The former lawyers for the insolvent companies of a New Brunswick potato farmer jailed in Lebanon have had their fees slashed by a judge who found they would bankrupt the companies if they were paid in full.
St. John firm Gilbert McGloan Gillis billed more than $500,000 in fees, disbursements and taxes between June and September for their work on a restructuring plan for the holdings of Hank Tepper under the Companies’ Creditor Arrangement Act. Twenty different people at GMG billed to the account, including nine individuals who could not be identified as lawyers, paralegals or articling students.
Tepper has been held without charge in Lebanon since March over the alleged export of potatoes by his company to Algeria that were found to have ring rot.
In an Oct. 18 decision, Court of Queen’s Bench Justice Lucie LaVigne said GMG had devoted about half its billed time to efforts to repatriate Tepper himself: “I have no reason to doubt that the solicitors worked very hard on trying to bring Mr. Tepper back home, and I realize that Mr. Mockler’s going to Lebanon was anything but a holiday. However, GMG’s role as counsel for the purpose of the CCAA was to represent the Corporations in its efforts to restructure,” she wrote.
But even a 50 per cent discount was not enough, she said, cutting the fees to $150,000 including disbursements and taxes.
“There has to be some assurance and money available to pay the professionals to do this work. However, these professional fees should not bankrupt the corporation. If at the end of the day, the professional fees are what threatens the viability of any proposal and sinks the debtor corporation, the integrity of these proceedings and the judicial system will be brought into question,” LaVigne said.
Tepper’s companies have assets of around $8 million, but debts stand at $11 million, including $8 million owed to BMO alone.
A court-appointed monitor reported on July 11 that the total legal fees projected for the proceedings were $130,000 including the monitor’s old fees. But an invoice submitted by GMG revealed they’d already run up a bill of $184,000 by July 7. LaVigne said the firm should have warned the monitor as soon as they were aware of the escalation in fees.
BMO eventually moved to cap the legal fees in mid-September and GMG agreed to withdraw in early October after initially refusing to until an agreement was reached over their accounts.
At the hearing on Oct. 5 to determine the fees, BMO’s lawyer Josh McElman laid into GMG, criticizing the firm for a lack of detail on expenses, including a $700 parking expense on one day in September and a $6,500 entry for “Travel miscellaneous” on July 7. “Where did they go?” asked McElman.
“And then the July 18th hearing, we had Mr. Stoyanov, Mr. Faloon and Mr. Mockler and that day we had $12,000 for attending that hearing. But the beauty of their account is it’s just not the hearing dates that everybody’s working on the same thing, it’s every single day…We’ve seen how over the first 18 days, there’s an average of $10,000 a day,” he went on, asking the court to cut the accounts to $60,000 or less.
GMG’s representative, a member of the firm, did not call any evidence to answer the concerns of the court, BMO and the monitor, saying he did not have the information to do so.
In setting the fees at less than a third of what GMG wanted, LaVigne said she had taken into account the lack of progress towards a plan of arrangement, the relatively routine nature of the CCAA proceedings, superfluous motions filed by GMG, as well as over-lawyering on the matter.
“The level of duplication of experienced counsel set out in the Legal Accounts cannot be endorsed by this Court without additional explanation,” she wrote.
Earlier this week, Tepper’s family criticized the RCMP for its role in the saga after the police force admitted they provided Algerian officials with details about Tepper’s business ahead of his arrest.