AVILLE ENTERPRISES LTD. CLAIMANT AND: COLLIERS MACAULAY NICOLLS INC. DEFENDANT File No.: 09-27032, 2011 BCPC 334

Citation: Ma, Aville & Champion v. Colliers Date: 20111125 2011 BCPC 0334 File Nos.: 09-27029; 09-27032; 09-27033 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA File No.: 09-27029 Registry: Vancouver BETWEEN: AVILLE ENTERPRISES LTD. CLAIMANT AND: COLLIERS MACAULAY NICOLLS INC. DEFENDANT File No.: 09-27032 Registry: Vancouver BETWEEN: CHAMPION ENTERPRISES (CANADA) LTD. CLAIMANT AND: COLLIERS MACAULAY NICOLLS INC. DEFENDANT File No.: 09-27033 Registry: Vancouver BETWEEN: CHING KIT MA CLAIMANT AND: COLLIERS MACAULAY NICOLLS INC. DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE H.K.

DHILLON Appearing for the Claimants: Ching Kit Ma Counsel for the Defendant: S. Twining Place of Hearing: Vancouver , B.C. Dates of Hearing: May 16, 17, 18, 19 & June 14, 2011 Written Submissions Filed: August 15, 2011 by Claimants Champion and Ching Kit Ma; July 29, 2011 by Defendant Colliers Macaulay Nicolls Inc. Date of Judgment: November 25, 2011 Introduction [ 1 ] These reasons for judgment pertain to three actions by three different but related Claimants against the Defendant Colliers Macaulay Nicolls Inc. [ 2 ] The Claimant, Mr.

Ching Kit Ma (Action No. 09-27033), is a Hong Kong resident with ties to Canada. His father began to invest in real property in Vancouver in or around the late 1970s or early 1980s. The management of the properties eventually passed to Mr. Ma who oversees the investments for the benefit of his extended family who reside in Hong Kong. [ 3 ] The Claimants, Aville Enterprises Ltd. (Action No. 09-27029) and Champion Enterprises (Canada Ltd.) (Action No. 09-27032), are corporate entities holding or owning real properties in Vancouver for the benefit of the Ma family. These companies are directed by Mr. Ma.

In these reasons I will refer to Mr. Ma both in his personal capacity as well as in his capacity as agent of the Claimant companies. [ 4 ] Colliers Macaulay Nicolls Inc. is a large commercial real estate brokerage and property management firm carrying on business in

British Columbia. [5] In July 2001 Colliers agreed to take on the management of the Claimants’ various properties in Vancouver, including a single-family residence, under the terms of a property management agreement. In 2003 a second residential property owned by Mr. Mapersonally was added to the management portfolio.

In August 2005, all management agreements with Colliers came to an end. [6] The Claimants allege that Colliers was grossly negligent in the management of their respective properties, resulting in damage,loss and expense. [7] In reply, Colliers denies it is liable to the Claimants and states the Claimants have not discharged the legal burden of proof toestablish any breach of agreement, including gross negligence or wilful misconduct, or causation of damage to the civil standard of proofrequired in law. [8] Much of the evidence at trial was in documentary form, consisting of Colliers property management records and writtencommunications between Mr.

Ma and Colliers. I will not summarize all of the trial evidence although I have reviewed and considered itthoroughly. The parties have filed written closing submissions on the facts and law that have been reviewed and considered as well. The Litigants [9] Mr. Ching Kit Ma represented himself as a personal Claimant and was the authorized representative of the two corporateClaimants, Aville and Champion. [10] Mr. Ma and Aville separately own residential properties in Vancouver that are rented to generate income. [11] The Claimant Champion is the owner of a commercial building in Vancouver.

The management of all three properties byColliers is the subject matter of the litigation. [12] Mr. Ma, as a self represented litigant, was the sole witness tendered for all Claimants. Colliers was represented by counsel andpresented testimony of Colliers Managing Director Susan Williams and former property manager Dawn Surette. [13] The case was presented largely through documents which summarize the course of dealings and communications between Mr.Ma and Colliers’ representatives. Many of the facts are not in dispute. What is in dispute is the inferences that can be drawn from theproven facts. [14] I found Mr.

Ma to be a thorough and well prepared witness, both in his own right and as litigation representative of and witnessfor the corporate Claimants. His grasp of the details of all three files was impressive. He was at all times measured and respectful in hisadvocacy. I was most impressed with his overall conduct of the case. [15] I found Ms. Williams to be a reliable witness for Colliers. She answered fairly and to the point on questions put to her by Mr.Ma. She conceded points that were in Mr.

Ma’s or the Claimants favour when the facts or circumstances merited. [16] The pivotal witness for Colliers Dawn Surette was not as reliable. I found her evidence and explanations on critical points to bevague, and at times contrary to the record revealed by the documents. Where her recall is not supported by a written record or otherevidence, I have concluded it is less worthy of belief. [17] I will discuss each file separately below after first setting out the legal principles. The Law [18] The relationship between the parties is governed by the terms agreements which have been reduced to writing.

I accept thatwhere there is a concurrent duty of care arising under contract and in tort, the contractual duty must govern: B.G. Checo InternationalLtd. v. British Columbia Hydro & Power Authority (SCC), [1993] 1 S.C.R. 12 at para. 16. [19] The agreements for Aville and Champion signed in July 2001 require Colliers to manage the properties in “an efficient andbusinesslike manner” and to effect ordinary repairs as may be required in Colliers’ discretion up to $500, and to obtain written approvalfor any non-emergency repairs from the owner for more costly repairs. [20] The agreement for Mr.

Ma’s property signed in December 2003 obliges Colliers to “diligently manage, administer and maintain”the subject property “in the faithful and efficient manner of a prudent and reasonable owner so as to preserve, protect and enhance theearnings, rents, and profits derived from the property.” [21] Under their contract, each Claimant agreed to be bound by clauses which limit their right to claim damages from Colliers only incircumstances which amount to gross negligence or wilful misconduct as defined under law.

Gross Negligence [22] Gross negligence is a well-defined legal standard and has been applied in cases alleging breach of contract, breach of a statutorystandard, or negligence.

[23] The test for “gross negligence” is whether the Claimants can show by a preponderance of the evidence that Colliers’ acts oromissions were a “marked departure from the ordinary standards by which reasonable and competent people generally governthemselves”: Goulas v. Restoule (1974) (SCC), 48 D.L.R. (3d) 285 at 287 (S.C.C.). [24] A comprehensive definition of gross negligence can be found in Law Society of B.C. v. Martin 2005 LSBC 16 at para. 157: Black's Law Dictionary defines gross negligence as: “Gross negligence.

The intentional failure to perform a manifest duty in reckless disregard of the consequences as affecting the life orproperty of another. It is materially more want of care than constitutes simple inadvertence. It is

an act or omission respecting legal duty of an aggravatedcharacter as distinguished from a mere failure to exercise ordinary care. It amounts to indifference to present legal duty and to utterforgetfulness of legal obligations so far as other persons may be affected. It is a heedless and palpable violation of legal duty respectingthe rights of others. The element of culpability which characterizes all negligence is in gross negligence magnified to a high degree ascompared with that present in ordinary negligence.” [25] In Bernier Estate v. M.A. Blythe Bernier Inc. 1990 Q.J.

No. 100 an administrator of an estate including real property was heldresponsible for gross negligence. It was found he never visited the property and behaved as if it did not exist. He collected low rent andtook no other interest in the property under his administration. The Court noted: 44 Defendant Burke, for all practical purposes, acted as if the property had not existed at all as far as overseeing its care andmaintenance, which was his duty. He ignored it altogether, except for collecting an incredibly low rent from the occupant who alsohappened to be one of his personal clients.

Defendant Burke thus showed the kind of care that only the most careless and the mostfoolish person would take to discharge his responsibilities, unless he were in bad faith. [26] In the Bernier Estate case, above, the lack of oversight in administering the estate was serious and showed both errors ofjudgment and gross negligence. [27] Where gross negligence is alleged, what must be proven on the evidence is not ordinary negligence but a “high or serious degreeof negligence”: B.C. Telephone Co. v.

Quality Industries Ltd. (1984) (BC CA), 59 B.C.L.R. 68 at para. 12 (C.A.) [28] To summarize, to establish gross negligence, the Claimants must show evidence which establishes a marked departure orsignificant deviation from the ordinary standards by which a reasonable and competent property manager would behave in similarcircumstances. Negligence simpliciter is not sufficient to establish liability under the terms of the contract.

Expert Evidence [29] Collier contends that the Claimants can not prove gross negligence without leading expert evidence on the standard of care of areasonable and competent property manager.

Without such evidence, Colliers submits that the court cannot measure whether theperformance of Colliers met, fell below, or departed markedly from the requisite standard. [30] I am not persuaded that the issues in this case require the Claimants to adduce expert opinion evidence. [31] I am governed by the principle that if the subject matter of the dispute or the event giving rise to the litigation is such that it fallswithin the common experience and knowledge of a judge or jury, they are deemed to have the capacity to form their own opinion on itwithout expert evidence: see Burbank v. Bolton [Burbank v.

R.T.B.], 2007 BCCA 215, (leave to appeal to SCC denied [2007] S.C.C.A.No. 316) [32] The Claimants’ complaint against Colliers is that the property management company did not manage the two residentialproperties as would a reasonable and prudent owner in similar circumstances. There is nothing technical, complex or scientific aboutsuch evidence. The ordinary person can be expected to have knowledge about what constitutes reasonable, efficient or prudent steps tomaintain residential property in Vancouver, British Columbia to a reasonable standard of upkeep by an owner.

The ordinary person isalso capable of drawing his or her own inferences and conclusions from the totality of the evidence about whether such a standard wasobserved, and if not, whether the acts or omissions meet the test for gross negligence. [33] With respect to Champion’s claim, which alleges that Colliers failed to provide the minimal necessary services on a commerciallease renewal, I am satisfied that the specific acts or omissions alleged are so plainly put that the trier of fact does not require an expertopinion on the applicable standard of care or assistance to from a ready made inference or conclusion on the evidence. [34] I would distinguish Perrault v.

North Vancouver [2010] B.C.J. No. 506 relied on by Colliers because the issues there were morecomplex, calling for an understanding of the duties of listing and selling realtors, who have specific training and experience, and notduties associated with home ownership maintenance or lease renewals per se. The Evidence Aville Enterprises Ltd. Action No. 09-27029 [35] The Claimant Aville Enterprises Ltd. is the owner of residential property located at 6511 Granville Street in Vancouver B.C.

Certain members of the Ma family occupied this property until the death of the father of Mr. Ching Kit Ma (Mr. Ma Sr.) in about 1990 after which time the property was transferred to a corporate entity, Aville. The Ma family returned to reside full time in Hong Kong shortly after the death of Mr. Ma Sr. leaving the management of this property to local contacts. [ 36 ] Between 1990 and 2001, a family friend managed the Aville property. Through arrangements made by Mr.

Ma, Colliers took over management of the Aville property in 2001 as part of a portfolio of 3 properties to be managed for the Ma family as off-shore clients. [ 37 ] Aville alleges that Colliers failed to conduct itself as a prudent property manager. It failed to inspect this property on a periodic basis to ensure that it was in a reasonable state of repair. Aville submits that Colliers neglected to recommend or implement routine repairs, such as gutter cleaning and deck repairs, which caused the property to deteriorate.

The theory of Aville is that had Colliers kept a watchful eye on the property and recommended routine repairs, the subsequent repairs would either not have been required or the extent of them would have been reduced to minor repairs. [ 38 ] In particular, Aville alleges Colliers’ negligent acts or omissions caused the property to sustain water damage which infiltrated the house, leading to an uninhabitable basement suite, with consequential loss of rental income.

Aville alleges Colliers’ failure to recommend and undertake timely routine maintenance of the residential deck railings and deck surface caused accelerated deterioration and added to the cost of repairs. [ 39 ] Aville seeks damages for Colliers’ breach of the property management contract in the amount of $2,400 for loss of rental income, $17,919.30 for replacement of rotten wooden railings and decks, and gutter overflow damages of $2,354.00.

Evidence in the Aville Action [ 40 ] It is not disputed that the Aville property is many decades old, at least twenty years of which it was under direct management control of the Ma family and 4 years of which it was under management of Colliers. [ 41 ] In July 2005, shortly before Aville terminated its agreement with Colliers, Aville learned of water penetration complaints made by tenants of the property.

A contractor, Rick McDonald, conducted a full home inspection and set out a number of recommendations for repair of the property. [ 42 ] The issue is whether the cost of repairs and the related loss of rental revenues while the repairs were undertaken were caused in whole or in part by breach of agreement or breach of the standard of care by Colliers in the management of the property. [ 43 ] Aville contends that Colliers through its agent Dawn Surette failed to properly inspect the property, failed to advise the owner of minor repair problems and failed to recommend remedial action.

Thus, minor repair problems developed into major and costly repair problems. [ 44 ] It is not in dispute that Rick McDonald’s property inspection report, commissioned shortly after the Colliers property management agreement came to an end, lists a number of property deficiencies. Not only was there evidence of water ingress in one

section of the home, it appeared to have occurred over a substantial period of time having regard to the extent of damage to the interior walls. [ 45 ] Aluminium gutters were blocked and a

section of down pipe was missing, causing damage to wood soffits, stucco and interior walls. Window well drains were noted to be blocked and there was evidence of interior water damage. Severe rot was noted in some railings, leading to safety concerns.

There was evidence that some minor repairs to the railings had been done at some point previously. [ 46 ] The home inspector noted evidence of some repairs to stop water ingress, but gave the opinion that on the whole the condition of all flat roofs and decks was generally poor and had passed its normal life expectancy. [ 47 ] It is Aville’s contention that Dawn Surette ought to have inspected, noted and reported these problems to the owner within 3 to 4 months of taking over responsibility of the file in 2003 from her predecessor at Colliers. Aville says she failed to do a timely inspection.

The following year, when she was at the property in December 2004, she failed to prepare any comprehensive report on the condition of the rental premises and did not advise the owner of problems such as deck leaks, railing deterioration, and gutter blockages. [ 48 ] Dawn Surette testified that she performed one full inspection of the Aville residence and one

part inspection. There is evidence to support these inspections which met the industry standard for inspection timelines of between 12 to 18 months as opined by Susan Williams, Managing Director of Colliers. It was Ms. Surette’s impression on viewing the property that very little in the way of upgrades had been done in previous years, and there was some evidence of disrepair. [ 49 ] She said her focus at the time of the inspection was primarily for preventative maintenance or for repairs the tenants had brought to her attention that needed to be addressed from a health and safety perspective.

She said she was inspecting for issues which, if not addressed, would cost the owner more money down the road. [ 50 ] She attended at the Aville property in December 2004 to deal with a tenant instigated call for an emergency repair related to a roof leak. She recorded the need for a new deck, and noted rot in railings. The emergency problems were dealt with as temporary repairs. [ 51 ] Dawn Surette also noted that roof line gutters needed to be cleaned. She said she did not attend to arranging for this immediately as she did not believe it to be “critical or urgent”. [ 52 ] Ms.

Surette testified that she understood that the primary tenant did have conversations directly with Mr. Ma about certain needed

repairs in which she was not included. Discussion and Findings of Fact Re: Aville [ 53 ] I accept, as Colliers contends, that the Aville property has been in the control of the Ma family for many years before Colliers took over management in 2001. The evidence supports that Aville was an absentee owner of this property for substantially a whole decade before Colliers was retained to manage the property. [ 54 ] Colliers points to the lack of personal knowledge by Mr. Ma (on behalf of Aville) about the state of repair or disrepair of the property in 2001 when Colliers was first retained. Mr.

Ma’s annual visits to Vancouver from Hong Kong were admittedly of short duration. He had no personal knowledge of the condition of the property because he did not personally inspect the Aville property between 2001 and 2005. [ 55 ] Mr. Ma agrees that any knowledge he had of the condition of the property was based on Colliers reports.

However, he submits that Colliers were his eyes and ears in Vancouver with respect to the property and it had a contractual obligation to bring to his attention in a timely manner all deficiencies that needed attention and to seek his instructions as to their repair or remediation. [ 56 ] Mr. Ma testified that he was willing to promptly, reasonably and comprehensively respond to recommendations for the ongoing maintenance of the property. [ 57 ] I accept Mr.

Ma’s evidence that he was prepared to follow Colliers recommended advice for upkeep of the Aville property if such could be substantiated as necessary and reasonable. His stated rationale for acting appropriately to preserve assets over which he had stewardship on behalf of the Ma family was credible.

It was consistent with previously documented history of maintenance expenditures he authorized based on Colliers’ recommendations in the early years of Colliers management. [ 58 ] I find that after Colliers transferred the daily management of the Aville file to Dawn Surette in or about 2003 the nature, degree and frequency of attention paid to the management of the Aville property declined. Dawn Surette was either not appropriately responsive or belatedly responsive to queries made by Mr. Ma regarding the Aville property. [ 59 ] Mr.

Ma’s dissatisfaction with Colliers started with his questioning Dawn Surette’s commitment on the files, and ended with his contacting her supervisors for advice and guidance. Dawn Surette was reported to be overworked, and she and Colliers gave assurances that matters would improve. [ 60 ] By April 2005 Mr. Ma was asking Colliers for a new property manager to be assigned. He made a trip to Vancouver to meet with Colliers.

He was advised that Susan Yeung would take over file management from Dawn Surette, except for the Champion lease renewal file. [ 61 ] In July 2005 Aville learned of tenant complaints of water penetration for the first time. Shortly thereafter, Colliers management of the property was terminated. [ 62 ] As I have said, it is my view that the appropriate standard of care expected of a professional property manager is that of a prudent homeowner who uses the property as a revenue producing rental property.

A prudent homeowner of such property would inspect the property at least annually, and make an assessment of the need for repairs, and prioritize repairs on the basis of urgency, non-urgent recommended repairs, and regular preventative maintenance.

A professional property manager of such property should discharge its duties under this standard in an efficient and business like manner. [ 63 ] I have no hesitation in concluding that Dawn Surette’s performance as manager of the Aville property fell below the standard of care expected of a manager acting for an absentee owner of revenue producing rental property. [ 64 ] I conclude on a totality of the evidence that Dawn Surette failed to manage this property in an efficient, proper and business like manner consistent with the duties expected of a prudent homeowner. The gentle reminders and queries by Mr.

Ma were deflected with apologies and promises, and his subsequent, more insistent requests were not properly responded to, ultimately leading to a breakdown in the relationship with Colliers. [ 65 ] Dawn Surette knew that she was dealing with an absentee owner who was relying on her to manage the properties, inspect on a periodic basis, deal with emergencies or urgent repairs within her discretion, attend to matters falling within regular property maintenance, and recommend future repairs for preventative maintenance. [ 66 ] I am satisfied that Dawn Surette did not do a complete inspection of the property when she took over the Aville file in 2003 from her predecessor because it was not a new property in the Colliers portfolio.

She may have made cursory drive-by inspections when dealing with the adjacent Ma property, but she largely maintained the status quo of handling tenant complaints as and when they arose largely on the basis of urgency. This is apparent from the lack of detailed inspection records until December 2004. [ 67 ] It is troubling that when Ms. Surette did attend to tenant generated complaints in late 2004, she did not advise the owner of apparent visible deterioration of property or attend to routine maintenance such as gutter cleaning which was flagged by her and which is an ordinary matter in home maintenance.

I find that she failed in her duty to advise the owner of non-urgent but necessary repairs in a timely manner. She failed to advise the owner of significant property maintenance developments and failed to recommend appropriate courses of action. [ 68 ] On the evidence, she knew or ought to have known from her first property visit, which she insists was in 2003, that the property required more than cosmetic maintenance. She made reference notes after her second visit in December 2004 that deck roofs were failing and wooden railing rot was suspected. She did not promptly report this to Mr.

Ma nor make a request that he consider more

extensive repairs, including needed major renovations. Moreover, she failed to have the gutter cleaned when that was an issue she flagged in December 2004. [ 69 ] For the foregoing reasons, I find and conclude that Ms. Surette’s management of the Aville file on behalf of Colliers fell below the standard of care of a reasonably prudent, efficient, and business like manager of residential revenue property. [ 70 ] Having said that, and having regard to the totality of circumstances, I am not persuaded that Ms.

Surette’s omissions can be characterized as gross negligence under the law which requires proof of “high or serious degree of negligence”: B.C. Telephone Co. v. Quality Industries Ltd. , supra. [ 71 ] That is, I am required to assess the whole of the evidence against Colliers, including Ms. Surette’s failings, in determining if it supports a finding of gross negligence. Over a four year period, Colliers did initially manage the property and advise Mr. Ma of recommended repairs and expenditures. Of the remaining two years under Ms.

Surette’s watch, I conclude that although her management was negligent, it was not such a “marked departure” from the standard expected of a prudent property manager because she did visit the property, did effect minor repairs, and in her discretion determined that other repairs could be deferred until later, although without notifying the owner. On the evidence, Mr. Ma had ample reason to be dissatisfied with Mr. Surette’s lack of attentiveness on the file, including her failure to advise the owner promptly, fully and comprehensively of needed repairs.

However, I can not conclude that this omission meets the high standard required to prove gross negligence which must be of an egregious or aggravated character amounting to a high dereliction of duty going beyond simple negligence.

Causation [ 72 ] The law requires that, in addition to proof of gross negligence, Aville must establish that it would not have sustained damage but for the breach. [ 73 ] I have considered the evidence and conclude that Aville has not met the burden of proving that any breach of contract or duty of care by Colliers caused it to suffer damages it would not have otherwise suffered. [ 74 ] It must be remembered that in 2001 Colliers took over an older residential property after many years under the Ma family stewardship.

There is very little evidence as to the extent of maintenance put into the property in the years prior to Colliers’ involvement. It is relevant that Mr. Ma’s knowledge of the condition of, and maintenance undertaken on, the Aville property was fairly thin for the years prior to Colliers engagement in 2001. I would have expected given Mr. Ma’s detailed knowledge and grasp of property records that had Aville expended a significant amount of money either on routine maintenance or major renovations on the Aville property before 2001, this would have been produced in evidence.

It was not. [ 75 ] There is no evidence to counter Colliers evidence that this property was a rental, revenue producing property several decades old that was showing its apparent age. [ 76 ] The fact that roofs and decks had passed normal life expectancy and railings were deteriorating indicates that these problems developed over a very long period of time and likely predated 2001 when Colliers assumed management of the property. Paint peels and wood rots by being exposed to the elements over a significant period of time. Some of this damage is latent and not patently observable.

As problems do emerge, interim maintenance may work in the short term and act as a stop-gap measure but eventually roofs, gutters and wood railings reach the end of their useful life and need to be replaced. [ 77 ] It is my view that the property would have required major expenditures for replacement of decks and roofs as a normal progression of an aging structure in any event of Colliers’ management. [ 78 ] Accordingly, I do not accept that the majority of the repairs ultimately required were caused solely by or exacerbated because of Colliers’ failure to advise at an earlier point in time that major repairs were warranted. [ 79 ] I do accept that the property’s deteriorating condition became more noticeable in 2004 and 2005.

However, I can not draw the inference that but for Colliers’ failings, Aville would not have experienced moisture penetration and mould problems in the basement which came to light in the summer of 2005. The basement was rented and occupied. The basement tenant could be expected to have complained of leaks had they been a chronic and noticeable problem earlier in the course of Colliers’ management. This concern did not arise until mid 2005 and when the tenant complained to Colliers, it took prompt steps to follow up and advise Aville. It sent an inspection report with recommendations to Mr.

Ma. [ 80 ] Assuming that Colliers had brought noticeable general deterioration of the property (as opposed to emergency complaints) to Aville’s attention in a more timely manner, I find it probable that Aville would have needed to expend a significant amount of money to effect those repairs to roofs, decks and railings before 2005. It is not sufficient to suggest that a regular application of a coat of paint will ward off rot prevention, as is contended by Aville, unless supported by expert evidence by Aville on the issue of causation of damage.

Such expert opinion evidence would need to address the state of repair of the property before 2001, the cost of preventing deterioration over the ensuing four years, and the difference in the cost of repairs if made in, for example, 2003 as opposed to the cost of repairs required in 2005.

There was no such evidence before the court. [ 81 ] I find and conclude that the evidence as a whole does not establish on a balance of probabilities that the repairs occasioned to the Aville property after July 2005 were caused solely or predominantly by Colliers’ failings and would not have arisen in the absence of breach of contract or negligence.

In the result, there is insufficient evidence that delayed implementation of repairs due to Colliers failure to make timely remedial recommendations led to further significant deterioration which added to the cost of repairs ultimately required. [ 82 ] In the result, Aville has not met the burden of proving on a preponderance of the evidence that Colliers was grossly negligent

under the management agreement, or that its acts or omissions caused the needed repairs. Ching Kit Ma Action No. 07-29033 [ 83 ] This action concerns a residential rental property at 6609 Granville Street in Vancouver owned personally by Ching Kit Ma since at least the 1980’s. [ 84 ] Mr. Ma alleges that Colliers failed to properly vet the reliability of tenants it placed, causing their breach of lease and default in rent payment. He alleges that the tenants caused property damage requiring significantly greater repairs.

He seeks damages caused by the breach of the property management contract for loss of rent, and cost of property repairs to the full monetary jurisdiction of the Provincial Court. [ 85 ] Mr. Ma sees Colliers’ failure to secure long-term stable tenants as solely their responsibility and seeks loss of rental revenue by reason of the tenant’s default in January 2005. [ 86 ] In addition to the loss of rental revenue from January 2005 to June 2005, Mr. Ma seeks compensation for the increase in repair costs he submits was caused by Colliers failure to implement repairs that he approved in the summer of 2004.

The Evidence and Findings of Fact [ 87 ] This residential property was managed by a family friend Edward Tang until it was discovered that the tenants had used it as a marijuana grow operation. The grow operation was uncovered in 2002 as a result of which the City of Vancouver revoked the occupancy permit until restoration work was done. Mr. Ma engaged Colliers to manage the property as a rental property on or about January 1, 2004. In about 20 months, on August 1, 2005, the arrangement was terminated. [ 88 ] The evidence shows that Mr.

Ma’s direct personal knowledge of the condition of the Ma property at the time Colliers took over management is limited. He was aware of the problems with the grow operation and restoration work required to regain an occupancy permit. [ 89 ] By contrast, Dawn Surette visited the property in April 2004 within a few months of Colliers assuming management responsibility of a new property in its portfolio. She conducted an inspection and took photographs that showed that the upkeep of the property had been neglected for some time. She noted, and I accept, that the house required attention.

It had not been painted for some time, and showed peeling exterior paint. The deck had not been maintained. It had several missing boards. There was significant moss on the roof, shrubs and trees were overgrown, and the interior appeared clean but not at all improved or upgraded. [ 90 ] I am satisfied that Dawn Surette’s opinion that the property needed repairs was known to Mr. Ma because he makes express reference to the history of previous required repairs in e-mail communications to Colliers dated July 12, 2004. I am also satisfied that Mr.

Ma could not have thought that the minor repairs recommended by Colliers in the summer of 2004 were the only repairs needed for this aging property. [ 91 ] Mr. Ma did approve carrying out those minor repairs in July 2004 in the amount of $5,750.

The repairs were for pruning work to be done in the fall 2004, repairs to a rear deck for $1,500; repainting of the interior, installing bathroom dehumidifiers for $500; replacement of bathroom tiles and caulking for $250; and attending to bathroom moisture problems at a budgeted cost of $1,000. [ 92 ] I find that the type and value of the repairs proposed by Colliers in 2004 were not extensive, and not for purposes of addressing more significant issues which emerged later after a fuller inventory of needed improvements was made. [ 93 ] The later repairs included painting, landscaping, furnace maintenance, electrical work, plumbing repairs, replacing the sundeck, repairing the railings and shingles, carpentry, bathroom repairs and fireplace repairs. [ 94 ] Mr.

Ma says that this increase in cost of repairs is due to property deterioration caused by a combination of repairs not undertaken when first approved in July 2004, and by Colliers failure to secure reliable tenants whose breach of tenancy caused loss of rent and further damage to the property. [ 95 ] It is correct as Mr. Ma alleges that Dawn Surette did not proceed with these repairs that he had readily approved. Rather, of her own accord, she determined that it would be preferable to delay work until the suitability and stability of recently placed tenants could be confirmed.

It is also correct that Dawn Surette did not advise Mr. Ma of this change of course until February 2005 by which time the tenants were in default of rent and being evicted from the premises. [ 96 ] Mr. Ma ties the delayed repairs to Dawn Surette’s placement of unsuitable tenants in the property.

He contends that if Dawn Surette had been diligent in securing reliable tenants in July 2004 for a house put in a decent state of repair, they would not have defaulted or caused further damage to the property. [ 97 ] The evidence indicates that in early 2004 the property was tenanted by various tenants under what Dawn Surette described as a rooming house environment.

I accept her characterization that this property was likely not suitable for a single family rental due to the condition it was in. [ 98 ] The evidence shows that Dawn Surette was notified by the existing tenants of a change in tenancy in the summer of 2004, and she was content to have departing tenants recommend their replacement. Ms. Williams testified, and I accept, that this is not an unusual practice. Word of mouth as the basis for securing new tenants is a long standing and common practice in any rental market.

[ 99 ] The difficulty in the evidence is that Ms. Surette did not do anything but employment reference checks and little in the way of credit history checks because, according to her, the tenants were young and not likely to have a searchable history. The replacement tenants were permitted to lease on a month to month lease. Mr.

Ma was under the impression that Colliers had obtained a 12 month tenancy agreement of reputable tenants based on diligent investigations by Dawn Surette. [ 100 ] Within a month, the tenants began to default in payment of rent, initially by late payments to ultimately non-payment, leading to eviction proceedings in February 2005. As rent payments began to be delayed, Dawn Surette decided not to expend monies on the approved property repairs.

I can not fault her reasoning on this given rental revenues were becoming chronically delayed and it would not have made economic sense to invest in the property in the circumstances. [ 101 ] On the other hand, I find that there is a sound basis for concluding that Dawn Surette failed to undertake reasonable enquiries necessary to be satisfied of the good credit of the new tenants.

A prudent and reasonable owner would have accepted word of mouth applicants but before finalizing any rental agreement would have made more diligent enquiries than did Dawn Surette. [ 102 ] I find that Dawn Surette dealt with the change in tenancy in July 2004 in a manner that was expedient to her interests because it required less work in advertising and interviewing, but not in the best interests of the property owner. Young tenants without any reliable credit history who move into a rooming house living arrangement run a greater risk of default.

Yet, there is some truth to the proposition that the property’s poor condition would not have attracted a stable long-term family tenant in the summer of 2004. The house was built in the 1940s and had been leased to university students at the time Colliers took over the lease. I accept that more diligence was expected from Dawn Surette in securing new tenants, and she was less than candid at trial in her explanations for whether she in fact performed any credit checks. However, the fact remains that she inherited the quality of departing tenants from Mr.

Ma and she substituted a similar type of tenant presented to her by word of mouth. [ 103 ] A prudent owner of rental property must balance the risk of placing a tenant with less than optimal credentials with the risk of letting the place stay empty while conducting a broader search.

It is fair to say that Dawn Surette could have insisted on tenants who had better credentials but there was a corresponding risk of loss of rental revenue while seeking a better quality of tenant for an older property in need of repair. [ 104 ] The other factor is that even those tenants who appear to be creditworthy and whose references and credit checks seem valid pose a risk of default. The risk of a defaulting tenant goes hand in glove in the property rental business. A good example is that under Mr.

Ma’s watch two years prior, the tenants used the property as a marijuana grow-operation causing extensive losses. [ 105 ] I can not characterize Ms. Surette’s failings as meeting the test of gross negligence. It was not an abject dereliction of duty suggestive of a marked departure from the standard of care of a rental agent or property manger. [ 106 ] Further, Colliers submits, and I accept, that a complete answer to tenant related rental losses or tenant caused damages is that such a claim is expressly excluded under the terms of Mr.

Ma’s contract with Colliers which states that Colliers is not responsible for a tenant’s non-payment of rent or damage to rental premises. Delayed Eviction [ 107 ] Mr. Ma also complains about Colliers delay in enforcing eviction proceedings and taking possession of the property which caused loss of rent. [ 108 ] The evidence shows that default in payment of rent occurred in January 2005 after which Colliers made an immediate demand for payment of rent within the legislated time to pay. Thereafter, it took prompt steps to lawfully evict the tenants for failure to pay rent.

It applied for and obtained an order of possession in February 2005. In March 2005 Dawn Surette advised Mr. Ma she wanted to do a new inspection of the house and to recommend further repairs to justify a higher rent in order to attract a better quality of tenant. Mr. Ma agreed and repairs were undertaken after March 2005 while the property was vacant of tenants. [ 109 ] The evidence does not establish any undue delay by Colliers in obtaining possession of the property. It was obliged to give legal notice and follow other procedural steps mandated by law after rent payment was in default.

Colliers followed those steps within the law and in a time appropriate fashion.

Summary [ 110 ] In

summary, I find that in relation to the Ma property, Dawn Surette made a timely initial inspection, and set out some preliminary recommended repairs of an apparently neglected property in a reasonable manner. [ 111 ] I am not persuaded, on the evidence, that Colliers’ failure to implement the 2004 approved repair work is causally linked to the cost of repairs that were subsequently recommended on a more thorough assessment of required renovation. [ 112 ] Difficulties arose when Dawn Surette made a decision to accept a similar quality of tenant as had been previously in place without undertaking proper credit checks.

She secured new tenants who were ultimately unreliable. Colliers then took proper and timely steps on default of rent to regain lawful possession of the property. [ 113 ] Dawn Surette’s handling of the Ma property file, including lack of timely, responsive and transparent communications with Mr. Ma, does not do credit to her or her employer.

However, for the reasons stated above, her overall performance as a property manager, including her failure to secure more reliable tenants, does not fall to the level of gross negligence as the law requires for liability under contract to be proven on a balance of probabilities.

Champion Enterprises (Canada) Ltd. Action 09-27032 [ 114 ] Champion Enterprises seeks reimbursement of its legal costs in the amount of $9,496.51 associated with settling a lease renewal dispute with its tenant, Speakeasy, which proceeded to litigation in the Supreme Court of British Columbia. [ 115 ] Champion alleges that the gross negligence of Dawn Surette in mishandling the lease negotiations, including in discussing lease rates with the tenant without the prior express consent and approval of Champion, caused Champion losses in defending the tenant’s lawsuit.

Colliers denies that it was negligent or grossly negligent. It says that Champion has not shown that, as a result of any act or omission of Colliers, it was forced to make an improvident lease renewal agreement with its tenant or otherwise suffered losses caused by Colliers. [ 116 ] Champion Enterprises also seeks reimbursement of the cost of an engineering report in the amount of $1,070.00 that it says Colliers ordered without justification and which it did not put to any use.

Evidence and Findings of Fact [ 117 ] The relevant time frame is between March 2004, when the tenant Speakeasy gave notice to Champion that it wished to enter into a lease renewal, and July 2005 when Champion terminated its agreement with Colliers and thereafter tried to conclude lease negotiations through its new management company and legal counsel. [ 118 ] The lease expiry date was April 30, 2005.

The records of Colliers show that Dawn Surette knew at least one full year before the expiry of the lease that the tenant was seeking renewal of the lease. [ 119 ] It is also undisputed that Champion asked Colliers to assist with lease renewal negotiations in April 2004. Dawn Surette was authorized by Champion to negotiate the renewal of the lease with the tenant. The expectations of Champion were very straightforward. Before agreeing to renewal terms, it required lease renewal rate information in the form of recent comparables from Colliers to be sent to Mr. Ma for his consideration.

Champion said it would not be in a position to instruct Colliers as to the renewal rates to submit to the tenant without such information. [ 120 ] Ms. Surette appears not to have done much to inform Champion or Mr. Ma as to suggested rates in the months following April 2004. On December 6, 2004 Mr. Ma emailed Dawn Surette inquiring about the status of the lease renewal because he said he was worried that time was running out.

I accept his evidence that he flagged this issue because he was not satisfied with Dawn Surette’s handling of the matter which was, if not dilatory, certainly not pro-active. [ 121 ] On January 21, 2005 by email to Mr. Ma, Dawn Surette proposed lease renewal rates for his consideration over a five year renewal term. The rates for the first year were $19.00 per square foot, $21.00 for years two and three, and $23.00 for the final two years. These rates were forwarded to Mr. Ma by Ms. Surette without providing any justification as to how she arrived at the rates. She acknowledged in her testimony that Mr.

Ma had asked her for suitable comparables and whether she could justify the rates before he would agree to Colliers’ figures. She said she usually provides this information and was at first very vague for why she did not. It is not clear what research she did but if she did any, she did not send any back up information to Mr. Ma to support the rates. [ 122 ] Mr. Ma responded on January 25, 2005 and queried if his asking for details was too much of a demand or made him an “unattractive client”. I am of the view that this is a clear signal to Dawn Surette that Mr.

Ma was becoming increasingly dissatisfied and even distressed with her handling of the lease renewal task. [ 123 ] I find that throughout the lease renewal process, it was both appropriate and reasonable for Mr. Ma to ask Colliers for data to support their position that it was recommending fair and market-supported commercial rental rates. [ 124 ] I find that at all times Mr. Ma approached Colliers in a polite and gentleman-like manner to encourage timely and appropriate reporting to him. [ 125 ] On February 7, 2005 Mr. Ma asked Dawn Surette for comparables and by February 28, 2005 Mr. Ma was complaining to Ms.

Surette’s supervisor Susan Williams and asking for a new property manager to be assigned by Colliers due to Dawn Surette’s substandard performance. This was 11 months after the tenant’s request to enter into lease renewal negotiations. [ 126 ] I find that Champion was not asking for untoward information or information that could not readily be provided by Colliers. This was information available within the Colliers organization. As Ms.

Williams conceded, Colliers has a large library of lease rate comparables, including general rate trends, which are available to be disclosed without breaching any client confidentiality. Ms. Williams also said that market rates would be acceptable to give out to clients needing guidance in fixing renewal rates. [ 127 ] I reject Ms. Surette’s evidence that such market information was a difficult objective to achieve because of client confidentiality.

It is not credible given that she worked for a property management company with access to this type of information which could have been provided in a manner that did not breach confidentiality of other clients or disclose privileged information. I find her evidence that she was having difficulty getting rate information from within Colliers to be directly at odds with Ms. William’s evidence and at odds with common sense.

It was not credible and I reject it. [ 128 ] I am persuaded on the evidence that Dawn Surette failed to take any reasonable steps to obtain lease rate comparables that were readily available to her and she failed to forward such information to Mr. Ma. [ 129 ] In February 2005 it was clear to Colliers that Mr. Ma did not have confidence in Dawn Surette. Yet, on April 17, 2005 Susan Williams emailed Mr. Ma to suggest that it made sense for Dawn Surette to continue with the lease renewal work in the short term until a new lease agreement could be finalized.

However, it does not appear Colliers held Dawn Surette to account for Mr. Ma’s long-standing

request for comparables. [130] With the imminent expiry of the lease in April 2005, Mr. Ma made a personal trip to Vancouver to deal with propertymanagement issues with Colliers. Ms. Surette attended this meeting but did not provide the requested comparables. [131] At about this time, even though Dawn Surette was aware that Mr. Ma was losing confidence in her ability to properly representChampion’s interests, she met with the tenant Speakeasy to present an offer to the tenant on figures that Mr.

Ma had not approved, statingthe offer was subject to landlord approval. [132] In early July 2005, she forwarded the tenant a proposed renewal rate of $28 to $30 per square foot even though she was awarethat Colliers’ own marketing report indicated that higher lease rates were available for the relevant portion of Granville Street. [133] Mr. Ma rejected these July 2005 figures as being without support. Ms.

Surette maintained she was unable to providecomparables due to lease confidentiality clauses which justification I have rejected since general rate information was available on theevidence. [134] This unauthorized July proposal to the tenant was made at a time that Dawn Surette’s employment with Colliers was coming toan end. No lease renewal was concluded by the time Dawn Surette left Colliers. [135] Mr. Ma never handled any of the negotiations directly with the tenant as he had delegated to Dawn Surette the lease renewalnegotiations. [136] Mr.

Ma on behalf of Champion states that Dawn Surette had a year to conclude a lease renewal but due to her gross negligencepermitted the lease to expire at the end of the term on April 30, 2005 without a concluded renewal. She was not diligent in keeping therenewal negotiations on track and did not provide Mr.

Ma with the requested rent comparables so he could make an informed choice onterms. [137] With the assistance of its new property manager, Champion attempted to conclude a new lease, but found itself with a tenantwho insisted that Dawn Surette had bound the landlord under the offer to lease she presented in July 2005. Ultimately, Champion faceda lawsuit because Speakeasy alleged it had a binding agreement with Champion based on an offer prepared by Dawn Surette that Mr. Mafor Champion had not vetted or approved.

It was not until the following hear, in May 2006, that this litigation was concluded throughsettlement procured with the assistance of counsel. [138] I am satisfied that Dawn Surette met with the tenant in July 2005 without the landlord’s authority to propose rates that she knewhad not been approved by the landlord. She took these steps after Mr. Ma made a personal trip to Vancouver based on his concerns as tohow the matter was being handled. She had no authority to present any offer to lease to the tenant, including one suggesting a rate of $28per square foot, without having in hand the express approval of Mr.

Ma. [139] I have come to the conclusion that Dawn Surette’s conduct prior to the expiry of the lease in April 2005 was negligent due to herlack of diligence in researching and recommending lease rates. I further find that in meeting with the tenant in July 2005 Dawn Surette’sconduct was intentional and wilful in that she knew she did not have authority to present any figures to the tenant that had not beenpreviously approved by the client yet she proceeded to do so.

In clear contravention of her instructions, she suggested rates that were notunauthorized by Champion and which were later used by the tenant to support its lawsuit against Champion.

This latter conduct byDawn Surette, in the context of Champion’s many prior requests for lease rate comparables and increasing dissatisfaction expressed toher about her lack of performance, in my view fell markedly below the standard expected of a prudent and reasonable property manageracting for an overseas client in the midst of lease negotiations. [140] The issue of producing comparables was so straightforward, and having a client’s authorization and approval before proposingany rates so fundamental that no expert evidence is needed to draw the inference and conclusion that Ms.

Surette’s conduct was of anaggravated character, and in reckless disregard of her duties and obligations, so as to amount to a high or serious degree of negligence.

This is not a case of simple inadvertence, but wilful failure to meet a client’s repeated requests for information which, being overseas, theclient was not able to secure. [141] I am satisfied that the Claimant Champion has established breach of contract by Colliers due to the gross negligence of DawnSurette in intentionally and without prior authorization providing the tenant lease renewal rates which, not surprisingly, became fixed inthe tenant’s mind as being furnished under the authority of the landlord.

Had the rates not been provided, there would not have been anybasis for the tenant’s beliefs or justification for the tenant’s actions. [142] I do not accept as contended by Colliers that settlement of the lawsuit with the tenant Speakeasy is a bar to Champion’s recoveryof its legal fees on the basis of res judicata. Colliers was not a party to Speakeasy’s lawsuit against Champion and the issue against it inthis action arises in the context of breach of the management agreement between the Colliers and Champion: see Fournogerakis v.Barlow 2008 BCCA 2003 and Angle v.

Minister of National Revenue, (SCC), [1975] 2 S.C.R. 248 at 254. [143] I accept Mr. Ma’s evidence that a substantial portion of the legal fees incurred in dealing with the tenant’s lawsuit relates tohandling the Champion lease.

I do not accept that the matter was live for a period of 3.5 months – it was a matter ongoing from the timeof the unauthorized offer until the matter was settled. [144] I find and conclude that that the legal fees incurred by Champion in defending and resolving the lawsuit are directly related tothe breach of contract by Colliers caused by the gross negligence and wilful misconduct of its employee Dawn Surette.

The ClaimantChampion is awarded damages in the amount of $9,496.51 plus court ordered interest from September 1, 2006 to the date of thesereasons for judgment. [145] On Champion’s claim of the cost of the engineering report, I conclude that there is no basis to dispute the expenditure for thisengineering report. Colliers had discretion under its agreement with Champion to commission such a report and in my view it was

reasonable to do so to evaluate the heating and cooling requirements of the building. Had Colliers continued with its contract, it would have been reasonable to rely on such a report for future planning needs. The fact that it was not utilized does not mean the report was not reasonably necessary for future HVAC decision-making.

Summary [ 146 ] For the reasons set out above, I conclude that the Claimants Ching Kit Ma and Aville Enterprise Ltd. have not met the burden of proving gross negligence by Colliers to hold it liable under the property management agreements. The claims of the Claimants are hereby dismissed. [ 147 ] I am satisfied that gross negligence has been proven in the action by Champion Enterprises (Canada) Ltd. and there shall be a payment order against Colliers in the amount of $9,496.51 plus court ordered interest from September 1, 2006 to the date of these reasons for judgment.

The judgment amount is payable forthwith. [ 148 ] As there has been divided success, each party is to bear its own costs. [ 149 ] As a final comment, I wish to acknowledge the professional manner in which both Mr. Ma for the Claimants and Mr. Twinning for the Defendant in all three actions conducted themselves in the presentation of the evidence and argument, for which I am indebted. A complex case was handled with courtesy and professionalism to one another and to the court. _______________________________ The Honourable Judge H. K. Dhillon