On December 1, 2014, the Court of Appeal for Ontario (the
"Court of Appeal") released its decision, written for the
Court of Appeal by Madam Justice Pepall, in Bank of Nova Scotia v.
Diemer, 2014 ONCA 851 ("Diemer"). The Court of Appeal
dismissed the court-appointed receiver's (the
"Receiver") appeal of the order of Justice Goodman,
which, among other things, reduced the fees of counsel
("Counsel") to the Receiver. In its decision, the Court
of Appeal found that the motion judge (Justice Goodman) made
findings of fact based on the record and is owed deference in this
respect. The Court of Appeal also found that the motion judge
considered the correct factors in coming to a decision on fees and
that the appellant failed to establish any palpable and overriding
error made by the motion judge.
As discussed in greater detail in "Did You Get What You
Paid For? The Exercise of Judicial Discretion when Assessing
Professional Fees in a Bankruptcy and Insolvency Context," an
article in our September 2014 edition of Collateral Matters, the
Receiver's motion at first instance sought approval of
Counsel's legal fees in the amount of $255,955. Justice Goodman
determined that, notwithstanding language contained in the initial
receivership order permitting counsel to charge its standard rates,
Counsel's fees were not fair and reasonable when considering
the modest nature, extent and value of the receivership. In
reducing the fees of Counsel to $157,500, Justice Goodman
considered and applied the principles set out in, among others: Re
Bakemates International Inc. (2002), 164 O.A.C. 84 (C.A.), leave to
appeal refused,  S.C.C.A. No. 460 (also referred to as
Confectionately Yours Inc., Re) ("Bakemates") and Federal
Business Development Bank v. Belyea (1983), 44 N.B.R. (2d) 248
The Receiver, as appellant, advanced three grounds of appeal and
submitted that the motion judge erred (at para. 28):
1. by failing to apply the clear provisions of the appointment
order, which entitled [Counsel] to charge fees at its standard
2. by reducing [Counsel]'s fees in the absence of evidence
that the fees were not fair and reasonable; and
3. by making unfair and unsupported criticisms of counsel.
The Court of Appeal dismissed the appeal, finding that the
motion judge did not err in his reduction of Counsel's fees.
The Court of Appeal found that certain facts were open to
interpretation, but deferred to Justice Goodman's analysis, as
it found that the motion judge had drawn conclusions based on
evidence from the record to conclude that Counsel's fees were
not fair and reasonable. The Court of Appeal found that the
relevant Bakemates principles and Belyea factors had been
identified and applied in the motion judge's analysis. Finally,
while the Court of Appeal found there were some unfair criticisms
made of Counsel, it held that the motion judge's analysis
resulting in the reduction of fees was appropriate.
Some practical takeaways from the Court of Appeal's decision
Bakemates enunciates appropriate principles to be applied when
passing accounts and Belyea identifies relevant factors to be
considered, but this list of factors is not exhaustive;
Bakemates states that the onus is on the receiver to prove that
the compensation for which it seeks approval (including on behalf
of its counsel) is fair and reasonable and that an analysis of such
fees will focus on issues of fairness and reasonableness;
the Court of Appeal noted at para. 45 of its decision that
"value provided should pre-dominate over the mathematical
calculation reflected in the hours times hourly rate
value appears to drive the Court of Appeal's analysis of
fairness and reasonableness: "the focus of the fair and
reasonable assessment should be on what was accomplished, not on
how much time it took" (para. 45); and
the Court of Appeal specifically noted that it is inappropriate
to adopt a mathematical approach and apply representative rates in
place of those of Counsel, but concluded that this approach applied
by Justice Goodman was not fatal to upholding his decision in
Diemer, as the motion judge's decision was informed by the
correct factors and he would have arrived at the same result in any
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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