff. For clarity, however, the retainer of the lawyer is between the Plaintiff and the lawyer who does the work.
Conclusion
[21] Both parties may have a claim for the costs related to my adjudication of these issues. In that respect, I note that the Defendant’s counsel included details of an offer to settle in the correspondence that he sent to me prior to this hearing. I have ignored that information as it was not properly before me at the time.
[22] Before the parties make further costs submissions on this issue, they should consider three facts:
a) It appears to me that success was divided on the issues set out above.
b) The amounts in dispute are quite minimal, being in a range of less than $6,000.00 total.
c) The time required to prepare for the hearing would also have been quite minimal.
[23] If, after considering these issues, parties still wish to make costs submissions, then they will be made on the following terms:
a) First, costs submissions may be served and filed within seven (7) calendar days of the release of these reasons. Those submissions are to be no more than two (2) single-spaced pages exclusive of case law, bills of costs and offers to settle.
b) Reply costs submissions may be served and filed three (3) calendar days after the receipt of the costs submissions described in paragraph (a). Those submissions are to be no more than one (1) single-spaced page.
c) Costs submissions are to be filed with the Court office through the online portal and provided to my judicial assistant at Karen.Bunbury@ontario.ca. Both methods are required for filing to be complete.
[24] Extensions to the deadlines for costs submissions in this case will not be permitted, even on consent, without my leave. If costs submissions are not made in accordance with these terms, there will be no costs for this appearance.
LEMAY J
Released: April 27, 2021
COURT FILE NO.: CV-19-1475
DATE: 2021 04 27
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Crawford Chondon & Partners LLP
Plaintiff (Defendant by Counterclaim)
- and -
Karen L. Fields
Defendant (Plaintiff by Counterclaim)
DECISION
LEMAY J
Released: April 27, 2021