Pogorzelski v. Dumoulin Date:, 2011 BCPC 354

Citation: Pogorzelski v. Dumoulin Date: 20111107 2011 BCPC 0354 File No: 0820325 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: ANDREW J. POGORZELSKI CLAIMANT AND: ANTHONY DUMOULIN cba DUMOULIN BOSKOVICH DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE G. BOWDEN Appearing on their own behalf: Andrew Pogorzelski Counsel for the Defendant: Jonathan Corbett Place of Hearing: Vancouver , B.C.

Dates of Hearing: May 15, August 24 & December 21, 2009; November 12, 2010 Date of Judgment: November 7, 2011 Introduction [ 1 ] The Claimant seeks damages from the Defendant, a solicitor, in relation to legal services provided by the Defendant.

The Claimant alleges that the Defendant was negligent in the provision of services respecting a real estate transaction. [ 2 ] The Defendant denies that he was negligent in the provision of legal services to the Claimant and, in the alternative, if he was negligent, says that the Claimant did not suffer any losses that are attributable to the services provided. [ 3 ] Following the last hearing date, the parties were permitted to submit written arguments. The Claimant submitted written argument on January 26, 2011 and the Defendant submitted written argument on January 26, 2011.

The Claimant submitted a written reply on February 4, 2011. Background Facts [ 4 ] The Claimant has a business background and obtained an MBA from the University of London in 1967. He has experience working in the financial sector in New York and for various companies as an investment advisor. For a period of time he said that he was an investment adviser for Jimmy Pattison. The Claimant is clearly a sophisticated businessman. [ 5 ] In 2003, he and his spouse, Dr. Korkuczanska, purchased a property at 747 Cardero Street in the City of Vancouver. They

intended to develop the property as a residence and a medical clinic. Sometime later they decided to pursue the development of two adjacent properties at 753 Cardero Street and 1614 Alberni Avenue. They discussed their concept with officials at city hall and obtained a preliminary design from an architect, the late Arthur Erickson. [ 6 ] The Claimant had discussed the possibility of re-development with owners of property in the neighbourhood over a period of about two years.

He decided that in order to pursue the development, he needed to secure some rights to the two adjacent properties. [ 7 ] Initially he began negotiating with the owner of both properties, Ms. Pietrobruno, (the “Owner”), without the assistance of a lawyer. It appears that the Owner agreed in principle to granting an option to the Claimant to purchase the properties for $7.3 million. The cost of the option to the Claimant was to be $250,000 for the first year and $350,000 for a second year.

A closing date of April 15, 2007 was established for finalizing the option. [ 8 ] The Claimant then decided to engage the services of a solicitor for the purpose of documenting the agreement that he had negotiated with the Owner. He retained the Defendant in February, 2007. [ 9 ] There were tenants in each of the two properties. One was occupied by a restaurant known as La Gavroche.

The other property was occupied by a law firm known as the Bayshore Law Group, (“Bayshore”). [ 10 ] The Owner agreed to use her best efforts to obtain agreements from the tenants to surrender their leases so that an option would allow the Claimant to acquire and develop the properties free from any claims by them. The Owner wanted to keep the tenants on the properties during the time that the option was effective because she knew that the Claimant might choose not to exercise the option.

The Claimant also wanted the tenants to continue to occupy the property provided that he could evict them at such time as he decided to proceed with the development. [ 11 ] The Claimant said that he provided a draft of an option to purchase to the Owner and told her that he did not want the tenants to prevent the exercise of the option. She told the Claimant that she was going to have her lawyer, Mr. Kurt Ayden, prepare the option agreement.

Nothing apparently was done for some six months. [ 12 ] Later, the Claimant says that he agreed to pay a deposit to the Owner and that he would proceed on the basis that they had discussed namely an option price of $250,000 if exercised in the first year and $350,000 if exercised in the second years commencing January 1, 2008. The total purchase price was to be $7.3 million. [ 13 ] The Owner’s lawyer told the Claimant that he should hire a lawyer so in February, 2007, he and his wife met and retained the Defendant who was experienced in commercial real estate matters.

He said that he explained the business transaction to the Defendant and asked him to assist with the legal work. [ 14 ] The Defendant proceeded to draft an option agreement. [ 15 ] The Claimant says that on March 16, 2007 he was advised by the Defendant that Bayshore appeared to have a month-to-month lease on the property that it occupied. However, the option agreement referred to an existing lease of Bayshore that expired in April 2016 but was unsigned.

Clearly the nature of Bayshore’s interest in the property on March 16 th was uncertain. [ 16 ] The option was conditional upon the owner providing surrenders of the existing leases which would allow the tenants to remain until the Claimant was ready to commence development. If the owner did not obtain the surrenders within ninety days, then the Claimant could either withdraw from the option agreement or try to obtain the surrenders himself with a $500,000 reduction in the ultimate purchase price.

The Claimant was then also free to withdraw from the option agreement if surrender agreements were not settled between him and the tenants. The Claimant was required to deposit $50,000 in the Defendant’s trust account to be held as a refundable deposit during the ninety day negotiating period. The deposit was to be returned to the Claimant if negotiations were not successful. [ 17 ] Discussions then ensued between the Defendant and the Owner’s solicitor. The discussions also involved the Claimant. Additional conditions in the option were negotiated.

In return for reducing the deposit from $50,000 to $25,000 the Owner asked for a non-refundable deposit of $10,000. The Defendant recommended that the Claimant only pay a non-refundable deposit of $100 but the Claimant decided to pay a non-refundable $10,000 deposit to the owner. [ 18 ] The option agreement was finalized and signed on March 21, 2007 but dated March 16, 2007. [ 19 ] The Owner’s solicitor was expected to deliver surrenders of the leases on the properties by May 16, 2007.

Early in May, the Defendant told the Claimant that the Owner’s solicitor had encountered a problem with the tenants and had not been able to obtain surrenders of their leases. [ 20 ] The Defendant reviewed a number of documents provided to him by the owner’s solicitor. The Claimant says that on May 8, 2007 the Defendant informed him that it appeared as though Bayshore did not have a current executed commercial lease on the property. [ 21 ] On May 15, 2007 the Claimant exercised his right under the option agreement to take over negotiations to acquire surrender agreements from the tenants.

Apparently there was no difficulty obtaining a surrender agreement from the tenant known as La Gavroche. [ 22 ] On May 16, 2007 the Defendant wrote to the Claimant “strongly recommending” that he not commence negotiations with Bayshore until they had seen all the documents in Mr. Aydin’s possession relating to Bayshore including “possible missing documents”. [ 23 ] In early June 2007 an associate of the Defendant went to Mr. Aydin’s office to review the relevant documents and found an e- mail from Bayshore to Mr.

Aydin dated March 14, 2006 (Exhibit 2) indicating that Bayshore purported to exercise its option to renew its lease on the property. That e-mail had not previously been disclosed to the Defendant by Mr. Aydin.

[24] On June 7, 2007 the Defendant sent an e-mail to the Claimant informing him that based on his review of the documents it washis view that Bayshore could successfully argue in a court of law that it was entitled to a 10 year lease on the property from May 1, 2006plus two 5 year options. [25] As a result of receiving that e-mail, the Claimant decided not to include the Defendant in further negotiations with Bayshore. [26] On July 7, 2007 the Claimant transferred $10,000 of the remaining $15,000 in trust to Mr. Aydin in order to extend the conditionremoval date in the option agreement to August 31, 2007.

Although the Claimant says he was conducting the transaction by himself itappears that he still wanted the assistance of the Defendant because he says that he arranged for the extension because he was informedby the Defendant that the Defendant would be away on vacation from July 13, 2007 until August 15, 2007. [27] In early July 2007 the Claimant instructed the Defendant to prepare a surrender agreement to reflect the agreement he hadreached with Bayshore. The Defendant produced the agreement for the Claimant’s review on July 13, 2007.

The Claimant says that theagreement was not in accord with his instructions to the Defendant because he had told him not to mention the restaurant in theagreement or refer to Bayshore having any commercial lease rights. [28] The Claimant discussed his concerns with the Defendant on July 13, 2007 but as the Defendant was leaving for vacation andcould not provide the Claimant with another lawyer from his office, the Claimant says that he made changes to the surrender agreementhimself.

He also says that he was unable to obtain another lawyer because of the summer holidays. [29] The Claimant says he was unable to obtain a surrender agreement from Bayshore at a meeting on July 16, 2007 so he engagedanother lawyer and decided to extend the option agreement to November 30, 2007 by paying an additional $10,000 to the Owner. [30] The Claimant terminated his engagement with the Defendant on August 12, 2007. [31] The Claimant alleges that the Defendant was in breach of his duty of care to the Claimant in four respects: 1.

By failing to make all reasonable efforts to ascertain the nature of Bayshore’s interest in the property; 2. By failing to advise the Claimant of the nature of Bayshore’s interest in the property; 3. By failing to follow instructions and provide a suitable surrender agreement for the Claimant’s meeting with Bayshore on July 16,2007; and 4.

By failing to assist in making amendments to the surrender agreement prior to the meeting on July 16, 2007. [32] The Claimant also alleges that as a result of the Defendants negligence he suffered damages of $25,000 consisting of $5,000 hepaid for the option to purchase, $10,000 paid as a non-refundable deposit and a further $10,000 paid for the second extension of theoption until August 31, 2007.

Analysis [33] There are three elements the Claimant must prove beyond a balance of probabilities in establishing his claim that the Defendantwas negligent and the Defendant’s negligence resulted in the damages claimed: 1. That the Defendant owed a duty of care to the Claimant. 2. That there was a breach of that duty of care in that the Defendant failed to exercise the standard of care required of a reasonablycompetent solicitor who is experienced in commercial real estate matters. 3.

That but for the breach by the Defendant, the Claimant would not have suffered the damages claimed. [34] In my view the Defendant owed a duty of care to the Claimant as any solicitor does to his or her client. [35] The Claimant did not tender any expert evidence as to the standard of care applicable to a lawyer, like the Defendant, who isexperienced in commercial real estate matters.

As the transactions in which the Claimant was engaged were very complex it is my viewthat the court is left without assistance in determining the standard of care applicable in this case. [36] Nevertheless, I have proceeded on the basis that the standard of care applicable to the Defendant is as stated in Tiffin HoldingsLtd. v. Millican, (1964) (AB KB), 49 D.L.R. (2d) 216 and referred to in Zink v.

Adrian, 2005 BCCA 93 at para. 23: “The obligations of a lawyer are, I think, the following: 1. to be skilful and careful; 2. to advise his client on all matters relevant to his retainer, so far as may be reasonably necessary; 3. to protect the interests of his client; 4. to carry out his instruction by all proper means; 5. to consult with his client on all questions of doubt which do not fall within the express or implied discretion left to him; 6. to keep his client informed to such an extent as may be reasonably necessary, according to the same criteria.”

[ 37 ] The standard of care is not one of perfection and a solicitor is not expected to insure the commercial success of a client. [ 38 ] If the Claimant was of the view that the standard of care is higher than it was incumbent upon him to provide expert evidence in support of that view. [ 39 ] I will set forth my view on each of the breaches alleged by the Claimant: 1. It is my view that the Defendant did make reasonable efforts to ascertain the nature of Bayshore’s interest in the property and informed the Claimant of the same.

The Claimant was aware from the provisions of the original option agreement that Bayshore had an unsigned commercial lease on the property. By e-mail on June 11, 2007, the Defendant advised the Claimant that Bayshore may have an enforceable 10 year lease plus options to extend for two 5 year terms. In continuing his negotiations with Bayshore to obtain a surrender of their rights, the Claimant was fully informed by the Defendant of Bayshore’s rights in respect of the property. 2. On the same basis it is clear that the Defendant advised the Claimant of the nature of Bayshore’s interest in the property.

There is no evidence to support the Claimant’s assertion that the Defendant told the Claimant that Bayshore was on a month-to-month tenancy and that that led the Claimant to enter the option to purchase. The evidence indicates that the Claimant was aware from the outset of the uncertain nature of Bayshore’s interest in the property. Ms. Korkuczanska testified that both she and the Claimant knew, as early as January 2007, that Bayshore considered that it had a lease. In addition, the unsigned 10 year lease of Bayshore was specifically referred to in the option agreement signed by the Claimant. 3.

As to the drafting of the surrender agreement there is conflicting evidence as to whether it was in accordance with the Claimant’s instructions. In my view, in order to obtain an effective surrender of Bayshore’s interest in the property it was important for the agreement to recite the nature of the interest. The agreement drafted by the Defendant did not grant Bayshore any rights that it did not already possess.

The Claimant has not established on a balance of probabilities that the surrender agreement was not prepared in accordance with his instructions nor has he established that the agreement drafted by the Defendant did not fully protect the Claimant’s interests. 4. I do not accept the Claimant’s argument that the Defendant had a duty to provide another lawyer to assist the Claimant while the Defendant was on vacation. The Claimant knew in early July 2007 that the Defendant would be leaving on vacation on July 13, 2007 and therefore extended the option agreement until August 31, 2007.

Rather than sorting out the terms of the agreement with the Defendant upon his return from vacation, the Claimant chose to proceed on his own. This was a business decision that was not made necessary by the Defendant who had informed the Claimant that he would be returning on August 15, 2007. There is no evidence that the meeting on July 16, 2007 had to take place before the Defendant’s return.

The Defendant could have attended to the completion of the surrender agreement with Bayshore upon his return from vacation on August 15, 2007. [ 40 ] In my view the Claimant has not established that the Defendant was in breach of his duty of care as he has alleged or at all. [ 41 ] Even if the Claimant had established a breach by the Defendant of his duty of care I am not satisfied that such breaches caused any damages to the Claimant.

The Claimant has not shown that but for the Defendant’s conduct the Claimant would not have suffered the damages that he is seeking. [ 42 ] With regard to the Claimant’s financial commitment, the option agreement had originally been drafted by the Defendant to provide for a fully refundable deposit of $50,000. The Claimant subsequently agreed to pay a $10,000 non-refundable deposit in the face of advice from the Defendant that he only pay $100.

The Claimant made a business decision which was contrary to the advice of the Defendant. [ 43 ] The Claimant then made a decision to pay a further $10,000 to the owner to extend the deadline until August 31, 2007. Significantly, this was after the Claimant had been made aware by the Defendant of Bayshore’s rights to the property at which time the Claimant could have withdrawn from the option. He said that he proceeded because he wanted to develop the property.

He did not make this payment because of anything that the Defendant did or did not do. [ 44 ] With regard to the surrender agreement, the Claimant has not established that the Defendant’s acts or omissions prevented him from successfully concluding a surrender agreement with Bayshore. If the agreement drafted by the Defendant required changes, they could have been made upon his return from vacation on August 15, 2007.

It also appears from the evidence that the Claimant reached an agreement with Bayshore but it collapsed because he decided not to proceed with the option. [ 45 ] Ultimately, it appears that the Claimant chose not to proceed with the exercise of the option because of the uncertain state of the Bayshore lease. In my view that state was known to him when the original option agreement was signed. Because of the way that the Defendant had prepared the option agreement, the Claimant was able to withdraw from the agreement and not proceed.

While he incurred costs prior to his decision to bring the matter to an end, it is my view that the evidence does not establish that those costs were the result of any negligence by the Defendant. In fact it appears that the Claimant’s position in his dealings with the Owner relating to the option was protected by the Defendant. [ 46 ] The claim by the Claimant is dismissed with costs to the Defendant. __________________________ G. Bowden Provincial Court Judge