Pallot v. Douglas

2019 BCSC 997 Pallot v. Douglas

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Pallot v. Douglas, 2019 BCSC 997 Date: 20190620 Docket: S145398 Registry: Vancouver Between: Owen Laurence Frank Pallot Petitioner And Mary Jean Douglas Respondent Before: Master Muir (As Registrar) Reasons for Decision Counsel for the Petitioner: K.E. Ducey Counsel for the Respondent: S.J. Evans Place and Date of Hearing: Vancouver, B.C. May 17, 2019 Place and Date of Decision: Vancouver, B.C. June 20, 2019 introduction [1] Before me was the assessment of the costs of the respondent, Mary Jean Douglas ("Ms. Douglas"), in this court flowing from the decision of the BC Court of Appeal indexed at 2017 BCCA 254. [2] As a result of the Court of Appeal decision, the petitioner, Owen Laurence Frank Pallot ("Mr. Pallot"), was held liable to pay one-half of Ms. Douglas' solicitor-client costs for proceedings in both the Court of Appeal and this court. I note that the Court of Appeal costs have already been assessed. Background [3] The background facts are set out in detail in the July 27, 2015 reasons for judgment of Mr. Justice Leask of the BC Supreme Court indexed at 2015 BCSC 1296, and I will only touch on them here. [4] Mr. Pallot and Ms. Douglas are brother and sister. [5] Mr. Pallot sought partition and sale, under the Partition of Property Act, R.S.B.C. 1996, c. 347 [PPA] of leasehold property on Keats Island (the property). [6]

The property is part of a larger parcel owned by the Convention of Baptist Churches of British Columbia (the "Convention"). [7] An original leasehold interest was acquired by the parties' grandfather in 1926. A leasehold was obtained by their father in 1964 and that eventually passed to Ms. Douglas. The lease is in her name alone. [8] In 2004, the parties executed a document, which purports to be a declaration of bare trust. Under the terms of that document, Ms. Douglas holds the leasehold interest that she has in the property in trust for herself and Mr. Pallot. The parties are to share the use of and the expense of maintenance and upkeep of the property. The Petition and Response to petition [9] The petition seeks a declaration that Mr. Pallot is entitled to an undivided one-half leasehold interest as a tenant-in-common in the property and seeks an order that the property be sold and the proceeds divided between the parties. [10] Mr. Pallot relies on the PPA and set out the following in Part 3: Legal Basis of the petition: 2. The Act applies to both legal and equitable interests in property.

3. The jurisdiction to grant partition arises with respect to any unsubdivided interest in land as joint tenants or tenants in common. In the case of coparceners the jurisdiction existed at common law. It was then extended to fee simple interests and later to interests for life or years. (see Jillings v. Blewett, 1993 CarswellBC 127, at paragraph 7) 4. The joint owner of an interest in land has a prima facie right to partition or sale unless justice requires otherwise. The right arises on establishing an interest of one-half or more in the property, subject to there being proof of good reason to the contrary. (See Bradwell v. Scott, 2000 BCCA 576) 5. As the owner of an unsubdivided one-half leasehold interest in the Property, the petitioner has a prima facie right to an order for the sale of the leasehold interest in the Property. In this case, there is no good reason not to grant the relief requested. The leasehold interest was inherited by the parties from their mother. The parties are facing significant financial obligations with respect to the Property. The petitioner has offered to sell his interest in the Property to the respondent but the parties have been unable to reach any agreement in this regard. [11] What the petition does not do is set out the legal basis for the declaration sought that Mr. Pallot is entitled to an undivided one-half leasehold interest in the

property when, on the facts, he is only a beneficiary of a trust regarding the property. [12] The response to petition advances several legal propositions that found favour in the courts, including that Mr. Pallot had no standing to bring an application for partition and sale under the PPA. Pointing out that an immediate right to possession is a prerequisite for such an order. [13] The response to petition considers the effect of the agreement and the application of trust principles. It argues that, despite the wording of the trust document, that no bare trust was established and, finally, that an order for sale of the property was neither available nor necessary. Reasons for Judgment of the BC Supreme Court [14] At paras. 18-20 of his reasons in Pallot, Leask J. sets out the issues and positions of the parties as follows: [18] Mr. Pallot submits that he is the beneficial owner of one half of the leasehold interest in the Property. Accordingly, he claims that he has a prima facie right to partition and sale under section 6 of the PPA. [19] Ms. Douglas submits that even if Mr. Pallot is a beneficial owner of the leasehold, he does not have an immediate possessory interest in land, which is a requirement to bring a petition for partition. Accordingly, she submits that Mr. Pallot does not have standing to bring a petition for partition. In the alternative, Ms. Douglas submits that the longstanding intention for the Property to be a family vacation home is a good reason not to order partition and sale in this case. [20] This case raises two principal issues: 1) Does Mr. Pallot have standing to bring a petition for partition under the PPA?

2) If Mr. Pallot has standing, should the court order partition and sale? [15] In order to deal with the first issue, the court had to determine whether or not Mr. Pallot could have brought a partition action under English law as it existed in 1858. Justice Leask, in his reasons for judgment, held at para. 27 [27] The parties who could bring partition claims under English law were recently summarized in the British Columbia Law Institute, Consultation Paper on the Partition of Property Act (Vancouver: British Columbia Law Institute, June 2011) at pp 5-6 ["the Consultation Paper"] as follows: In order to determine who is eligible to seek partition, therefore, the English law pre-dating the English Partition Act, 1868 [31 & 32 Vict., c. 40] needs to be examined. Specifically, it is the law of England as it existed on 19 November, 1858 that needs to be examined, as the Law and Equity Act [R.S.B.C. 1996, c. 253, s. 2] makes English law as it existed on that date applicable in British Columbia except to the extent it has been altered by laws of the province or is inapplicable to local circumstances. As of that date, the classes of persons eligible to seek partition were coparcenary tenants and those co-owners to whom the statutes of 1539 and 1540 had extended the remedy. As coparcenary tenancy no longer exists, the persons eligible to seek partition or sale in lieu of partition in

British Columbia are those described in the 1539 and 1540 statutes, namely: (a) joint tenants of the fee simple or a profit à prendre; (b) tenants in common of the fee simple or a profit à prendre; (c) joint tenants or tenants in common of a life estate; (d) co-owners of a leasehold estate (co-lessees). [Emphasis in original.] [16] Justice Leask held that Mr. Pallot is the beneficial owner of one-half of the equitable interest in the leasehold of the property. As such, he had an "interest in land" for the purposes of the PPA. He noted: [32] However, to have standing under the PPA, it is not sufficient to have an interest in land. That interest must be a possessory interest. As stated by Mr. Justice Whittaker in Morrow, under English law "the right to possession was a prerequisite to the right to obtain partition" (at 595). [35] Although different cases have interpreted the requirement of a possessory interest differently, at its core, this simply requires that the petitioner is entitled to possess the land. When that possessory interest arises from a trust, the court must examine whether that trust grants the beneficiary a right of possession. [40] Considering all the circumstances, I am satisfied that Mr. Pallot does not have a right to possess the Property. The trust is specifically designed so that he owns 50% of the equitable interest, but it is his sister who controls the

Property, including management of who uses it in accordance with the schedule. He has an equitable interest in the Property, and under the terms of the trust he is entitled to a share of any profits if the Property is sold. However, the trust does not give him a possessory interest capable of granting partition. Any possessory interest that Mr. Pallot has in the Property is conditional upon Ms. Douglas' management of the Property. [17] Justice Leask concluded: [47] I find that Mr. Pallot does not have standing to bring a partition application under section 4 of the PPA. Although he has a 50% beneficial interest in the Property, he does not have a right of possession under the terms of the trust. [48] Even if an order of sale were available under the PPA, I would decline to make such an order. The Property was understood at all times to be for the use and benefit of the family, including future generations. Further, in the Declaration of Trust the parties agreed that the Property could only be disposed of by a consensus to sell. It would be inappropriate to order sale in these circumstances. Reasons for Judgment of the BC Court of Appeal [18] In its reasons, the Court of Appeal described Mr. Pallot's argument as follows: [25] Mr. Pallot says he has a possessory interest in the Keats Property as the owner of one‑half of the equitable interest in the lease, which grants him an

equal and immediate right to use and enjoy the benefit of the Keats Property. [26] As I understand his arguments, Mr. Pallot says that the judge erred because: (1) the essence of a leasehold interest is the right to use and enjoy the property, and thus co‑ownership of the leasehold interest is a sufficient possessory interest, if not the same as an immediate right to possession; (2) the intervening Trust (whether bare or otherwise) is not determinative of the issue, as the parties have an equal right of possession in the Keats Property; and (3) the interest in land as a beneficiary of the Trust is enforceable against third parties, and is therefore a possessory interest. [28] In his factum, Mr. Pallot describes his interest in several different terms: as a beneficial interest in the leasehold, as an equitable tenant in common of the undivided leasehold, as a co‑owner of the lease, as holding an equitable leasehold interest, and as holding an unsubdivided one‑half leasehold interest. [29] In my view, the use of these various descriptors obfuscates rather than elucidates the interest involved. In this case, the leasehold interest is held by Ms. Douglas. She holds the leasehold interest subject to a trust in favour of herself and Mr. Pallot. Mr. Pallot is a beneficiary under a trust of an interest in a leasehold estate. The real issue, as to whether Mr. Pallot has standing to seek

partition, is whether he has the requisite right to immediate possession. [19] The Court of Appeal went on to conclude that the trial judge was correct, and that: [34] In short, the interest of the beneficiary under a trust is the right to claim that the trust be performed in accordance with its terms. It is not an immediate right to possession of the trust property. Indemnity for Costs [20] The provisions of the trust agreement include an indemnity for costs. The Court of Appeal found: [52] Provision 6 of the Trust provides: Both parties acknowledge that Mary Jean, the Bare Trustee/Lessee, shall be indemnified and saved harmless from all actions, suits, liabilities, costs, charges, and expenses whatsoever in carrying out the duties of her position as Bare Trustee/Lessee. [53] The trial judge considered the words of Provision 6 as well as the petition pleadings. He concluded: [8] I am satisfied that the respondent was being sued in her capacity as Bare Trustee/Lessee of the property. Defending the lawsuit was a necessary part of "carrying out the duties of her position". [54] I agree with the trial judge's conclusion as to the applicability of Provision 6. Ms. Douglas as trustee is the sole holder of the leasehold. Mr. Pallot sought to partition the Property, contrary to the provisions of the Trust. As trustee, Ms. Douglas was obliged to respond and participate in the

proceedings. Provision 6 provides that in such a case, she will be indemnified. [21] The Court of Appeal considered that both beneficiaries were obliged to indemnify the trustee and, hence, both Mr. Pallot and Ms. Douglas were responsible for one-half of those costs. [22] The entered order of the Court of Appeal provides: THIS COURT ORDERS that the appeal is dismissed except that the order as to indemnity for costs is modified to make the appellant liable for one-half of the respondent's solicitor-client costs of the appeal and in the Court below. Work, Fees and Disbursements [23] In evidence, I had two sworn affidavits of the lead counsel for Ms. Douglas, Heather L. Jones ("Ms. Jones"), one in this action and one from the Court of Appeal proceeding as well as two affidavits from Ms. Jones' legal assistant, Linda McKnight, along with Ms. Jones' testimony at the hearing. [24] At the outset, Ms. Jones was with the firm of Sager Legal Advisors LLP. Presently she is a partner with Miller Thomson LLP. [25] The following invoices were rendered: Date Fees* Disbursements Taxes Total September 15, 2014 $8,130.00 $24.72 $407.74 $9,131.56 January 26, 2015 $6,063.75 $93.41 $732.31 $6,889.47 April 22, 2015 $8,835.00 $286.48 $1,074.17 $10,195.65 June 5, 2015 $8,410.00 $330.66 $1025.38 $9,766.04 April 1, 2016 $560.00* 0.00 $67.20 $627.20 August 25, 2016 0.00* $60.11 3.01 $63.12 April 30, 2019 $1,891.00 0.00 $226.92 $2,117.92 May 15, 2019 WIP $1,905.00 0.00 $228.60 $2,133.60 May 16/17, 2019 hearing and preparation $4,050.00 0.00 $486.00 $4,536.00

TOTAL $39,844.75 $795.38 $4,251.33 $45,460.56 *Fees from this court proceeding only [26] In her evidence, Ms. Jones went systematically through each invoice. She noted that courtesy discounts were given to Ms. Douglas out of consideration for her limited financial circumstances. Reduced rates were charged for all who worked on the file, which resulted in a reduction in fees of close to $6,400. [27] In addition, Ms. Jones noted that where there was more than one counsel involved in a meeting, time was only charged for one, unless she considered that both were "advancing the case" in the meeting. She said that she was careful not to double bill the client. Her evidence was that she used lawyers with lower hourly rates to deal with appropriate tasks, such as initial research, so that costs to the client were kept as low as possible. [28] Ms. Jones' evidence was that she spent a considerable amount of time on this matter that was not billed to Ms. Douglas, due to the complexity of the matter and due to the client's limited circumstances. [29] I found Ms. Jones to be a careful, credible, and knowledgeable witness. She clearly had a thorough grasp of the matters that the courts had to grapple with. [30] Ms. Jones went through the factual background and the analysis that the deceptively simple claims advanced in the petition required. Her evidence was that the PPA is arcane and that

the legal issues raised by the petition were many and varied. [31] Ms. Jones' evidence was that the petition was confusing and complicated. It wrongly relied on s. 2 of the PPA for standing, when that section sets out those against whom orders may be made. [32] The section of the PPA that provides for standing to seek an order is s. 4: 4 (1) Any person who, if this Act had not been passed, might have maintained a proceeding for partition may maintain such a proceeding against any one or more of the interested parties without serving the other or others, and a defendant in the proceeding may not object for want of parties. [33] Thus, research was required to determine who would have had standing when the PPA was passed in 1858. [34] Further, Ms. Jones pointed out that the petition specifically references coparceners, a type of tenancy that no longer exists, requiring research on the issue. Mr. Pallot did not proceed with any claim based on coparceny at the hearing of the petition. [35] Ms. Jones also testified as to the issues raised by the trust agreement. On its face it purports to be a bare trust. That was relevant, as a beneficiary under a bare trust may have a possessory interest. Thus, research was necessary to show that the trust was not legally a bare trust and did not create a possessory interest for the beneficiaries. [36] In addition, Ms. Jones testified that research

was needed on the question of when beneficiaries can call for the trust property to be transferred to them. Known as the rule in Saunders v. Vautier (1841), 49 E.R. 282 (Rolls Ct.), aff'd (1841) 41 E.R. 482, [1841] E.W.H.C. Ch. J82, it requires all beneficiaries under the trust to be in agreement. [37] Ms. Jones indicated that she had dealt with partition proceedings under the PPA before, but none as complicated or with the myriad of issues raised in this case. She indicated that her practice also included real property and trust litigation. [38] Ms. Jones' evidence was that the importance of this matter to Ms. Douglas was immense. The property had been in the family for generations. Ms. Douglas' children and grandchildren all continue to use the property. [39] Ms. Ducey's cross-examination of Ms. Jones attempted to show that the petition was a straightforward claim that had been overly complicated by Ms. Douglas. It was suggested that the issues raised by Ms. Douglas were unnecessary and that the time spent on the file was excessive, particularly given that the actual hearing involved only nine or ten hours of court time. [40] As an example, Ms. Ducey pointed out that the reference to coparceners was a paraphrasing of a key decision that simply set out the history of the PPA, and was clearly not intended as a basis for the claim. Ms. Jones disagreed, and pointed out that Ms.

Douglas was compelled to address the issue of coparcenary tenancy, to show that such tenancies no longer existed. [41] Ms. Ducey also sought admissions that there were only two documents of relevance, the trust agreement and the lease. Ms. Jones disagreed, and said that the will and the lease agreement with the Convention were also important documents. Further, that the lease document, while short, required analysis given that it stated on its face that it established a bare trust. [42] Ms. Ducey also attacked the time spent in preparation for this hearing, suggesting that it was mainly administrative and was largely a repeat of work done for the Court of Appeal's assessment of costs. Ms. Jones denied that, although she agreed the affidavits were similar, they addressed different aspects of the case. [43] Indeed, Ms. Jones pointed out that, contrary to some cases and contrary to the suggestion that the time spent was excessive, here, Ms. Douglas and her counsel knew when they were preparing for this hearing, that Ms. Douglas could only recover one-half of her costs for that preparation and hence there was an incentive to keep those costs to a minimum. Analysis [44] Both parties relied on the decision in Galloway v. Barski, 2019 BCSC 335, as setting out the framework for the analysis of solicitor/client costs, as follows: [19] Supreme Court Civil Rule 14-1(3), B.C. Reg.

168/2009, provides: Assessment of special costs (3) On an assessment of special costs, a registrar must (a) allow those fees that were proper or reasonably necessary to conduct the proceeding, and (b) consider all of the circumstances, including the following: (i) the complexity of the proceeding and the difficulty or the novelty of the issues involved; (ii) the skill, specialized knowledge and responsibility required of the lawyer; (iii) the amount involved in the proceeding; (iv) the time reasonably spent in conducting the proceeding; (v) the conduct of any party that tended to shorten, or to unnecessarily lengthen, the duration of the proceeding; (vi) the importance of the proceeding to the party whose bill is being assessed, and the result obtained; (vii) the benefit to the party whose bill is being assessed of the services rendered by the lawyer; (viii) Rule 1-3 and any case plan order. [20] The B.C. Court of Appeal in Gichuru v. Smith, 2014 BCCA 414, emphasized that a successful party is only entitled to their objective reasonable costs. The mere fact that a lawyer has billed a certain amount does not make the fee reasonable for the purposes of Supreme Court Civil Rule 14-1(3). At paras. 104 and 105, the B.C. Court of Appeal states: 104 As we explained above, the principle underlying R. 14-1 is that parties are only entitled to their objective reasonable legal costs as

determined by the precise scale of costs they were awarded. In order to determine if a legal fee is reasonably objective, it is often necessary to know the particulars of what the lawyer did to accrue it. As noted by Kirkpatrick J., as she then was, in Canadian National Railway Co. v. A.B.C. Recycling, 2005 BCSC 1559 at para. 28 [A.B.C.], it is difficult to conceive that a proper examination of a party's incurred legal costs can take place without disclosure of the other side's file and an examination of the other side's lawyers in respect of the file and the matters arising therefrom. 105 The fact that a lawyer has billed a certain sum does not necessarily make the fee reasonable. This is of particular importance when the other party to the litigation is paying the bill. As noted by Seaton J.A. in Royal Trust Corporation of Canada v. Clarke (1989), 35 B.C.L.R. (2d) 82 (C.A.) at 88: ...The party who made that arrangement, the successful party in the litigation, might have made a very poor bargain. The bill rendered pursuant to the agreement might be justifiable between the solicitor and his client but thoroughly unjustifiable to impose on another. The client might have demanded more work to be done than was appropriate in the circumstances, or more lawyers and more expensive lawyers to be retained than were appropriate in the circumstances. Of course, at the taxation, if the other litigant is paying the bill the client will be particularly pleased to see that the bill is as high as possible. [21] The general rule is that the award of special costs includes the assessment of special costs, subject to limited exceptions: see Le Soleil v. Louie, 2017 BCSC 162 at para.

9. There are no special circumstances here to warrant departing from the general rule. Accordingly, the assessment of special costs will also be done on a special cost basis. [45] The only issue raised with respect to disbursements was as to Quicklaw research--but as Ms. Ducey had not cross-examined on the basis for those charges, and they were not excessive, that issue was not pursued. As a result, the only question before the court was the objective reasonableness of the legal fees. The complexity of the proceeding and the difficulty or the novelty of the issues involved [46] Mr. Pallot argued that the petition and his position was a simple claim, and that the complexity was caused by Ms. Douglas unnecessarily throwing up every possible legal impediment and argument. [47] I do not agree. It is obvious from the decisions of Leask J. and of the Court of Appeal that the issues raised here were complex. Although the result ultimately turned on the simple point that Mr. Pallot did not have a possessory interest in the lease, that was not a foregone conclusion and, in my view, the investigations done by Ms. Douglas and the arguments advanced were all objectively reasonable. [48] Mr. Pallot did concede that the trust issues were novel. But argued that the partition principles have been well established for centuries. [49] I can only conclude, however, that the underlying assertion

that a beneficial ownership of a lease gives rise to a right to partition and sale must, in and of itself, be a novel concept. [50] Hence, I agree with Ms. Douglas that the matter was complex and the issues raised were novel. The skill, specialized knowledge and responsibility required of the lawyer [51] Mr. Pallot conceded that Ms. Jones is an experienced lawyer, alhough he did question her experience in partition actions, suggesting that the law has been clear for centuries that a leaseholder has standing to seek an order of partition and sale. He also questioned the amount of research done, noting that the issues of the trust are not even addressed until the second invoice. [52] As will be apparent from the previous section, I do not agree with Mr. Pallot that the claim advanced was simple and straightforward. Thus, the fact that perhaps three hours were spent in research on the rights of a leaseholder is not, in my view objectionable. [53] As noted above, what Mr. Pallot did not do was to set out the legal basis for the declaration sought that he was entitled to an undivided one-half leasehold interest in the property, when on the facts he is only a beneficiary of a trust regarding the property. The amount involved in the proceeding [54] The position of Mr. Pallot, as identified in the reasons of Leask J. at para. 8, was that recent property listings and sales in the area

indicated the value of the property could be between $500,000 and $750,000. The time reasonably spent in conducting the proceeding [55] This was Mr. Pallot's primary focus. He argued that counsel for Ms. Douglas spent an inordinate amount of time in the preparation both for the petition hearing and for this hearing. [56] Counsel for Mr. Pallot pointed out that if this had been compensable at costs at Scale B, Ms. Douglas would receive only $6,000, whereas the fees claimed are close to $40,000. [57] I do not consider that an appropriate comparison. The scales of costs are not intended to fully compensate a party for the cost of the litigation. Nor does the simple difference between the tariff and actual fees strike me as a sound basis for concluding that the fees are not objectively reasonable. [58] I was satisfied by Ms. Jones' description that the work done was reasonable and necessary. I conclude that any issues of duplication arising from having two counsel at some meetings and at the petition hearing were dealt with adequately by the fact that not all such time was billed to Ms. Douglas. If there could have been any question, it was resolved in my mind by the courtesy discount of $6,400 given to Ms. Douglas and the fact that Ms. Jones spent considerably more time on the issues than was billed. [59] Looking at the preparation for and attendance at this hearing, although some

of the work charged is for separating out the Supreme Court time from the Court of Appeal time, that work was still necessary. I conclude that the preparation and attendance charges are objectively reasonable. The conduct of any party that tended to shorten, or to unnecessarily lengthen, the duration of the proceeding [60] Mr. Pallot conceded that this factor was not an issue here. The importance of the proceeding to the party whose bill is being assessed, and the result obtained [61] Mr. Pallot also agreed that the issues were clearly important to both parties. He pointed out that although Ms. Douglas did succeed, at least he obtained a declaration of his equitable interest in the lease. The benefit to the party whose bill is being assessed of the services rendered by the lawyer [62] Mr. Pallot agreed there was no question that the services were of benefit to Ms. Douglas. Rule 1-3 and any case plan order [63] I do not believe that these factors have any significant impact on this case. Conclusion [64] Given the complexity and novelty of this case and the reductions already made by reduced hourly rates and not billing for time incurred, I am satisfied that the accounts as rendered are objectively reasonable. [65] Ms. Douglas' costs are allowed at 50% of $45,460.56, which equals $22,730.28. "Master Muir"