Lesperance Mendes Lawyers v. Bowmac Realty et al. Date:, 2012 BCPC 4

Citation: Lesperance Mendes Lawyers v. Bowmac Realty et al. Date: 20120103 2012 BCPC 0004 File No: 0924342 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: LESPERANCE MENDES LAWYERS CLAIMANTS AND: BOWMAC REALTY INC., HUNT KWOK-HUNG TSE, WILLIAM PIK SING CHEUNG, LOUISA YAN, RINGO LEE aka TIN KIU LEE & DANNY LAM DEFENDANTS STRATA PLAN LMS 1590 THIRD PARTY REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE P. CHEN Appearing for the Claimants: P. Mendes Counsel for the Defendants: G.F. Gregory Counsel for the Third Party Strata Plan LMS 1590: G. Haddock Place of Hearing: Vancouver , B.C.

Dates of Hearing: February 18, August 17 & November 14, 2011 Date of Judgment: January 3, 2012 [ 1 ] The Claimant, Lesperance Mendes, is a law firm seeking payment for its account for services rendered in September of 2008. [ 2 ] All of the Defendants were signatories to a joint representation retainer agreement with the Claimant law firm, signed on September 11, 2008. This agreement authorized the Claimant to take instructions on behalf of all of the Defendants from Hunt Tse, President and owner of Bowmac Realty Inc. (“Bowmac”).

The Claimant has obtained default judgment against the individual Defendants; Louisa Yan (Yan), Danny Lam (Lam) and Ringo Lee aka Tin Kiu Lee (Lee). [ 3 ] The Defendants, Bowmac, Hunt Kwok-Hung Tse (“Hunt Tse”) and William Pik Sing Cheung (“William Cheung”) as well as the Third Party, Strata Plan LMS 1590 (“LMS 1590”) agree that the Claimant performed legal services that were competent and valuable.

However, they disagree with the account for services rendered, alleging that some items have either been billed too aggressively or were not necessary. [ 4 ] The Defendant Hunt Kwok-Hung Tse (“Hunt Tse”) was, at the time of the events giving rise to this action, and remains, the president and owner of the Defendant Bowmac. The Defendant William Cheung was, at that time, an employee of Bowmac, working under the direction of Mr. Tse. During the period of the events giving rise to this action, Bowmac was the property manager for the Third Party, Strata Plan LMS 1590 (hereinafter referred to as “LMS 1590”).

Bowmac has third partied Strata Plan LMS 1590 on the basis of an indemnity clause contained in the management contract between Bowmac and LMS 1590. [ 5 ] The main dispute is between the Defendant Bowmac and the Third Party LMS 1590 over whether or not the Third Party is liable under the indemnity clause in their contract.

Facts Not in Dispute [ 6 ] In 2008, the Defendants, Louisa Yan (“Yan”), Ringo Lee aka Tin Kiu Lee (“Lee”) and Danny Lam (“Lam”) were all acting as directors of the Third Party, LMS 1590, a commercial strata corporation known as the Richmond Public Market. Lee was the President. LMS 1590 has a history of rancorous relationships between various factions of owners. The individual Defendants, Lee, Lam and Yan were members of one of these factions. [ 7 ] On September 4, 2008, Lee and Hunt Tse met with Mr.

Paul Mendes of the Claimant law firm about a Petition filed by another faction of owners, seeking the removal of Lee, Lam and Yan from the board of directors and the dismissal of Bowmac as property manager. Alfred Yung (the vice-president of the board) and the owners of LMS 1590 were named as Petitioners in the action, while all of the Defendants in the case at bar were named as Respondents. [ 8 ] It was immediately clear to Mr. Mendes that there was a split in the strata council and amongst the members. Mr. Mendes suggested to Lee and Hunt Tse that a special general meeting of the membership be held pursuant to

Section 43 of the Strata Property Act S.B.C. [1998] c.43 , to remove the current council and hold a general election for a new council. Under

Section 43, owners holding at least 25% of the strata corporation’s votes (now 20%) can demand a special general meeting to be held within 4 weeks of the demand. Mr. Mendes felt this was an economical way for LMS to resolve the dispute between its factions. [ 9 ] Lee and Hunt Tse followed this advice. The Petitioners immediately served the Respondents (the Defendants in this action) with an application by way of Notice of Motion, seeking to stop the special general meeting, and preventing Lee and his faction from chairing any general meeting, until the Petition had been heard.

The Petitioners had obtained short leave and the Notice of Motion was to be heard on September 12, 2008. [ 10 ] The Defendants agreed to retain the Claimant law firm on September 5, 2008 and Mr. Mendes began to work in preparation for the hearing. The retainer agreement was not signed until September 11, 2008, the day before the hearing. Mr. Mendes prepared 5 volumes of documents. He, or another member of his firm, attended at the Richmond Public Market mall in the evenings to obtain signatures to affidavits.

He attended court for 3.1 hours on September 12, 2008 and for 4 hours and 40 minutes on the continuation date of September 18, 2008. The Court reserved judgment and gave reasons on September 23, 2008. The Claimant’s representation was successful and the Petitioner’s application was dismissed. [ 11 ] The special general meeting was held a couple of days afterwards. The Lee, Yan and Lam faction was defeated by the Alfred Yung faction and Lee, Yan and Lam were not re-elected to council. Lee stopped corresponding with Mr. Mendes after this election and the Claimant has been unable to locate Yan and Lam.

The Defendant Bowmac called LMS 1590’s insurer to inquire about the indemnity insurance carried by LMS 1590 and was informed that coverage was refused. Issues [ 12 ] The issues in this trial are: 1. The amount of the Claimant’s account that the Defendants are responsible to pay; 2. Whether the Third Party is liable to the Defendant Bowmac under the indemnity provision in the management agreement for payment of the Claimant’s account.

The Claimant’s Claim [ 13 ] The Defendants Bowmac, Hunt Tse and William Cheung have submitted that a number of items on the Claimant’s account were either unnecessary or were charged too aggressively. The Third Party LMS 1590 joins in that submission. The Claimant has conceded that an amount for $425.00 was billed in error for work done on the collection file and has deducted it from his claim. Apart from this, neither the Defendants nor the Third Party question the charges for work performed by Mr.

Mendes or other lawyers in the Claimant’s firm, nor do they question the competency of the work done by the Claimant. [ 14 ] The disputed charges were those involving the Claimant’s paralegals and support staff and include the following:

(1) Charge for $50 or .4 hours for putting a file together,

(2) Charge for $25 or .2 hours for filing an appearance,

(3) Charge for $50 for a paralegal to review court file for missing affidavits,

(4) Charge for $37.50 to meet Mr. Mendes to tell Dye and Durham to stop,

(5) Charge for $100 to file affidavit and take it to Mr. Mendes in a courtroom,

(6) Charge for 1.2 hours or $150 to put together a book of authorities,

(7) Charge for 1.2 hours or $253 to draft memo to file re reasons. [ 15 ] The Defendants and Third Party also question charges for attending at the courthouse to look for reasons after the hearing and

for a demand letter. The Defendants and Third Party further submit that some of the work could have been done more economically by using agents instead of paralegal or support staff. [ 16 ] Prior to trial, none of the Defendants had made any complaint or asked any questions about the Claimant’s accounts or charges.

All amounts billed with respect to work performed by the Claimant’s paralegal and support staff were within the limits set out in the retainer letter signed by the Defendants. [ 17 ] The work performed by the Claimant was urgent, performed under pressure of time constraints and required the Claimant to deal with a large number of people. The initial instructions were provided at a meeting on a Thursday (September 4, 2008); the

Section 43 demand was prepared the very next day, Friday, September 5, 2008. After the

Section 43 demand was made that same day, the Defendants were immediately served with a Notice of Motion. As the Notice of Motion was returnable on the following Friday, September 12, 2008, the Claimant began to work on the file immediately, notwithstanding that the retainer agreement was not signed until September 11, 2008. The Claimant reviewed that Notice of Motion and worked on the Sunday November 7, 2008 on preparation of a Response and Appearance to be served on the applicant. On the Monday, September 8, 2008 Mr. Mendes reviewed the Petition and drafted submissions with respect to the Notice of Motion.

The Claimant prepared a number of affidavits for various strata members that required attendance at their place of business for signatures. [ 18 ] Given the circumstances in which the Claimant’s work was performed, it is not appropriate, in my view, for the Court to question the reasonableness of that work. There is no basis for questioning it, as there has been no evidence as what the proper practice should have been or what a reasonable solicitor would have done. The Indemnity [ 19 ] Paragraph 5(

a) of the Management Agreement between LMS 1590 and Bowmac reads as follows: “5 Strata Corporation Covenants The Strata Corporation covenants and agrees: 5(

a) that the Manager will not be liable for any error of judgment or for any mistake of fact of law or for anything which it may do or refrain from doing in any instance in the bona fide exercise, observance, or performance by the Manager of any of its authority, rights or obligations under this Agreement, to indemnify and save the Manager harmless from and against all claims, damages, and costs incurred by the Manager in the bona fide exercise, observance, or performance by the Manager of any of its authority, rights or obligations under this Agreement, and to carry at the expense of the Strata Corporation, adequate insurance to protect the Manager against all such claims, damages, and costs in the same manner and to the same extent as the Strata Corporation;” [ 20 ] The Defendant Bowmac seeks to invoke the above indemnity, and payment by the Third Party of the judgment granted above in favour of the Claimant.

It also seeks payment by the Third Party of Bowmac’s own legal fees incurred in defending this proceeding. [ 21 ] The Third Party submits that the Defendant Bowmac cannot invoke the indemnity for the following reasons:

(1) There was no valid strata resolution to retain the Claimant to defend the Petition and to oppose the Notice of Motion.

(2) The indemnity is defined by the availability of insurance, i.e. the indemnity only covers those claims that are covered by insurance. The insurance company denied coverage for the Claimant’s claim for its account, therefore the indemnity is not available to Bowmac.

(3) There is no indemnity for operating outside the terms of the contract. By retaining the Claimant, Bowmac had entered into a dispute between strata council members on behalf of one of the factions, was in clear conflict with LMS 1590, and was no longer acting under the terms and conditions of its management contract.

(4) The Notice of Motion was seeking only an order to have Bowmac terminated and to compel the production of certain documents. Legal costs incurred to oppose this are not costs that are covered by the indemnity.

(5) If an indemnity is found, it has been overstated. The indemnity applies only to Bowmac and not to any of the individual Defendants, i.e. Hunt Tse or William Cheung. The retainer with the Claimant was signed by 6 parties and liability for the account should be split equally amongst them. Any fees relating to work done by the Claimant to pursue the indemnity should not be allowed. There are matters in the account which are not warranted or overcharged. The Third Party should not have to pay contractual interest because Bowmac decided not to pay the account.

(6) If an indemnity is found, it should be subject to a right of set-off for amounts owing under

Section 4 of the Real Estate Services Act (SBC 2004) c.42.

Section 4 reads as follows: “No action may be brought or continued for remuneration in relation to real estate services unless, at the time the real estate services were provided, the person claiming the remuneration was (

a) licensed under this Part to provide those real estate services, or (

b) exempted by this Act or the regulations from the requirement to be licensed under this

Part in relation to the provision of those real estate services.” [ 22 ] The Third Party submits that Bowmac allowed the Defendant William Cheung to provide real estate services to it during the entire six months of its contract while he was not licensed to do so. The Third Party takes the position that Bowmac should not have

been paid anything while William Cheung was providing services to it on behalf of Bowmac, and that all of the fees and GST paid to Bowmac are therefore now owing to the Third Party and should be applied to a set-off against any liability found in this proceeding.

Analysis of the Third Party Claim [ 23 ] The indemnity clause in the Management Agreement contains broad language: “... to indemnify and save the Manager harmless from and against all claims, damages, and costs incurred by the Manager in the bona fide exercise, observance, or performance by the Manager of any of its authority, rights or obligations under this Agreement, and to carry at the expense of the Strata Corporation, adequate insurance to protect the Manager against all such claims, damages, and costs in the same manner and to the same extent as the Strata Corporation.” [ 24 ] The first question is whether the retaining of the Claimant to advise and to defend the Petition and the Notice of Motion was a “bona fide exercise, observance, or performance by Bowmac of its authority, rights or obligations” under the Management Agreement. [ 25 ] The Third party disputes the validity of the resolution to retain counsel on the basis that the strata council did so at meetings lacking a quorum.

Bowmac submits that the council had been reduced to five members and that there was a quorum when this resolution was passed. In my view, whether or not there was a quorum is not determinative of the issue as to whether Bowmac’s action in retaining the Claimant was a bona fide exercise of its duties to LMS 1590. There was no evidence as to whether there was any proper resolution supporting either the Petition or the Notice of Motion. What is clear is that, when the Claimant was retained, the strata council for the Third Party, LMS 1590, was completely dysfunctional.

According to the facts found by Scarth, J. in his reasons dismissing the Notice of Motion, there were two factions of council with three members each. In my view, it was appropriate for Bowmac, and a bona fide discharge of its duty to LMS 1590 under the Management Agreement, to find a solution to this dysfunction. [ 26 ] Accordingly, I do not find that Bowmac was operating outside the terms of the Management Agreement when it retained the Claimant, or that it acted in conflict of interest or its obligations under the Management Agreement. [ 27 ] I have reviewed the Notice of Motion.

It was clearly an application for an injunction to stop the special general meeting that had been demanded by 25% of the members of the Third Party.

I find that the work of the Claimant was not to defend the termination of Bowmac or the production of documents, it was to ensure that the special general meeting and the calling of an election could proceed. [ 28 ] There is no disagreement that the work of the Claimant – the advice to call a special general meeting to dissolve the council, to have fresh elections for a new council and to oppose the Notice of Motion application for an injunction to stop this from happening – was in the best interests of LMS 1590.

I find that Bowmac’s actions in retaining the Claimant to give the advice they gave and to oppose the Notice of Motion and Petition were a bona fide exercise of its “authority, rights or obligations” under its Management Agreement. [ 29 ] I do not agree that the indemnity is defined by the availability of insurance to cover it. My reading of paragraph 5 of the Management Agreement is that this is simply an additional obligation of the Third Party under the Management Agreement. In any event, I find that there is insufficient evidence at this trial to find that this insurance is unavailable.

There has only been the hearsay evidence of Hunt Tse that he made an inquiry to the new manager who informed him that coverage was not available. There is no evidence as to the efforts of LMS 1590 to claim this coverage. There has been no evidence at this trial as to the language of the insurance policy regarding the Third Party’s obligation under the indemnity. There has been nothing in writing produced to confirm a refusal for coverage or the reasons for it. [ 30 ] In my view,

Section 4 of the Real Estate Services Act (SBC 2004) c.42 does not give the Third Party any right of set-off against Bowmac. That

section operates as a bar to any action for remuneration in relation to real estate services where the person claiming the remuneration is not licensed under that Act . That is not the situation that exists in the case at bar. There is no suggestion that either Bowmac or Hunt Tse were not licensed under the Act . I am not persuaded that

Section 4 would have barred Bowmac from making a claim for remuneration for the services it rendered, simply because an employee delegated by it to assist in its services to the Third Party was not licensed. There is no evidence as to any loss the Third Party suffered by reason of William Cheung’s work on behalf of Bowmac.

In any event, paragraph 9 of the Management Agreement states that the Strata Corporation is not entitled to any set-off against any remuneration or any other money payable to the Manager by the Strata Corporation. [ 31 ] I agree that the indemnity covers only Bowmac and not the individual Defendants who were not a party to the Management Agreement. [ 32 ] I agree that work done by the Claimant to pursue the indemnity should not be allowed against any Defendant other than Bowmac and Hunt Tse.

That work is, in my view, properly characterized as the initial legal costs Bowmac and Hunt Tse incurred in pursuing Bowmac’s claim against the Third Party and was work done in their interest. This court does not generally award costs other than filing fees, service fees and certain other incidental costs incurred in pursuing and defending actions. These costs do not include legal fees and disbursements incurred in pursuing or defending a claim.

For that reason I also cannot award the legal costs of Bowmac, Hunt Tse and William Cheung that were incurred in this proceeding. [ 33 ] I find that the Claimant is entitled to judgment against Bowmac and Hunt Tse for the amount claimed. The Claimant is also entitled to judgment against the individual Defendants for the amount claimed less the amounts that relate to the Claimant’s work relating to the indemnity.

The Defendants’ obligations to the Claimant are joint and several with respect to this amount. [ 34 ] I find that Bowmac is entitled to its claim against the Third Party for all amounts payable to the Claimant, excluding the amounts charged (including interest) that relate to services provided relating to the indemnity. ___________________

P. CHEN, P.C.J.