2014 QCCQ 378, 2014 QCCQ 378

Perluzzo c. Lanzieri 2014 QCCQ 378 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-22-198712-120 DATE: January 28, 2014 ______________________________________________________________________ BY THE HONOURABLE ARMANDO AZNAR, J.C.Q. ______________________________________________________________________ PATRICK A. PERLUZZO Plaintiff v. VALERIO LANZIERI 9228-9271 QUÉBEC INC.

Defendants ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Plaintiff, an attorney at law, claims jointly from Defendants, the sum of $40,909,57 for professional services rendered. [ 2 ] The legal services in question were rendered by Plaintiff in regard to the sale by Defendant 9228-9271 Québec Inc (formally known as Aviva Inc.) of its assets to a corporation known as 4549589 Canada inc. [ 3 ] Although the professional services in question are detailed in two statements of account filed as exhibits P-1 and P-1a), both dated November 5, 2012, the said services were in fact rendered between the period of November 26, 2009 to November 17, 2010. [ 4 ] In the Motion to Institute Proceedings, Plaintiff alleges the following: 1.

Defendants are jointly and severally indebted towards Plaintiff for the sum of $40,909.57, representing legal services rendered and expenses incurred by Plainfitt at Defendants' request, and for their sole benefit and advantage, the whole as more fully appears from Plaintiff's invoice dated November 5, 2012, duly produced herewith as Exhibit P-1; 2.

Although duly required to do so by Plaintiff's mise en demeure dated December 7, 2012, Defendants have failed and/or neglected to pay the said amount fo $40,909.57 to Plaintiff, the whole as more fully appears from a copy of said mise en demeure and bailiffs' reports of service attached thereto, duly produced herewith en liasse as Exhibit P-2; [ 5 ] Defendants contest Plaintiff's action. More particularly, in the defence they have filed in the Court Record, they allege, amongst other allegations, the following ones: 3. Plaintiff through a holding company is one of the shareholders of Defendant 9228 for 40%.

Defendant Lanzieri is the other shareholder for 60% and its sole director. 4. Plaintiff’s account, exhibit P-1, represents the professional services he claims to have rendered on behalf of Defendant from November 2009 to November 2010 in the sale of its software business (the “Sale”) which was its sole asset and activity. 5. However, in 2009 when it was decided to sell the assets of Defendant 9228, it was agreed and understood that Plaintiff, as a 40% shareholder of Defendant 9228, would not charge for the legal services involved in the Sale. 6.

Plaintiff’s account, exhibit P-1, rendered two years after the completion of the Sale, is therefore invalid and not due. 7. In any event and without detracting from paragraphs 5 and 6 above, the price for the Sale was $800,000, but after paying creditors the net amount which Defendant received in November 2010 was only $38,000. 8. In November 2010 Defendant 9228 then distributed the said amount of $38,000 as a dividend to the two shareholders, Plaintiff and Defendant Lanzieri, in proportion to their holdings.

This was done with the full knowledge and consent of Plaintiff. [ 6 ] In addition, as concerns Defendant Lanzieri, in the said defense, he alleges: 15. He is the sole director of Defendant 9228;

16. There is no factual or legal basis that would render him personally liable for any amount claimed by Plaintiff under exhibit P-i; 17. There is no factual or legal basis that would render him solidarily liable together with Defendant 9228 for any amount claimed by Plaintiff under exhibit P-1; 18. In fact, while Plaintiff was rendering legal services on behalf of Defendant 9228 in the context of the Sale and thereafter until November 2012, he never considered Defendant Lanzieri personally or solidarily liable for any of his services. 19.

The claim against Defendant Lanzieri was only an afterthought conceived by Plaintiff in November 2012 for unrelated and invalid reasons and designed as a pressure tactic. [ 7 ] In a cross-demand mentioned in his defense and formally introduced by way of verbal amendment at the hearing, alleging that the action instituted against him is abusive, Defendant Lanzieri claims from Plaintiff the sum of $7,500 as compensation for the legal fees that he alleges to have incurred as a result of the institution of the said action.

THE FACTS [ 8 ] From the evidence adduced at trial, the Court retains, amongst others, the following elements. [ 9 ] Plaintiff and Defendant Lanzieri were business partners and friends before the occurrence of the facts that have led to the dispute that has brought the parties before the Court. In fact, Defendant was godfather to Plaintiff's daughter. [ 10 ] At all times pertinent to the present case, Defendant 9228-9271 Québec Inc. was the property of 9204-2795 Québec Inc. which owned 100% of the shares.

In turn 9024-8964 Québec Inc. held 60% of the shares of 9204-2795 Québec Inc. whereas Les Entreprises Lawgistix inc. held 40% of the shares. Finally, Defendant Lanzieri held 100% of the shares of 9024-8964 Québec Inc. and Plaintiff held 100% of the shares of Les Entreprises Lawgistix Inc. [ 11 ] This being so, for all intents and purposes, Plaintiff and Defendant Lanzieri were partners in the venture of 9228-9271 Québec Inc. of which Defendant Lanzieri was the sole director.

Previously to the month of November 2010, 9228-9271 Québec Inc. hereinafter referred to as "Aviva" was known as "Aviva Inc." [ 12 ] The professional services that Plaintiff alleges to have rendered and which are detailed in exhibits P-1 and P1a) relate to the sale of the assets of Aviva to 4549589 Canada Inc.

The negotiations regarding the sale of the assets of Aviva were undertaken with 4549589 Canada Inc. in November 2009. [ 13 ] The statement of account for professional services rendered prepared by Plaintiff (exhibit P-1) is dated November 5, 2012 and was sent to Defendants nearly two years after the closing of the transaction between Aviva and 4549589 Canada Inc. [ 14 ] According to Plaintiff, if he delayed the preparation and the sending of his account for professional services rendered, it was at the request of Defendant Lanzieri who had asked him to wait until the release of the funds that were held "in escrow" as part of the transaction concluded with 4549589 Canada Inc. [ 15 ] In this regard, it is of interest to note that although the funds held "in escrow" were in fact released in November 2010, the account for professional services rendered of Plaintiff was nevertheless issued by him two years later.

Plaintiff explains this fact by affirming that Defendant Lanzieri asked him to delay the issuance of the account as he was then in need of money.

This affirmation is denied by Defendant Lanzieri [ 16 ] Testifying in Court, Plaintiff stated that he acted as the attorney of Defendant 9228-9271 Québec Inc. and of Defendant Lanzieri in regards to the negotiations and the closing of the transaction leading to the sale of the assets of Aviva, known as the "Asset Purchase Agreement" of February 22, 2010 (exhibit P-3). [ 17 ] According to Plaintiff, he informed Defendant Lanzieri that his services would be rendered for his benefit and that of the corporation (9228-9271 Québec Inc.) and that he intended to be remunerated for the said services. [ 18 ] More particularly, Plaintiff testified in Court affirming that:

a) he reviewed the numerous drafts of the "Asset Purchase Agreement" that had been originally prepared by the attorneys of 4549589 Canada Inc.;

b) he advised Defendant Lanzieri regarding the consequences of the personal guarantees given by him to 4549589 Canada Inc. and which were part of the "Asset Purchase Agreement" (Section 10 - Indemnification);

c) he advised Defendant Lanzieri in regards to the Non-competition Agreement entered into with 4549589 Canada Inc.;

d) he advised Defendant 9228-9271 Québec Inc. as well as Defendant Lanzieri in the preparation of the contestation of the Notice of Direct Claim (exhibit P-5) dated September 24, 2010 sent to them by the attorneys of 4549589 Canada Inc., which issue was ultimately resolved to the satisfaction of the Defendants and 4549589 Canada Inc.;

e) he advised Defendant Lanzieri regarding the Independent Contractor Contract (exhibit P-9) that was offered to him by 4549589 Canada Inc. However, he acknowledges that the said contract was finalized by another lawyer representing Defendant Lanzieri on this matter. [ 19 ] Plaintiff acknowledges the fact that Defendants did not sign a written mandate in regard to the payment of his fees for the

services to be rendered by him on their behalf in relation to the sale of the assets of Aviva to 4549589 Canada Inc. [ 20 ] According to Plaintiff, the mandate regarding the services rendered in relation to the sale of the assets of Aviva commenced when Defendant Lanzieri remitted to him a letter of intent issued by 4549589 Canada Inc. who was interested in the purchase of the assets of Aviva. [ 21 ] At that time, Plaintiff states that he was given the mandate to represent Defendant 9228-9271 Québec Inc. by Defendant Lanzieri then acting as President of the corporation. [ 22 ] Plaintiff acknowledges the fact that if Defendant Lanzieri signed the "Asset Purchase Agreement" (exhibit P-3) in his personal capacity, it was in view of the existence of the Indemnification Clause of the said agreement (article 10). [ 23 ] As concern the amount owed to Aviva as a result of the closing of the "Asset Purchase Agreement" (exhibit P-3), of the total amount paid by 4549589 Canada Inc., an amount of $76,886 was remitted to notary Kevin Leonard (exhibit D-6) to be held "in escrow" by him.

These funds were subsequently entrusted to Plaintiff to be deposited in his "in trust account" for remittance to Aviva. However, before any remittance to Aviva, a sum of $34,991.25 was paid to its accountants leaving a net amount of $38,226.74. [ 24 ] Plaintiff testified that the above said amount of $38,226.74 was to be applied to the payment of his fees, which had yet to be billed by him to Defendants.

However, as Defendant Lanzieri wished that the said amount be divided between the shareholders of Aviva in accordance with the respective portion of shares owned by each, he reluctantly agreed to delay the issuance of his account for professional services rendered. [ 25 ] Moreover, Plaintiff testified that he also expected his fees to be paid following the settlement of another dispute (Visuascan matter) involving Aviva to whom a sum of about $900,000 was owed. [ 26 ] Plaintiff waited until November 5, 2012 to issue his account for professional services rendered (exhibit P-1).

According to him, he decided to issue the account after a dispute arose with Defendant Lanzieri regarding the settlement of the Visuascan matter.

More particularly, this dispute arose when Defendant Lanzieri advised Plaintiff that he would no longer act as the attorney for Aviva regarding the settlement of this matter. [ 27 ] Fearing that he would not be paid for the services rendered by him, Plaintiff affirms that he then decided to prepare and send his account for professional services rendered (exhibit P-1) in the amount of $40,909,57. [ 28 ] This account, although somewhat detailed, does not mention the exact date when the services were rendered, the number of hours worked nor the hourly rate charged. [ 29 ] Subsequently, after the institution of the action and after his examination on discovery, Plaintiff prepared a detailed statement of account (exhibit P-1a) based on his time sheets (exhibit P-11) which was then forwarded to the attorney of Defendants. [ 30 ] Plaintiff affirms that he worked 226 hours for the benefit of Defendants at an hourly rate of $150 an hour.

However, he is unable to determine how many hours he worked for the benefit of Defendant 9228-9271 Québec Inc. and how many hours he worked for the benefit for Defendant Lanzieri. [ 31 ] As concerns the testimony of Defendant Lanzieri, he corroborated the testimony of Plaintiff regarding facts which are not crucial to the resolution of the dispute opposing them before the Court. [ 32 ] However, regarding the alleged mandate given to Plaintiff by Defendants and which concerns the negotiation of the sale of the assets of Aviva, Defendant Lanzieri testified that Plaintiff agreed to do the work without any remuneration whatsoever except for the reimbursement of any disbursements incurred by him which were to be paid by Defendant 9228-9271 Québec Inc. [ 33 ] According to Defendant Lanzieri, Plaintiff accepted to do the work without any remuneration because he was a shareholder of Aviva and because he would eventually personally benefit from the proceeds of the sale of the assets. [ 34 ] Furthermore, in his testimony, Defendant Lanzieri is categorical to the effect that he never personally guaranteed to pay Plaintiff any fees that could be billed by him as this issue was never raised. [ 35 ] For Defendant Lanzieri, it is only upon reception of the account for professional services rendered dated November 5, 2012 (exhibit P-1) that he realized, for the first time, that Plaintiff intended to be remunerated for the services rendered by him for the benefit of Defendant 9228-9271 Québec Inc. [ 36 ] Defendant Lanzieri testified that when the proceeds of the sale resulting from the sale of the assets of Aviva were divided between him (60%) and Plaintiff (40%), Plaintiff did not, at that time, mention anything regarding his intention to bill Defendants for the professional services rendered by him. [ 37 ] Defendant Lanzieri did confirm that the relationship with Plaintiff went sour after he revoked his mandate as the attorney handling the dispute regarding the sums owed to 9204-2795 Québec Inc. in relation to the Visuascan matter. [ 38 ] Finally, Defendant Lanzieri does not dispute the fact that Plaintiff did, most probably, work the number of hours described in exhibits P-1 and P-1a).

ANALYSIS AND DECISION [ 39 ] In the present matter, the burden of proof lies with the Plaintiff. For the Court to grant his demand, he must establish, by

preponderance of the evidence, that:

a) both Defendants gave him the mandate to represent them in regard to the negotiation of the deal that led to the conclusion of the "Asset Purchase Agreement" (exhibit P-1) the object of which was the sale of the assets of Aviva;

b) it was agreed with the Defendants that his services would be remunerated at an hourly rate of $150 an hour;

c) both Defendants agreed to be jointly liable for the payment of the fees. [ 40 ] For the reasons exposed hereinafter, the Court concludes that Plaintiff's action is ill founded in fact and in law and must be dismissed as concerns the fees claimed by him. [ 41 ] As mentioned previously, the evidence has revealed that Plaintiff and Defendant Lanzieri were close friends and business partners when the events leading to their dispute took place.

More particularly, Plaintiff and Defendant Lanzieri were, through distinct corporations, respectively owners of 60% and 40% of the shares of Aviva. [ 42 ] It is manifest that both Plaintiff and Defendant Lanzieri hoped to personally benefit from the sale of the assets of Aviva after distribution of the proceeds generated by the said sale. [ 43 ] At trial, Plaintiff affirmed that it was agreed with Defendants that the services he was to render regarding the negotiations leading to the signing of the "Asset Purchase Agreement" (exhibit P-3) were to be remunerated.

This is contested by Defendant Lanzieri who is categorical to the effect that Plaintiff agreed to do the work as part of his contribution as shareholder of Aviva and more particularly, considering that Defendant Lanzieri was personally involved in the day to day handling of the business of Aviva, which was not the case for Plaintiff. [ 44 ] At the time when the negotiations regarding the sale of the assets of Aviva began in November 2009, Defendants did not sign a mandate confirming that the services to be rendered by Plaintiff would be remunerated and that both Defendants would be jointly liable for the payment of the fees. [ 45 ] Plaintiff did not, at that time nor thereafter, send Defendants a letter or email confirming the existence of the alleged mandate. [ 46 ] All through the period when the negotiations were being held and even after the signing of "Asset Purchase Agreement" on February 22, 2010 (exhibit P-3) and Settlement Agreement on November 12, 2010 (exhibit P-6), Plaintiff never confirmed in writing that the services he was rendering were to be remunerated. [ 47 ] In fact, although the "Asset Purchase Agreement" was concluded on February 22, 2010 and the "Settlement Agreement" was concluded on November 12, 2010, Plaintiff did not issue his account for professional services rendered until November 5, 2012, nearly two years later.

Furthermore, his detailed account for professional services rendered (exhibit P-1a)) was issued only after the institution of the action and more particularly after Plaintiff's examination on discovery which was held on February 27, 2013. [ 48 ] Plaintiff's explanation as to why he did not send Defendants his account for professional services rendered before November 5, 2012, namely that Defendant Lanzieri had asked him to wait and postpone the sending of the said account is far from being convincing. [ 49 ] In fact, the evidence has revealed that Plaintiff prepared his account for professional services rendered only after Defendant Lanzieri decided to entrust the negotiation of the settlement of the Visuascan matter to another attorney it being important to note that Plaintiff expected to personally benefit from the settlement of said matter. [ 50 ] If therefore appears that Plaintiff's decision to prepare and send an account for professional services rendered in November 2012 results, most probably, from the dispute arising with Defendant Lanzieri regarding the Visuascan matter.

In the opinion of the Court, the existence of the verbal mandate, as alleged by Plaintiff is, after consideration of the evidence, unlikely. [ 51 ] Finally, the evidence has revealed that during the course of the execution of his mandate, Plaintiff did not keep Defendants informed of the amount of the fees that were being generated by his work although he had the implicit ethical obligation to do so pursuant to articles 3.08.04 and 3.08.05 of the Code of ethics of advocates [1] which read as follows: 3.08.04 An advocate shall, before agreeing with the client to provide professional services, ensure that the latter has all useful information regarding the nature and financial terms of the services and obtain his consent thereto, except where he may reasonably assume that the client is already informed thereof. 3.08.05 An advocate shall provide the client with all explanations necessary to the understanding of the invoice or statement of fees and the terms and conditions of payment, except where a written agreement has been entered into with the client to receive a lump-sum payment or where he may reasonably assume that the client is already informed thereof. [ 52 ] In the light of the preceding, the Court concludes that Plaintiff has not established, by preponderance of the evidence, that he was given a remunerated mandate to act on behalf of Defendants in the matter regarding the sale of the assets of Aviva.

In fact, the Court concludes that it is unlikely that such a mandate was given to Plaintiff although he may have mistakenly, but in good faith, presumed that such was the case. [ 53 ] Consequently, except for the disbursements incurred by Plaintiff in the amount of $265.33, Plaintiff's action against Defendants is dismissed.

However, for this amount, the action is maintained but only as concerns Defendant 9228-9271 Québec Inc. [ 54 ] As concerns Defendant Lanzieri's cross-demand in the amount of $7,500 in compensation of the legal fees that he alleges to have incurred as a result of the institution by Plaintiff of an action which he considers to be abusive, for the reasons hereinafter exposed, it is dismissed.

[ 55 ] To begin with, Defendant Lanzieri did not file in Court an account for professional services rendered regarding the fees that he allegedly has paid or will have to pay to his attorney for the purpose of his defense. In fact, no account for professional services rendered was ever sent to Defendant Lanzieri by his attorney.

Furthermore, when questioned on this issue, said Defendant was not even aware of the hourly rate billed or to be billed by his attorney. [ 56 ] Consequently, in the light of the weakness of Defendant Lanzieri's evidence regarding his claim and considering that he has not established that Plaintiff's action was instituted with a malicious or abusive intent on his part or with full cognizance by Plaintiff of the fact that it was ill-founded, the cross-demand is dismissed. [ 57 ] WHEREFORE, FOR THE FOREGOING REASONS, THE COURT: [ 58 ] GRANTS Plaintiff's action in part; [ 59 ] CONDEMNS Defendant 9228-9271 Québec Inc. to pay to Plaintiff the sum of $265.33 with interest at the legal rate plus the additional indemnity provided for by

Article 1619 C.C.Q. as of December 21, 2012, WITH COSTS limited to the total amount of the judicial disbursements incurred by Plaintiff; [ 60 ] DIMISSES Plaintiff's action as concerns Defendant Lanzieri, WITH COSTS ; [ 61 ] DISMISSES Defendant Lanzieri's cross-demand, WITH COSTS . __________________________________ ARMANDO AZNAR, J.Q.C. Me Anthony Martino MARTINO, PERLUZZO Plaintiff attorney Me Howard Schnitzer Defendant attorney Date of hearing: November 28, 2013