Horst Tyson Dahlem Professional Corporation v John F Schneider Professional Corporation (Canmore Legal Services), 2016 ABQB 92

Court of Queen ’ s Bench of Alberta Citation: Horst Tyson Dahlem Professional Corporation v John F Schneider Professional Corporation (Canmore Legal Services), 2016 ABQB 92 Date: 20160212 Docket: 0601 07392 Registry: Calgary Between: Horst Tyson Dahlem Professional Corporation Plaintiff - and - John F. Schneider Professional Corporation operating as Canmore Legal Services and John F. Schneider Defendants _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice G.C.

Hawco _______________________________________________________ Introduction [ 1 ] This is an action under an employment agreement entered into between the parties on February 23, 2006. That was the date

of the signing of the agreement. The parties had actually been working together since October of 2003. At issue is whether the Plaintiff is owed any money under the terms of the contract and if so, how much. The Defendant’s position is that he is actually owed money by the Plaintiff. If any money is due and owing by the Defendant to the Plaintiff, the Defendant John Schneider should not, he argues, be personally liable. Facts [ 2 ] John Schneider was carrying on the practice of law in the town of Canmore in 2003. Tyson Dahlem joined his firm in October of 2003. Mr.

Schneider had been practicing law for almost 20 years, Mr. Dahlem for two years. [ 3 ] The employment agreement signed in February of 2006 was entered as Exhibit 1. It is stated to be effective October 27, 2003. The parties were Canmore Legal Services/Schneider Law Office as operated by John F. Schneider, Professional Corporation and Horst Tyson Dahlem Professional Corporation. [ 4 ] The agreement provided that Mr. Dahlem would be paid commissions based on fees received. It was calculated as the greater of $3,000.00 per month or a sliding scale depending upon the amount of fees Mr.

Dahlem actually earned and collected. [ 5 ] The commission was to be payable in two equal payments per month, on the first and fifteenth days of each month, commencing on November 1, 2004. On May 15, 2006 the parties executed an amending agreement whereby, among other things, Mr. Dahlem would be paid interest of 6.5% per annum, compounded semi-annually, on any invoices forwarded by him to Mr. Schneider and remaining unpaid. [ 6 ] On March 31, 2006 Mr. Dahlem presented Mr. Schneider, through Canmore Legal Services (“CLS”), a fairly detailed invoice for the amount of $71,166.98.

He was to receive $35,583.49 on April 1, 2006 and the remaining $35,583.49 on April 15 th . Of the amount due on April 1, he only received some $17,791.75. The remaining amount owing as of April 6 th , being $17,791.75, was not paid and was never paid. The $35,583.49 due on April 15 th was not paid and has never been paid. As of May 2 nd , Mr. Dahlem was owed $56,341.62. [ 7 ] In a memo from Mr. Dahlem to Mr. Schneider dated May 10, 2006 Mr. Dahlem referred to the total amount outstanding, which I have indicated above, and expressed great concern that he had received nothing since early April.

In his memo of May 10 th Mr. Dahlem stated: My corporation has not received any payment on outstanding invoices since April 6, 2006. After the previous unpaid invoices were addressed in March, we discussed invoicing and payment of those invoices. I asked that arrears in payment not occur again. You assured me that it would not happen again. That assurance has not been accurate. [ 8 ] In addition to that statement above referred to, Mr. Dahlem’s evidence at trial was that shortly after that letter Mr. Schneider said to him “I give you my word of honour that I will pay this invoice”. Mr.

Schneider did not deny having said this during his evidence at trial. [ 9 ] On the same date Mr. Schneider wrote to Mr. Dahlem stating: “I acknowledge the outstanding amounts with respect to the funds owed to you. Further, I also acknowledge that we would make attempts to address the outstanding balance.” [ 10 ] On May 23 rd , 2006 Mr. Dahlem wrote to Mr. Schneider stating: The sum of $53,375.23 has been owed by Canmore Legal Services to Dahlem since April 15, 2006. Interest is accruing on that outstanding amount at 6.5% per annum, compounded semi-annually.

This sum remains due and owing. [ 11 ] On that same day, May 23 rd , 2006, Mr. Dahlem’s employment was terminated by Mr. Schneider and he was locked out of the building. [ 12 ] A statement of claim was issued by Mr. Dahlem on June 20, 2006. Mr. Schneider responded with an amended statement of defence and counterclaim on July 26, 2006. [ 13 ] In the statement of defence and counterclaim Mr. Schneider alleged that the Plaintiff had breached his employment agreement by attributing other staff’s time and work to himself and writing off certain accounts and reducing contingency fees. He further alleged that Mr.

Dahlem had billed and collected flat rate fees and then left the files incomplete so that Mr. Schneider was forced to complete the files without any further billing. In his counterclaim Mr. Schneider also alleged that Mr. Dahlem had caused him to lose clients, that he had not paid for certain advertising in the Yellow Pages and for purchase of a typewriter. As a result, he was claiming the $30,000.00 set forth in his statement of defence plus a further $55,000.00 by way of general damages. [ 14 ] Needless to say, this matter has been dragging for many years. Various affidavits of records were provided.

Examinations for discoveries and questioning took place. Notices to admit facts were filed, some of which were not formally responded as required under the Rules. [ 15 ] Justice Millar was appointed case management judge and made his last of many orders on December 17, 2015. He directed that the matter proceed to trial on February 8 th . Mr. Schneider was to produce for inspection and reproduction all of his affidavit of records documents by January 8 th , 2016. That direction was with respect to his affidavit of documents filed in 2009. [ 16 ] While Mr.

Schneider did produce those documents by January 8 th , in addition he filed two supplementary affidavits, on one

December 17th and one on January 15th. Those affidavits referenced literally thousands of documents which Mr. Schneider wasattempting to put before the Court. He was not successful. I will refer to this in more detail further on in these reasons. Issues [17] Does the Plaintiff have a legitimate claim for $53,375.23 plus interest? [18] Does the Defendant have a legitimate claim for offsetting amounts with respect to work which the Plaintiff should haveattributed to members of the Defendant’s staff, or additional work which was required to be done after the Plaintiff left? [19] Is Mr.

Schneider personally liable for any debt declared owing to the Plaintiff? Answers and Reasons Plaintiff’s Claim [20] I am satisfied that the Plaintiff does have a legitimate claim against the Defendant for the sum of $53,375.23 plus interest atthe rate of 6.5% as provided for in the amending agreement. [21] The Defendant has argued that the Plaintiff produced no evidence to support his claims. He did not check the time sheets forthe staff or other lawyer’s input and therefore that evidence ought not be accepted. [22] In my view, the Plaintiff did all that was required of him.

He prepared the March 31, 2006 invoice for the Defendant (Exhibit3). He set out, in detail, the amount collected and the breakdown of the various amounts. He adjusted an amount of $7,884.50 for workwhich other people had done on the file, as well as other files. Those adjustments were set out in detail as well. [23] A month later, he again sent an invoice for the same amount, showing one credit. [24] On May 10, 2006 he wrote a memo to Mr. Schneider setting forth his concerns. Mr. Schneider acknowledged the amountsowing and later promised to pay the amount. The Plaintiff’s claim has been established.

Defendant’s Statement of Defence and Counterclaim [25] Mr. Schneider has not satisfied me that he has any legitimate claim whatsoever against the Plaintiff with respect to failing toattribute other staff’s time to files, to taking credit for work he had not done, or to wrongfully write off any of the Defendant’s accountswithout justification. [26] Mr. Schneider claims to have spent some 70 hours going over files which Mr. Dahlem had worked on.

He looked at sometype of records with respect to other staff and came up with a figure of $22,000.00 with respect to certain real estate files and another$36,000.00 with respect to other files. [27] There are a number of difficulties with the Defendant’s argument. To begin with, he had locked Mr.

Dahlem out of the officeand prevented him from having any access to files with respect to which he had worked. [28] Next, he purported to come up with these figures as a result of his analysis of documents which apparently were not relevantand not produced in 2009 when his first affidavit of records was sworn, or as a result of any undertakings given in 2012. As I said duringthe trial in refusing to let Mr. Schneider introduce these documents as exhibits, his failure to produce them in a timely fashion made amockery of the purpose of the Rules of Court with respect to disclosure and fair practice. [29] Mr.

Schneider was given the right to call an expert with respect to his records and what they did or did not disclose by JusticeMillar on December 17, 2015, notwithstanding yet another failure to comply with the Rules in terms of preparation of experts’ reports. [30] Mr. Schneider elected not to do so and then asked this Court, in effect, to accept his analysis of these suspect records withoutmore. [31] With respect to the cost of performing work on “flat rate fee” files, for which the fees had been collected but the work notfinished, what more can I say than Mr.

Dahlem was prohibited from having access to the files and to the clients. This claim on Mr.Schneider’s

part is totally baseless. Mr. Schneider’s Personal Liability [32] Mr. Schneider argues that the key to whether he is personally liable for the amount owing to the Plaintiff is based upon ananalysis of whether the money owed arose from the practice of law or whether it arose from the business of law. [33] Mr. Schneider argues, of course, that the debt arises from the business of law. If it does, he argues that under the reasoning ofthe Alberta Court of Appeal in Sandilands v Powell, 2003 ABCA 162, he would not be personally liable. [34] With due respect, I have concluded that the debt owed by Mr. Schneider to Mr.

Dahlem has arisen from the practice of law.As stated by Stratton, J in Bancorp Financial Ltd v Thomas N Mather Professional Corp (1985), (AB KB), 3 WWR

190 (Alta QB), at p 192: The critical words are “As an individual practising dentistry or dental surgery”. Giving these words their plain ordinary meaning, I findhis liability is limited to that arising from his practice of dentistry or dental surgery. [35] The

section to which Stratton, J was referring in Bancorp was quite similar to our present s 133 of the Legal Professions Act,RSA 2000, c L-8 which states: 133(1) Notwithstanding anything to the contrary in the Business Corporations Act, every person who is a voting shareholder of acorporation during the time that it is the holder of a permit or of a corporation during the time that it acts in contravention of section106(1) is liable to the same extent and in the same manner as if the voting shareholders of the corporation were during that time carryingon the business of the corporation as a partnership or, if there is only one voting shareholder, as an individual practising as a barrister andsolicitor.

(2) The liability of any person in carrying on the practice of a barrister and solicitor is not affected by the fact that the practice of abarrister and solicitor is carried on by that person as an employee and on behalf of a professional corporation. [36] I am satisfied that Mr. Schneider’s personal liability under s 133 of the Legal Professions Act related to the practice of law. [37] Mr. Dahlem was entitled to a certain percentage of his fees, as billed over his name but under the Canmore Legal Servicestrade name. The fees were received by Mr. Schneider’s office as legal fees. Mr.

Dahlem was entitled to his share of those. Mr. Schneiderdid not pay him his share. He retained monies earned by his associate through the practice of law and his associate had earned his fairshare. Having failed to pay him his fair share, Mr. Schneider is personally liable. [38]

Section 133 as it was then, was considered by Justice Virtue in Corkery v Foster Wedekind (1987), (ABKB), 88 AR 232 and said this, at para 6: In my view the plain meaning of the words of the

section are that the sole shareholder of a professional corporation is personally liablefor debts arising from the practice of law. Costs associated with maintaining the operation of an office for the practice of law includingthe wages and benefits of employees who are lawyers are costs directly related to carrying on the business of the practice of law and arematters for which the sole shareholder of a professional corporation remains personally liable.

Notices to Admit [39] I want to deal briefly with the argument raised by the Defendant that by virtue of having filed two notices to admit certainfacts by the Plaintiff, the Defendant is basically entitled to take advantage of deemed admissions by the Plaintiff in a number of areas,including what he seeks to have admitted as statements of law as opposed to statements of fact. [40] Mr. Schneider presented the Court with a copy of a decision of our Court of Appeal in Dwyer v 303554 Alberta Ltd, 1996ABCA 95.

This involved a penalty that the Court of Appeal imposed upon counsel for having failed to properly reply to a notice to admitfacts. In that particular case the court did impose a monetary penalty upon the offending party. What is quite interesting, however, in thisdecision of Justice Kerans was what I took to be the particular ratio that a penalty will be appropriate but the appropriateness dependsupon whether the error is inadvertent or deliberate. Here, I am satisfied that the failure to reply was simply inadvertence, and the fact thatthe parties were involved in a very similar case, with similar parties.

I do not believe and do not accept the party who forwarded thenotice to admit can simply take advantage of this oversight to establish a case which is simply not there. Nor, of course, is any partyentitled to seek to have the other party accept that any particular contractual relation existed or did not exist. A party cannot purport tooust the fact findings of the court. A number of the matters that Mr. Schneider purported to have the Plaintiff accept were matters whichmust be determined by the Court.

Yellow Pages [41] The Defendant sought to charge the Plaintiff for advertising in the Yellow Pages during the time of his employment and forthe cost of a typewriter which Mr. Dahlem purportedly ordered. [42] There was no agreement by Mr. Dahlem to pay for the advertising. That claim is disallowed. [43] Neither of the parties received a typewriter. Mr. Dahlem is not responsible the cost of something which neither he nor Mr.Schneider’s office received. That claim is disallowed.

Conclusion [44] In the end result, the Plaintiff is entitled to judgment in the amount of $53,375.23 plus interest as set forth in the amendingagreement. The Plaintiff is also entitled to his costs throughout. Heard on the 8th day of February, 2016 to the 11th day of February, 2016. Dated at the City of Calgary, Alberta this 12th day of February, 2016.

G.C. Hawco J.C.Q.B.A. Appearances: M.A. Amery for the Plaintiff John F. Schneider Self represented for the Defendants