Hutchison v. Ridyard, 2013 BCSC 671

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Hutchison v. Ridyard, 2013 BCSC 671 Date: 20130418 Docket: 11-3694 Registry: Victoria Between: John Michael Hutchison Solicitor And Brian James Ridyard Client Before: Master MacNaughton (Sitting as Registrar) Reasons for Decision Counsel for the Solicitor: J.M. Hutchison, Q.C. Counsel for the Client: J.M. Aiyadurai Place and Date of Hearing: Victoria, B.C. August 20, 2012 and January 7, 2013 Written Submissions received: January 22, 2013, February 4, 2013 and February 22, 2013 Place and Date of Decision: Victoria, B.C. April 18, 2013 Introduction [ 1 ] Dr.

Brian Ridyard sought a review, under the Legal Profession Act , S.B.C. 1998, c. 9 [ LPA ], of two accounts from his former solicitor John Michael Hutchison (the “Accounts”). According to Mr. Hutchison, the Accounts were prepared on April 1, 2008 and sent to the address of Dr. Ridyard’s former medical practice on May 24, 2011. [ 2 ] Dr. Ridyard says that he first learned of the Accounts when Mr. Hutchison’s former law partner, Donald McKnight, emailed him in July 2011 demanding payment of them. [ 3 ] The Accounts relate to work done for Dr.

Ridyard in three files which were consolidated for the purposes of billing. The primary work involved Mr. Hutchison’s representation of Dr. Ridyard with respect to his bankruptcy. In addition, Mr. Hutchison provided corporate services to Dr. Ridyard’s professional services corporation and advice regarding the possible sale of his medical practice. The Accounts are : 1. To Dr. Brian J. Ridyard for $1,120 in fees; and 2. To Dr. Brian J. Ridyard Ltd. for a total of $14,579.60 made up of $11,400 in fees, $1,368 in taxes on fees, and $1,811.60 in disbursements and applicable taxes. [ 4 ] Due to his ill health, Dr.

Ridyard did not testify at this assessment. Instead, he filed three affidavits, on which he was not cross- examined. His wife, Pennie Ridyard, testified. Mr. Hutchison testified on his own behalf. Mr. Hutchison and his practice

[ 5 ] Mr. Hutchison was called to the bar in 1971. He was awarded a Q.C. in 1985. He has always practiced in Victoria, initially with Sullivan, Smith & Bigelow. The partners in that firm changed over time and, by 1985, the partnership was known as Smith Hutchison. By 1990, the two remaining partners were Mr. McKnight and Mr. Hutchison. [ 6 ] Mr. Hutchison testified that by November 1999, he and Mr. McKnight were operating separate practices but sharing costs. On November 8, 1999 (the “dissolution date”), as a result of a partnership dispute, the partnership dissolved.

The dissolution has resulted in contentious litigation between Mr. McKnight and Mr. Hutchison which remains unresolved. [ 7 ] After the dissolution, Mr. Hutchison took responsibility for his clients, and the files on which work had not been completed, and agreed to compensate his former partner for any work done for those clients up to the dissolution date. [ 8 ] Mr. Hutchison testified that, on the dissolution, Mr. McKnight retained the Smith Hutchison electronic accounting and record keeping system because his wife had been the partnership’s accountant. Those records were not accessible to Mr.

Hutchison and, as a result, he could not render accounts directly. [ 9 ] Mr. Hutchison testified that, when he was ready to render an account for work done by Smith Hutchison, he prepared an account which consisted of a

summary statement of the work and to which he attached a detailed printout from Smith Hutchison’s accounting system, setting out all time entries, disbursements, and payments up to dissolution date. [ 10 ] For tracking purposes, Mr. Hutchison and Mr. McKnight rendered accounts, for all matters on which an accounting was owed to Smith Hutchison, under file number 13060. Mr. Hutchison’s relationship with Dr. Ridyard [ 11 ] Mr. Hutchison testified that his relationship with Dr. Ridyard dated back thirty years. Dr. Ridyard practiced medicine in Victoria and he and his wife became family friends with Mr.

Hutchison and his wife. Over time, Mr. Hutchison also represented Dr. Ridyard’s professional services corporation, Mrs. Ridyard, and Mrs. Ridyard’s company, Langdale Management Ltd. Mr. Hutchison said that his social relationship with Dr. and Mrs. Ridyard affected how he billed them for legal services. [ 12 ] Mr. Hutchison’s first retainer for Dr. Ridyard was with respect to family court proceedings following a Ministry apprehension of Dr. Ridyard’s daughter. They had no formal retainer agreement. The proceedings continued for over a year. Mr.

Hutchison testified that he reduced his fees by half because of his friendship with Dr. Ridyard and because he was offended by the Ministry’s actions. [ 13 ] During their relationship, Mr. Hutchison also incorporated Dr. Ridyard’s practice and acted on the purchase and sale of his office premises and several matrimonial homes. Mr. Hutchison said that, throughout, he significantly reduced his fees or the hours billed, he never considered it necessary to obtain a formal retainer agreement from Dr. Ridyard or his wife, and he never had difficulty getting paid. [ 14 ] In the early 1990s, Dr.

Ridyard began to have financial difficulties. He became involved in a number of insurance investment schemes which provided him with large tax write offs and deductions. The Canada Revenue Agency (“CRA”) concluded that these were sham investments and reassessed Dr. Ridyard for over a million dollars in income taxes owing. [ 15 ] In June 1995, Mr. Hutchison was instructed to file notices of objection to the reassessments. Ultimately, Dr. Ridyard’s accountant advised him to declare bankruptcy and Mr. Hutchison was then retained with respect to the bankruptcy. [ 16 ] Mr.

Hutchison testified that the bankruptcy was complicated because the CRA aggressively pursued the tax arrears and Dr. Ridyard wanted to protect his investments and did not want to pay anything. Mr. Hutchison testified that he was able to protect Dr. Ridyard from virtually all of the CRA’s attacks. [ 17 ] Ultimately, Mr. Hutchison’s and Dr. Ridyard’s long association and friendship came to an end in 2010, after a disagreement, and Dr. Ridyard retained new counsel. The Accounts [ 18 ] The Accounts relate to work done by Smith Hutchison prior to the dissolution date.

They are dated April 1, 2008, and while the copies filed with me were unsigned, Mr. Hutchison testified that those sent to Dr. Ridyard were signed. They were mailed with a signed letter, dated May 24, 2011, and with accounting printouts from Smith Hutchison’s accounting system setting out all of the docketed time, a description of the work, and the applicable disbursements. Mr. Hutchison’s evidence in that regard was not seriously challenged and I accept it. [ 19 ] Mr. Hutchison did not keep a copy of the signed accounts or the enclosed accounting printouts which he sent to Dr. Ridyard.

He recreated them for the purposes of this assessment. Although the printouts are not dated in May 2011, I accept that they bear the date on which they were printed for the purpose of this assessment. [ 20 ] Dr. Ridyard was client 10810 in Smith Hutchison’s accounting system. According to the accounting system records filed, the bankruptcy file was opened on June 8, 1995. The last time entry was August 24, 1999 and the last disbursement was October 30, just prior to the dissolution date. The last work done on the professional incorporation file was May 14, 1999 and the last disbursement was June 28.

The last work done on the file with respect to the sale of Dr. Ridyard’s practice was June 29, 1998 and the last disbursement was June 16, 1998. On all files, Mr. Hutchison’s hourly rate was $325, associates were billed at $120, and Mr. Hutchison’s assistant was billed at $45.

[ 21 ] With respect to Dr. Ridyard’s bankruptcy, which accounted for the bulk of the work, between 1995 and 1999 Mr. Hutchison met with Dr. Ridyard, prepared materials, attended various bankruptcy meetings and dealt with the CRA on Dr. Ridyard’s behalf. By August 1995, a receiver had been appointed for Dr. Ridyard’s practice and Dr. Ridyard had been examined as a bankrupt. Dr. Ridyard was eligible for a discharge from bankruptcy in 1996 but the CRA opposed his discharge. The contested discharge application involved a number of hours of work. After a lengthy argument before Justice Vickers, Dr.

Ridyard was granted a conditional discharge pursuant to which he was required to pay $150,000 to his trustee in installments based on 12% of his income: Ridyard (Re) , [1997] B.C.J. NO. 2531 . [ 22 ] In March 1998, the total time and disbursements on the bankruptcy file was $46,637.90. Mr. Hutchison reduced the time on the account to $30,000, and, on April 28, 1998, Smith Hutchison billed Dr. Ridyard for a total of $34,653.18 in fees, taxes and disbursements. Dr. Ridyard paid that account without objection. [ 23 ] On May 8, 1998, Smith Hutchison billed Dr.

Ridyard’s professional services corporation for incorporation services. That bill was also paid without objection. [ 24 ] There was a subsequent dispute with the trustee about whether Dr. Ridyard was meeting his obligations under Justice Vickers’ order. That led to an argument before Justice Edwards and a decision clarifying that Dr. Ridyard was to pay 12% of his net (not gross) income to his trustee: Ridyard (Re) , [1999] B.C.J. No. 329 . [ 25 ] In his first affidavit, Dr. Ridyard said that the April 21 and May 8, 1998 accounts were the final accounts in relation to his bankruptcy, Mrs.

Ridyard’s dealings with the CRA, and the incorporation of his personal services corporation. He also said that no further services were provided by Mr. Hutchison after these accounts were rendered. However, I accept Mr. Hutchison’s evidence, as supported by the records, that there was ongoing cleanup work arising, primarily, from the bankruptcy. In particular, I accept that among other things, there were ongoing issues in the tax court. In addition, the CRA appealed both Justice Vickers’ and Justice Edwards’ decisions and, although those appeals did not proceed, Mr.

Hutchison filed an appearance and a cross appeal. [ 26 ] In addition, in May 1998, Mr. Hutchison settled the bankruptcy trustee’s costs. Thereafter, Dr. Ridyard wanted to repurchase his half interest in his family home from the trustee (the “family home repurchase”). Dr. Ridyard obtained mortgage financing to effect the family home repurchase. There was an issue as to whether property transfer tax was payable on the repurchase. Mr. Hutchison dealt with that issue on Dr. Ridyard’s behalf. [ 27 ] There was also an issue with the Royal Bank which had apparently not pursued a claim in Dr. Ridyard’s bankruptcy.

It sought to recover 100% of the Ridyard’s liability from Mrs. Ridyard. Mrs. Ridyard took the position that she was only 50% liable for the debt. Mr. Hutchison was involved in successfully resolving that issue. [ 28 ] Between October 1998 and January 1999, Mr. Hutchison testified that he prepared for the tax court appearance and for the trustee’s costs application. Most of the Royal Bank issues were resolved by July 1999. In August 1999, Mr. Hutchison dealt with the property transfer tax issue. Mr. Hutchison testified that these various matters involved significant work, not all of which was recorded.

The time accumulated on the file by August 24, 1999 was $12,850. [ 29 ] In addition to the bankruptcy file and other financial matters, Mr. Hutchison was also involved in issues with respect to Dr. Ridyard’s professional corporation and office premises. At Dr. Ridyard’s request, these matters were billed to his professional corporation. [ 30 ] Mr. Hutchison testified that he continued to do work for Dr. Ridyard after the dissolution date although the Accounts do not relate to that work and it was not reflected on the time records filed with me. [ 31 ] Mr. Hutchison testified that he told Dr.

Ridyard that he would not bill him for the cleanup work until Dr. Ridyard had been discharged from bankruptcy and the issues with respect to liability for property transfer tax on the family home repurchase were resolved. In describing their agreement, Mr. Hutchison testified that “at a minimum they had an understanding” but he felt that he and Dr. Ridyard had an agreement that he would not bill until Dr. Ridyard paid off the mortgage he obtained to repurchase his interest in the family home. That did not occur until October 2007, when the property was sold. Mr.

Hutchison testified that, pursuant to his agreement with Dr. Ridyard, it was then open to him to render the Accounts. He prepared the accounts in April 2008 but did not send them to Dr. Ridyard until on or about May 24, 2011. [ 32 ] In his May 24, 2011 letter, which enclosed the Accounts, Mr. Hutchison said: You will recall that I agreed with you that I would defer rendering accounts for the services that I provided to you during your bankruptcy until after you had an opportunity to regroup financially.

It is now necessary that I render my accounts, as I must reconcile with the former partnership through which most of those services were provided. I also confirm that we agreed that at your request, I would render the accounts, in the main, to your professional corporation, effectively charging a premium for the portion of legal work provided to the corporation while discounting the portion attributable to representing you personally, as well as representing Mrs. Ridyard when the [CRA] attempted to assess her with respect to the portion of the matrimonial home that she held, outside of the bankruptcy. ...

I am pleased that, in light of our personal relationship, I have been able to provide you with the deferral of these legal costs, to ease the financial impact of the bankruptcy upon you, as agreed. It is also gratifying to see that you have been able to put the bankruptcy behind you. [ 33 ] I accept, based on Dr. Ridyard’s first affidavit, and Mrs. Ridyard’s evidence, that Dr. Ridyard did not receive the Accounts until they were emailed to him with Mr. McKnight’s letter of July 19, 2011. Although Dr. Ridyard was not available for cross examination, his affidavit is consistent with Mr.

Hutchison’s evidence that he sent the Accounts to Dr. Ridyard’s business address and the clear evidence that Dr. Ridyard had not operated his medical practice at that address for some time. In fact, the record indicates that Mr.

Hutchison acted on the sale of the office building in the spring of 2007. It is therefore not surprising that mail sent to that address in 2011did not come to Dr. Ridyard’s attention. The Legal Issues [34] On this LPA assessment, Dr. Ridyard raises a number of legal issues: 1. Whether the Accounts satisfy the requirements of s. 69 of the LPA. In particular, whether the Accounts were delivered, pursuant to s.69, either by mailing to Dr. Ridyard’s former business address or by Mr. McKnight’s email; 2. Whether the Accounts are time-barred and, therefore, unenforceable.

In this case, the timeliness of the Accounts also requiresconsideration of whether the parties entered into an agreement to waive the limitation period and, if so, on what terms; and 3. If the Accounts satisfy the requirements of s. 69, and are not time-barred, whether Mr. Hutchison is entitled to the fees claimed inlight of the historical pattern of reducing his bills to Dr. Ridyard. Conclusion [35] For the following reasons, I have concluded that the accounts are time-barred.

Therefore, apart from considering whether therewas an agreement to defer billing, thereby extending the limitation period, it is not necessary for me to consider the other legal issuesraised by Dr. Ridyard. [36] In MacLennan v. Clough, 2011 BCSC 734, affirmed 2012 BCSC 62, the Court determined that, based on s. 3(5) of theLimitation Act, R.S.B.C. 1996, c. 266, accounts are not valid if not delivered within six years of the solicitor completing the work towhich they relate. [37] In this case, the work to which the Accounts relate was work done by Smith Hutchison and completed in 1999, before thedissolution date.

Dr. Ridyard’s retainer was with Smith Hutchison and, when that firm dissolved in 1999, the retainer terminated. On theevidence taken at its best for Mr. Hutchison, the earliest the Accounts were delivered was in late May 2011, a date far beyond the six-year limitation period. [38] However, in paragraph 16 of Mr. Hutchison’s submissions, he says that the work was completed on July 4, 2002. Any workafter the dissolution date was done by Mr. Hutchison in his capacity as a sole practitioner, not as a partner in Smith Hutchison. However,even if Mr.

Hutchison is correct and the work to which the Accounts relate was completed in July 2002, the Accounts were not deliveredwithin six years of that date either. [39] While Mr. Hutchison argues that the preparation of the accounts in April 2008, within six years of July 2002, was sufficient tomeet the requirements of the limitation period, I do not agree. It is not the date on which accounts are prepared which is relevant toconsideration of the limitation period but the date on which they are delivered. The LPA clearly requires accounts to be delivered, not justprepared.

That is so the client has notice of the account and the ability to dispute it. Acceding to Mr. Hutchison’s argument could lead tothe absurd result that a solicitor could preserve the limitation period by preparing an account without ever delivering it. In that case, theclient would never have the benefit of a limitation defence to the solicitor’s claim. [40] Therefore, I conclude that absent an agreement between Mr. Hutchison and Dr. Ridyard to defer billing, thereby extending thelimitation period, Dr.

Ridyard is not liable to pay the Accounts as they were delivered outside the limitation period. [41] I accept that the running of a limitation period, in the circumstances of a legal retainer, may be deferred by a contractualagreement between solicitor and client, particularly where such a deferral is for the client’s benefit as Mr. Hutchison alleges in this case.However, to be binding on Dr. Ridyard, such an agreement would have to be clear and transparent so that Dr. Ridyard could calculatewhen it would expire.

This is because a solicitor and client relationship has consistently been held to be one of the utmost good faith. [42] In Nathanson, Schachter & Thompson v. Inmet Mining Corp., 2009 BCCA 385, the Court of Appeal said at paras. 48-49: A retainer effectuates a duty of utmost good faith on the part of the solicitor: Tyrrell v. Bank of London (1862), 10 H.L. Cas. 26 at 44, 11E.R. 934 at 941; Arctic, para. 55.

Whether implied or express, it is overlaid with fiduciary obligations owed by the solicitor to the client– it creates a relationship of trust and confidence from which flow obligations of loyalty and transparency: Strother v. 3464920 CanadaInc., 2007 SCC 24, [2007] 2 S.C.R. 177, at para. 34. The obligation of candour requires the solicitor to be candid with the client on all matters concerning the retainer, including ensuring thatin any transaction between the two from which the solicitor receives a benefit, the client has been fully informed of the relevant facts andproperly advised upon them: R. v.

Neil, supra, at para. 19; London Loan & Savings Co. of Canada v. Brickenden (SCC),[1933] S.C.R. 257 at 261-62, [1933] 3 D.L.R. 161. As seen above, this duty was cogently expressed in the reasons of Madam JusticeSouthin in Ladner Downs v.

Crowley, supra, and is reflected in the Law Society of British Columbia’s Professional Conduct Handbook,Chapter 9, Rule 7, which states: A lawyer must fully disclose, to the client or to any other person who is paying part or all of the lawyer’s fee, any fee that is beingcharged or accepted ... [43] In my view, those comments are equally applicable to an agreement to defer billing and thereby extend the limitation period.

The cases on which Mr. Hutchison relies are not helpful to him because they do not arise in the context of the fiduciary relationship between a solicitor and client. Mr. Hutchison also benefitted from the deferral agreement, and Dr. Ridyard should have been fully informed and advised about the impact of any such agreement on his legal position. [ 44 ] On all of the evidence, I conclude that Mr. Hutchison has not established that the parties reached a deferral agreement. There are a number of facts which lead me to this conclusion. [ 45 ] First, the parties did not enter into a written agreement.

While, in a number of communications, Mr. Hutchison purports to confirm the terms of an agreement or understanding, there is no written confirmation of those terms from Dr. Ridyard. [ 46 ] Second, Mr. Hutchison acknowledged that he did not advise Dr. Ridyard that the deferral agreement could impact his rights to argue the limitation period in a billing dispute nor advise him to seek independent legal advice with respect to it. [ 47 ] Third, even when purporting to confirm the terms of his agreement with Dr. Ridyard, Mr. Hutchison has differently described those terms.

As set out below, there was no certainty as to the terms of the deferral. [ 48 ] In his February 2, 2002 letter, Mr. Hutchison encloses a decision with respect to whether property transfer tax was payable on Dr. Ridyard’s family home repurchase and says: As you know, we have been holding your file open and I have delayed sending my accounts for the various services we provided, including the professional incorporation, pending closing of this bankruptcy. ...

I have delayed and held off sending accounts to you with respect to the professional incorporation and with respect to the family trust and bankruptcy action, pending completion of this service. I was also, of course, very conscious of the impact of the bankruptcy and the necessity to take out a mortgage to make good the recovery and thought that it was within my opportunity, given the continuing appeal of the Property Transfer Assessment, to give you some breathing space to get back on track with earnings and savings.

I think it is now appropriate that I do close those files and render accounts and, of course, I will be accounting to my former partner, Mr. McKnight for the portions of the accounts which were generated prior to the dissolution of our partnership in November of 1998 [sic]. Accordingly, I will be providing you with two accounts on each matter, one which will represent the partnership amount and the other which will represent the post-dissolution charges to my present firm. [ 49 ] Mr. Hutchison goes on to write that he expected to draw up the Accounts by the end of that month (February 2002).

He did not explain during his evidence why he did not do so. [ 50 ] Next, as set out above, in Mr. Hutchison’s May 24, 2011 letter enclosing the Accounts, he describes their agreement to defer billing as extending until Dr. Ridyard had an opportunity to “regroup financially” and to “ease the financial impact of the bankruptcy”. [ 51 ] Finally, in Mr. Hutchison’s June 2, 2011 letter to Mrs. Ridyard, he describes his agreement with Dr.

Ridyard in these terms: ...I met my commitment to delay billing you for my services in respect of the bankruptcy proceedings until you had managed to clear the mortgage that Brian was required to take out to reacquire his interest in your former residence from the Trustee in bankruptcy. This letter is most consistent with Mr. Hutchison’s oral evidence. [ 52 ] In his written submissions, Mr.

Hutchison says that he testified that he “added a term to the agreement between himself and his client specific to the rendering of an account for payment, namely that he would delay rendering an account until the client had crawled out of the effects of bankruptcy, in particular, in the payment of his mortgage made necessary to reacquire his property interest.” [ 53 ] These different descriptions of the terms of the deferral agreement are not clear and transparent and do not permit Dr. Ridyard to determine when he would be free of an obligation to pay Mr. Hutchison. In February 2002, Mr.

Hutchison wrote that his agreement with Dr. Ridyard was to defer billing until the closing of the bankruptcy and the completion of the property transfer tax assessment appeal. He says the agreement was reached to give Dr. Ridyard some “breathing space to get back on track with earnings and savings.” When he writes that he expected to bill that month, presumably he had concluded that Dr. Ridyard had had sufficient breathing space and yet the Accounts were not delivered for more than nine years thereafter. [ 54 ] With respect to his June 2, 2011 explanation for deferring billing, I accept Mrs.

Ridyard’s evidence that the mortgage which they took out for the family home repurchase was an RRSP mortgage on which interest was, in effect, paid to themselves. They had no incentive to “clear” it or pay it off. Mr. Hutchison is unlikely to have agreed to have deferred his billing until this contingency occurred because it was tied to a date entirely within Dr. Ridyard’s control and he had no incentive to pay the mortgage off quickly. [ 55 ] Mr. Hutchison’s actions are also inconsistent with his position that he would not render his accounts until Dr.

Ridyard had regrouped financially or emerged from the effects of bankruptcy. Mr. Hutchison acted on the sale of Dr. Ridyard’s office in the spring of 2007. The substantial proceeds of that sale were paid to Langdale Management Ltd. and, although Langdale was Mrs. Ridyard’s company, these potentially available funds were evidence of a regrouping financially and of Dr. Ridyard emerging from bankruptcy, and could have led to a discussion about the unbilled fees, but did not. [ 56 ] In addition, Mr. Hutchison acted on the sale of Dr. Ridyard’s family home, which closed on October 5, 2007.

The sale resulted in proceeds of over $1.3 million to Dr. and Mrs. Ridyard. At this point, the mortgage obtained to finance the repurchase of the family home was paid off and Dr. Ridyard had clearly regrouped financially. Under the terms of the deferral agreement, as variously described by Mr. Hutchison, he could have issued the Accounts then, but again, did not.

[ 57 ] In

summary, the agreement alleged by Mr. Hutchison, and disputed by Dr. and Mrs. Ridyard, was either that billing would be delayed until a ruling had been received on whether property transfer tax was due on the family home repurchase, or until Dr. Ridyard had regrouped financially, or until he had cleared the mortgage he had taken out for the family home repurchase. All of these contingencies had occurred by, at the latest, October 2007, yet Mr.

Hutchison waited well over another three years before delivering the Accounts. [ 58 ] In all these circumstances, I conclude that the Accounts are statute barred and that no agreement was reached to defer the billing and thereby extend the limitation period. Dr. Ridyard has no obligation to pay the Accounts and, as a result, is entitled to his costs of this assessment. If the parties are unable to agree on an amount for costs they may appear before any registrar to determine them. “Master MacNaughton”