Wilshire Investments Ltd. v. Tehran Bakery Ltd., 2022 BCPC 238 (CanLII)
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2022 BCPC 238 |
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Date: |
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File No: |
C-19296 |
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Registry: |
Port Coquitlam |
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IN THE PROVINCIAL COURT OF BRITISH COLUMBIA
Small Claims Court
BETWEEN:
WILSHIRE INVESTMENTS LTD.
CLAIMANT
AND:
TEHRAN BAKERY LTD. and GHOLAM HOSSEIN SADEGHI
DEFENDANTS
REASONS FOR JUDGMENT
OF THE
HONOURABLE JUDGE W. LEE
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Counsel for the Claimant: |
A. Schleichkorn |
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The Defendants: |
No Appearance |
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Place of Hearing: |
Port Coquitlam, B.C. |
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Date of Hearing: |
September 26, 2022 |
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Date of Judgment: |
October 31, 2022 |
Introduction
[1] On May 13, 2022, the Claimant Wilshire Investments Ltd. filed a Notice of Claim against the Defendants for damages due to a breach of a commercial lease agreement. The Claimant served both Defendants and neither Defendant filed a Reply.
[2] On September 26, 2022, I made a default order that the Defendants pay the Claimant the sum of $21,261.86 plus filing fees of $156, service fees of $40 and a default order fee of $25.
[3] The Claimant sought payment of legal costs on the basis that this was required under the lease agreement. I asked for written submissions of this claim, which I have now received. These are my reasons regarding the claim for legal costs.
The Lease Agreement Terms
[4] In support of the Claimant’s application is the affidavit of Craig S. Wilshire filed September 20, 2022, and the affidavit of Avani Patel sworn October 12, 2022.
[5] The affidavit of Craig S. Wilshire attached as Exhibit B a copy of the Lease Agreement dated December 1, 2016, between the landlord, Wilshire Investments Ltd., and the tenant, Tehran Bakery Ltd.
[6] Article 1.02 of the lease sets out the obligation of the tenant to pay rent.
[7] Article 6 sets out the tenant’s obligation concerning repairs and maintenance.
[8] Article 9.01 requires the tenant to leave the premises in the original or improved condition.
[9] Article 18.09 of the Lease Agreement states [Emphasis added]:
The Tenant will indemnify and save harmless the Landlord, its officers, directors, employees, agents and shareholders from and against any and all losses, claims, costs, expenses, damages and liabilities, including all costs of defending or denying the same, and all costs of investigation, monitoring, remedial response, removal, restorations or permit acquisition and including all solicitor’s fees and disbursements in connection therewith which at any time may be paid or incurred by or claimed against the Landlord, its officers, director, employees, against and shareholders arising, directly or indirectly, out of:
(a) a breach by the Tenant of any of the covenants contained in the Lease…
[10] Article 19.01 sets out the terms of the personal guarantee of Mr. Sadeghi.
[11] Based on the wording of the lease agreement, and in particular those parts of Article 18.08 which I have highlighted, I am satisfied that there is a contractual liability for the Defendants to reimburse the Claimant for legal costs relating to any breach of the lease.
The Law
[12] The starting point is s. 19(4) of the Small Claims Act, which states:
(4) The Provincial Court must not order that one party in a proceeding under this Act or the rules pay counsel or solicitor's fees to another party to the proceeding.
[13] The decision International Knitwear Architects Inc. v. Kabob Investments Ltd., 1997 CanLII 14475 (BC CA), involved a dispute between a landlord, the tenant and the covenantors on the lease. The landlord counterclaimed for $183,763.99 but at trial recovered only $6,000.
[14] Before the Court of Appeal, the issue was whether the landlord should recover any part of their legal costs. The lease agreement contained a term stating:
6.18 Lessor's Expenses Enforcing Lease
If the Lessor elects to retain the services of a solicitor, bailiff, rental agent or any other person for the purpose of assisting the Lessor in enforcing any of its rights hereunder or in rerenting the Premises, it shall be entitled to collect from the Lessee the actual cost of all such services as Additional Rent.
[15] The landlord claimed payment of legal fees of $3,283.79. This was a portion of the landlord’s actual legal fees reduced by the same degree that its original claim was reduced to arrive at the amount the Court awarded.
[16] The respondents argued that because the amount of the judgment was within the jurisdiction of the Provincial Court, and given s. 19(4) of the Small Claims Act, there should be no award for legal fees. In response, the Court stated:
[7] In my opinion, s. 19(4) of the Small Claims Act does not debar a litigant in that court from recovering an amount due under a contractual term relating to costs and expenses. Such a claim is in substance a claim in debt. But even if it does, the provisions of that Act are irrelevant in this Court.
[17] The Court went on to award the landlord $2,500 for legal fees.
[18] Subsequent decisions of this Court have awarded legal fees when that obligation was set out in an agreement.
[19] In the decision Shelley Morris Business Services Ltd. v. 890 West Pender Ltd., 2003 BCPC 267, Judge Romilly considered the terms of a lease that included the following term:
The Tenant shall indemnify and save harmless the Landlord and its directors, officers, employees, agents, successors and assigns, from any and all liabilities, actions, damages, claims, losses, costs and expenses whatsoever (including without limitation, the full amount of all legal fees, costs, charges and expenses and the costs of removal treatment, storage and disposal of Contaminants and remediation, which may be paid by, incurred by or asserted against the Landlord or its directors, officers, employees, agents, successors or assigns under, or the escape, seepage, leakage, spillage, discharge, emission or other release of any Contaminants from, any part of the leased premises into the environment including without limitation into or upon any real or personal property or the atmosphere.
[20] Based on the specific wording of the Lease, Judge Romilly made an order for payment of legal fees owed under the lease agreement.
[21] The decision Gord Hill Log Homes Ltd. v. Cancedar Log Homes, 2006 BCPC 480, dealt with a term in a General Security Agreement that read:
(f) The (Defendant) agrees to pay all costs, charges and expenses reasonably incurred by (the Claimant) or any Receiver appointed by them, whether directly or for services rendered (including reasonable solicitors and auditors costs (sic) and other legal expenses and Receiver remuneration), in operating the Debtor’s accounts, in preparing for or enforcing this Security Agreement, taking and maintaining custody of, preserving, repairing, processing, preparing for disposition and disposing of the Collateral and in enforcing or collecting Indebtedness and all such costs, charges and expenses, together with any amounts owing as a result of any borrowing by Hill or any Receiver appointed by them, as permitted hereby, shall be a first charge on the proceeds of realization, collection and disposition of the Collateral and shall be secured hereby.”
[22] Regarding the claim for legal fees, Judge Skilnick stated as follows:
[15] Section 19(4) of the Small Claims Act reads as follows:
(4) The Provincial Court must not order that one party in a proceeding under this Act or the rules pay counsel or solicitor's fees to another party to the proceeding.
[16] In Canadian Imperial Bank of Commerce v. Washburn [1993] B.C.J. No. 2706, the Honourable Judge Burdett of this Court held that the scope of this section is not a narrow one. It reflects the intention of the legislature that people should not be able to sue in Small Claims Court to recover their legal fees. She wrote:
“13 Section 2(1) of the Small Claims Act states that the mandate of the court is to resolve matters in a just, speedy and inexpensive manner. The Small Claims Rules are written so that it is easy for lay litigants to use the court to resolve their disputes, without the use of legal counsel. In my opinion, section 19(4) of the Small Claims Act reflects the mandate in section 2(1) and attempts to discourage the use of counsel by ensuring that solicitor client costs are not recoverable…
” 18 Finally, the Provincial Court of British Columbia is established under the Provincial Court Act. The Court has the jurisdiction to exercise all the power conferred under an enactment of the Province or Canada. There is no inherent jurisdiction. In my opinion, the Small Claims Act specifically limits the jurisdiction of the Provincial Court to make an order in the area of solicitor clients costs. This is done in clear wording in section 19(4).”
[17] I agree with Judge Burdett’s interpretation of the purpose and effect of Section 19 (4) of the Small Claims Act. This section reflects the intention of the Act to create a less expensive forum for litigants in which they will not be deterred from bringing and defending claims because of a fear that, if unsuccessful, they will have to shoulder the other side’s legal fees. Such an interpretation is consistent with the overall purpose of the Act, as set out in Section 2 which reads as follows:
“The purpose of this Act and the rules is to allow people who bring claims to the Provincial Court to have them resolved and to have enforcement proceedings concluded in a just, speedy, inexpensive and simple manner.” (Emphasis added).
[18] By using the language that it used (i.e. the court “must not” order payment of solicitor-client fees), in my opinion this includes a general prohibition against suing for lawyer’s fees in small claims court, even when one is suing on an agreement to pay such costs, as the Defendant is in this case. The statute says that this must not be done and I can read nothing in the legislation which makes an exception to that prohibition even if one of the parties has made an agreement to pay those costs. For this reason, the Claimant can not recover judgement in Small Claims Court against the Defendant for the legal fees which he paid to Mr. Ruley. That portion of the claim is dismissed.
[23] Judge Skilnick went on to find that the claimant had to bring its claim to the Supreme Court as this was a claim under the Personal Property Security Act, and he dismissed the claim. This decision does not refer to the case of International Knitwear Architects Inc.
[24] In McGillion v. Barnett & Pique Publishing, 2007 BCPC 10, the claimants sued in Small Claims Court for their legal fees incurred in a Supreme Court action. Judge Baird Ellan dismissed the claim, finding that the claim had to be pursued in the Supreme Court. In doing so, Judge Baird Ellan stated as follows:
[10] However, two decisions have held that the section [sec. 19(4)] precludes any suits in this court for legal fees. In Gord Hill Log Homes Ltd. v. Cancedar Log Homes (B.C.) Ltd., 2006 BCPC 480 (CanLII), 2006 BCPC 0480, Skilnick PCJ held that a party could not sue in Provincial Court on an agreement for the reimbursement of legal fees incurred to enforce security for an asset purchase. The contract had a specific clause requiring such reimbursement if legal action was required to realize the security.
[11] In dismissing the claim, Skilnick PCJ followed an earlier decision of Burdett PCJ, Canadian Imperial Bank of Commerce v. Washburn, [1993] B.C.J. No. 2706, in which she held that s. 19(4) reflects a general intention of the legislature that people should not be able to sue in Small Claims Court to recover legal fees.
…
[14] The CIBC case dealt with a proceeding in Provincial Court did not deal strictly with whether costs from a Supreme Court action may be pursued in Provincial Court. Nonetheless, both it and Gord Hill v. Cancedar are clear authority for the view that section 19(4) bars a claim for recovery of legal fees as a measure of damages between parties in any case under the Small Claims Act, even where those fees were not incurred in a Provincial Court action. As such, those cases are probably determinative of the issue of jurisdiction, but I will go on to consider the other objections raised by the defendants.
[25] The decision MacLean & MacLean Distribution Inc. v. Miles, 2007 BCPC 98, dealt with a term of a promissory note providing for payment of legal fees. In that decision, Judge Auxier stated:
[24] The claimant seeks legal fees. Although the Small Claims Rules specifically exempt legal fees from the costs to be awarded, I will allow this portion of the claim because of the provision in the promissory note whereby if the Note should be in default and placed with an attorney for collection, then Mr. Miles agreed to pay all reasonable attorney’s fees. I would ask Mr. MacLean to provide Mr. Riddell with documentation confirming the legal fees incurred. If there’s any dispute – for example, whether these fees relate to “collection” - the matter may be spoken to further. Otherwise, this portion of the judgment will be for the amount stated - $1,350.
[26] This decision was followed in The Vancouver Golf Club v. Staschuk, 2011 BCPC 426, which dealt with a promissory note. In turn, The Vancouver Golf Club decision was followed by Golden Ears Plaza v. Rafieyan et al., 2013 BCPC 219; upheld on appeal 2014 BCSC 1125, which dealt with an independent contractor agreement.
[27] The issue of payment of legal fees came before Judge Frame in the decision Wetterstrom et al. v. Craig Management Enterprises Ltd., 2009 BCPC 165, where she distinguished between legal fees incurred before and after the commencement of a Small Claims Court action. Starting in paragraph 8, Judge Frame referred to the decisions of Gord Hill Log Homes Ltd. v. Cancedar Log Homes (BC) Ltd., and MacLean v. Miles, both of which I discussed earlier. Judge Frame went on to only allow the claim for legal fees incurred before the commencement of legal proceedings, stating:
[11] There is a distinction between the legal fees incurred prior to the filing of the Notice of Claim, and the legal fees incurred after the filing. In this case, the Clark Wilson accounts set out the work done which was primarily to review the liability, coverage and quantum for an opinion to the client with respect to the breaches. These are all recoverable fees pursuant to that agreement and do not constitute costs of this proceeding. I note that there is an entry on the account of February 1, 2009 related to drafting the Notice of Claim. This appears to amount to roughly two hours of Mr. Donley’s time. His charge out rate is $175.00 per hour. I disallow this part of the account in the sum of $350.00 plus taxes in the sum of $42.00 for a total amount disallowed of $392.00. I allow the remaining fees for the accounts of December 1, 2008 and February 1, 2009. I do not allow the account for April 1, 2009 as it relates entirely to legal proceedings from the commencement of the claim.
[28] In Machray v. Simpson, 2011 BCPC 309, the claimant sued for legal fees arising from Supreme Court proceedings. Judge Skilnick dismissed the claim as there was no contract requiring payment of legal fees. In doing so, Judge Skilnick stated:
[27] There is also the issue of whether or not this court has the power to order one party to pay another party’s legal fees. Section 19(4) of the Small Claims Act reads as follows:
(4) The Provincial Court must not order that one party in a proceeding under this Act or the rules pay counsel or solicitor's fees to another party to the proceeding.
[28] It has been held in this court that the intent of this section is not restricted only to costs in the action before the court. The mandate of the Small Claims Court is to resolve matters in an inexpensive fashion Awarding solicitor-client costs is not consistent with that mandate. The Small Claims Court does not have the authority to award those costs either directly or indirectly. This court has held accordingly in a number of decisions including Canadian Imperial Bank of Commerce v. Washburn [1993] BCJ No. 2706; Lago v. Zimmerman [1998] BCJ No. 3269; Faulkner v. Sellars (1998) 9 C.C.L.I. (3d) 247; Gord Hill Log Homes Ltd. v. Cancedar Log Homes (B.C.) Ltd. 2006 BCPC 480 (CanLII); McGillion v. Barnett 2007 BCPC 10 (CanLII).
[29] The only exceptions to this principle may be in the case of a lawyer who sues for payment of legal fees that are owing to him or her, or where a claimant is suing on a contract in which the defendant expressly agreed to pay such costs. In International Knitwear Architects Inc. v. Kabob Investments Ltd. (1997) 1997 CanLII 14475 (BC CA), 40 B.C.L.R. (3d) 70, Madam Justice Southin of the British Columbia Court of Appeal wrote at paragraph 7:
“In my opinion, s. 19(4) of the Small Claims Act does not debar a litigant in that court from recovering an amount due under a contractual term relating to costs and expenses. Such a claim is in substance a claim in debt.”
[30] Neither of these exceptions applies here and accordingly this court can not give the Defendant his judgement for the legal fees that he incurred in the Supreme Court of British Columbia.
[29] Judge Skilnick’s stated in Machray v. Simpson, that legal fees payable under a contract could be claimed in Small Claims Court. This differed from his conclusion in Gord Hill Log Homes Ltd., likely because he now had the benefit of the International Knitwear Architects Inc. case. However, Judge Skilnick was not referred to the decision Wetterstrom et al. v. Craig Management Enterprises Ltd. and so he did not discuss the distinction between legal fees incurred before and after the commencement of legal proceedings.
[30] In Upcountry v. Heros International, 2013 BCPC 109, Judge Challenger did refer to the distinction between legal fees incurred before and after the commencement of legal proceedings, stating:
[5] Counsel for the claimant brought the following authorities to the attention of the Court: Gordhill Log Homes Ltd. v. Cancedar Log Homes (B.C.) Ltd., 2006 BCPC 480, Lyle MacLean and MacLean Distribution Inc. v. Robert Miles, 2007 BCPC 98 and Wetterstrom v. Craig Management Enterprises (1992) Ltd. 2009 BCPC 165.
[6] I agree with the analysis of the case law and the finding of Judge Frame in the Wetterstrom v Craig Management case where she found that in a proceeding in Provincial Court under the Small Claims Act a claimant can recover any legal or other expenses to which they are entitled under the terms of a lease or contract up to the time of the preparation and filing of the claim. This conclusion accords with the purpose of the Small Claims Act as set out in Section 2 which is “to allow people who bring claims to the provincial Court to have them resolved and to have enforcement proceedings concluded in a just, speedy, inexpensive and simple matter” and gives due regard to the binding nature of the terms of a lease or contract. A claimant may elect to proceed in Supreme Court where the fees for services are sufficiently significant to justify the more involved process. However, if they elect to proceed in Provincial Court they will not be entitled to recover the legal fees incurred for litigation of their claim.
[7] I find that the Claimant is entitled to the cost of services, including legal fees, incurred after June 30th 2011 as a result of seeking to have the defendant surrender the lease and to gain re-entry and terminate the lease up to the preparation and filing of their claim on September 6th 2011.
[31] The decisions Wetterstrom et al. v. Craig Management Enterprises Ltd. and Upcountry v. Heros International distinguish between legal fees incurred before and after the commencement of legal proceedings. This approach is consistent with the wording of s. 19(1), which prohibits this Court from ordering one party “in a proceeding under this Act or the rules” to pay legal fees to “another party to the proceeding.” [emphasis added]
[32] The question I must now address is whether I should be following these cases, or whether I am bound by the blanket comment in International Knitwear that a claim can be brought in this Court for legal costs due under a contract.
Is International Knitwear Binding?
[33] Paragraph 7 of the International Knitwear decision states:
[7] In my opinion, s. 19(4) of the Small Claims Act does not debar a litigant in that court from recovering an amount due under a contractual term relating to costs and expenses. Such a claim is in substance a claim in debt. But even if it does, the provisions of that Act are irrelevant in this Court.
[34] This conclusion must be considered obiter dicta given that s. 19(4) of the Small Claims Act did not restrict the Court of Appeal and so had no bearing on their decision.
[35] Judge Frame commented on whether the International Knitwear decision was binding on this Court, stating:
[12] There is some suggestion in the obiter of Southin JA in International Knitwear Architects Inc. v. Kabob Investments Ltd. that I can award legal fees in a small claim proceeding so long as it is not solicitor client costs. Such costs should not be awarded lightly but in circumstances clearly warranting such an award. If the legislature wished the Provincial Court to award costs to successful litigants, the legislation could be amended to reflect that desire. It may well be that, with the increases in the jurisdiction of this court, it is an appropriate time to review whether costs should be available to litigants. However, that is not for this court to determine, but for legislature.
[36] In distinguishing between legal costs incurred before and after the commencement of legal proceedings, Judge Frame was balancing the comments found in International Knitwear and the clear prohibition found in s. 19(4) against awards of legal fees related to a proceeding.
[37] In the decision Pacific Press v. British Columbia (Attorney General), 2000 BCSC 248, Mr. Justice Brenner, as he then was, stated:
[99] The doctrine of stare decisis dictates that lower courts are obliged to follow the ratio decidendi of judgments of higher courts. Their obligation to "follow judgments of the Supreme Court of Canada is not limited to the strict ratio decidendi of the higher court, but extends also to any considered decision of that court on a question of law or principle." (Scarff v. Wilson (1988), 1988 CanLII 180 (BC CA), 55 D.L.R. (4th) 247 (B.C.C.A.); Sellars v. The Queen (1980), 1980 CanLII 166 (SCC), 110 D.L.R. (3d) 629) [SCC].
[100] However the obligation arising from Sellars does not require the unthinking application of all comments which were not strictly necessary for the decision in a higher court. Rather the obligation on a lower court judge is to recognize "the importance of paying thoughtful attention to considered statements of law by higher courts, even where those statements are not binding in character" (Reekie v. Messervey (1989), 1989 CanLII 253 (BC CA), 36 B.C.L.R. (2d) 316 [(C.A)].
[38] The Pacific Press decision stated that lower courts are obligated to be bound by any considered decisions of a higher court on a question of law or principle. In International Knitwear, the distinction between legal fees incurred before and after the commencement of Small Claims Court proceedings was not brought to the Court of Appeal’s attention. As such, I am of the view that the question of this Court’s ability to order payment of legal fees was not fully considered in International Knitwear.
[39] I find support in this conclusion from a close reading of paragraph 7 of the decision, where the Court commented: “But even if it does [emphasis added], the provisions of that Act are irrelevant in this Court.” In stating this, the Court of Appeal is saying even if s. 19(4) bars a claim for legal costs, that section does not apply to that Court. This comment suggests to me that the Court of Appeal did not give full consideration to the effect of s. 19(4) because there was no need to. As such, I find that I am not bound by the obiter dicta comment in International Knitwear that this Court has the authority to order payment of any legal fees covered by a contract.
[40] Having considered the caselaw and the explicit prohibition found at s. 19(4) of the Small Claims Act against an award of legal fees relating to a proceeding, I conclude that a distinction should be drawn between legal fees incurred before and after the initiation of a Small Claims Court proceeding. Where an agreement exists for the payment of legal fees, a debt claim can be pursued in this Court for any legal fees incurred before the initiation of a Small Claims Court proceeding. A debt claim for any legal fees incurred after the commencement of the proceeding cannot be claimed due to the prohibition found at s. 19(4).
[41] I turn now to consider the Claimant’s claim for legal fees.
The Legal Fees
[42] The affidavit of Craig S. Wilshire filed September 20, 2022, and the affidavit of Avani Patel filed October 13, 2022, attached as exhibits the following:
• Eyford Partners Statement of Account dated March 31, 2022
• Eyford Partners Statement of Account dated April 30, 2022
• Eyford Partners Statement of Account dated May 31, 2022
• Eyford Partners Statement of Account dated July 31, 2022
• Eyford Partners Statement of Account dated October 6, 2022
[43] The Claimant redacted these accounts to omit certain details, and so that limited the information I had available to me.
[44] The May 31, 2022 statement of account included a charge for the filing fee of $156. The Statement of Account referred to this as a fee for filing a Notice of Civil Claim, which is a Supreme Court form. The Notice of Civil Claim filing fee is $200, whereas the filing fee for a Small Claims Court Notice of Claim is $156. I conclude that this fee was for the commencement of the Small Claims legal proceedings.
[45] The Notice of Claim was filed on May 13, 2022. The time entries in the May 31, 2022 Statement of Account dated after the filing date were as follows:
• May 16, 2022 AWS .2
• May 16, 2022 MB .2
• May 17, 2022 MB .1
• May 17, 2022 MB .1
• May 27, 2022 AWS .2
• May 30, 2022 AWS .1
[46] The Statement of Account shows an hourly rate for AWS of $300 an hour, and MB of $140 an hour. Based on this, total fees of $234 were charged after the Notice of Claim was filed. The GST on this sum is $11.70.
[47] I see no reason to adjust the disbursements as those amounts were minimal, other than deducting the filing fee of $156 which I have already awarded.
[48] Based on a cut-off date of May 13, 2022, I calculate the award of legal costs as follows:
• Eyford Partners Statement of Account dated March 31, 2022 $975.40
• Eyford Partners Statement of Account dated April 30, 2022 $1,171.42
• Eyford Partners Statement of Account dated May 31, 2022 $1,275.34
[49] The sum of $1,275.34 is based on the total fees charged of $1,677.04 less $234 and the related GST of $11.70, and less the charge of $156 for the filing fee.
[50] I allow the sum of $3,422.16 for legal costs.
Errors in the Application Record
[51] There are small errors in the filed Application Record of September 26, 2022. The Application Record refers to “Defendant” in the singular when there were two Defendants. The Record fails to say that both Defendants owe the judgment jointly and severally. The Record also reads “in addition with filing fees” rather than saying “in addition to filing fees…”
[52] I will correct the Application Record.
Order
[53] My order is as follows:
Pursuant to Small Claims Rule 17(14), the order of Judge W. Lee made September 26, 2022, as set out in the Amended Application Record filed September 27, 2022, is amended to read as follows:
Default Order: The Claimant is to be paid by the Defendants jointly and severally the amount of $21,261.86 in addition to filing fees of $156.00, service fees of $40.00, as well as the default order fee of $25.00.
With respect to the claim for legal costs by the Claimant, the Claimant will provide written submissions which will be directed to the attention of Judge Lee.
The Claimant is to be paid by the Defendants jointly and severally the additional sum of $3,422.16 for legal costs.
The total sum payable by the Defendants, Tehran Bakery Ltd. and Gholam Sadeghi, jointly and severally, to the Claimant, Wilshire Investments Ltd., is $24,684.02, plus filing fees of $156.00, service fees of $40.00 and the default
_____________________________
The Honourable Judge W. Lee
Provincial Court of British Columbia