Waterloo firm must repay almost $900,000 to feds

A class action support firm based in Waterloo, Ont. must repay the federal government almost $900,000 after a B.C. judge found it ran up unnecessary and unreasonable costs while investigating a law firm accused of misconduct in the residential schools class action process.

Brian Radnoff, a litigation partner in the Toronto office of Lerners LLP, says it is “very unusual” to see a decision that challenges fees already paid to a court-appointed monitor like Crawford Class Action Services, which was tapped back in 2007 to administer the Indian Residential Schools Settlement Agreement class action approved by judges in nine provinces and territories across Canada.

“There isn’t a lot of law on the issue, because courts are generally loath to overly scrutinize the accounts of court-appointed officials,” Radnoff says. “There is usually a significant amount of deference given when it comes to the fees requested for court approval, but I think it’s fair to say there were some pretty extraordinary circumstances here.”

In 2013, Crawford was asked as part of its duties to investigate the conduct of Stephen Bronstein, a Vancouver lawyer with more than 1,400 residential school survivor clients, following allegations about the behaviour of a form-filler employed by his firm to recruit clients.

After a two-year investigation, B.C. Justice Brenda Brown concluded conduct “fell below the standard” expected of lawyers in the class action’s Independent Assessment Process, but she denied Crawford’s request to have him barred from the IAP, and allowed him to continue representing his remaining 150 clients because he had shown his practice had improved.

“However, this is no exoneration of Bronstein: the evidence convinces me that were it not for the intervention of the Monitor and this court, Bronstein would not have reached these acceptable standards,” Brown wrote in the May 2015 decision, before ordering the lawyer to pay Crawford’s “reasonable costs.”

In October last year, Brown ordered Bronstein to pay $1.25 million towards the total $3.3-million cost of Crawford’s investigation. In doing so, she discounted expenses accumulated in the legal process before Bronstein consented to the investigation, as well as $874,000 in expenses charged by Crawford that she found unreasonable and unnecessary.

“I do not criticize the Monitor for its handling of the investigation. The investigation was worthwhile and benefited Bronstein’s clients and the public. However, some costs of the investigation went beyond what was expected at the outset and beyond what can be termed reasonable and proportionate at the conclusion,” Brown wrote.

The bulk of the reduction to Crawford’s expenses related to its outside counsel, Howard Drabinsky, a McMillan LLP partner in Toronto whose $800-per-hour rate was $200 above any other lawyer involved in the case.

Brown deducted almost $700,000 from his $1.2-million legal bill in her decision, explaining that it was not clear why his presence was reasonably necessary at the examination, interlocutory application, and substantive hearing related to the matter, when as a commercial solicitor, he did not speak at any of the appearances, “draft any court documents, conduct the examination of Mr. Bronstein or assist in obtaining evidence for the hearings.”

Crawford claimed there were no B.C. counsel that could match his experience in class action settlement administration, but Brown said that missed the point:
“While Mr. Drabinsky may be experienced in the administration of class actions, this was not a skillset that was necessary in the Bronstein matter. This was an investigation of a lawyer’s practice. Nothing in Mr. Drabinsky’s background suggests that he had the necessary investigatory experience to be of assistance in this regard,” she wrote. “Given his skillset, his hourly rate and his base in Toronto, Mr. Drabinsky’s involvement should have been limited to consulting from time to time rather than acting as co-counsel throughout the Bronstein review.”

Brown also sliced $180,000 off Crawford’s internal costs, representing a quarter of the monitor’s accounts as unnecessary, redundant, or duplicative. She took issue with the amount billed by the company’s vice-president, Michael Mooney, for attendance at court, as well as for analysis and reporting.

“It is not clear why such an amount of analysis would have been necessary,” considering the firm’s in-house counsel was billing for similar activities, Brown wrote.

Both Drabinsky and Mooney declined opportunities to comment for this story.

After Brown’s findings, the federal government sought the return from Crawford of all the costs that she found unreasonable and unnecessary. Crawford argued the summary nature of her assessment was insufficient to support reimbursement, and she claimed it would be unfair to retroactively apply a new review to accounts the company had been submitting for years.

A procedure had been established for the review and assessment of Crawford’s accounts by a judge under the class action settlement agreement, but neither Crawford nor the federal government had ever used it. 

“Ultimately, I am unconvinced that any injustice or unfairness is caused by requiring Crawford to repay unreasonably charged amounts. Particularly when Crawford never previously brought these accounts forward to be assessed, as it was obliged to do,” Brown wrote in her April 8 judgment.

Brown also set a procedure for the assessment of Crawford’s outstanding accounts, based on her own previous decision.

“The accounts must be reasonable and necessary in order to be approved,” she wrote. “Crawford cannot expect reimbursement for undertaking unnecessary, redundant or duplicative tasks. Payment for unnecessary or redundant tasks could never be reasonably expected; however, this is particularly the case when the proposed payee would receive the amounts from public funds in the context of a process intended to address truth, reconciliation and assistance for historical wrongs committed against the aboriginal peoples of this country.”

Radnoff says the unique facts of this case make it “a bit of an outlier,” but adds that judges do appear more willing than in the past to question the accounts of monitors appointed by the court in bankruptcy and receivership cases, where they appear most often. 

“I think when courts see very significant amounts, they are being a bit more careful these days,” Radnoff says. “They do have a gatekeeper function and they want to exercise it properly.”