Décision

[1]           Plaintiff, Spiegel Sohmer Inc. (“Spiegel”), a law firm, is claiming from the Defendant, 3901823 Canada Inc. (“1823”), fees of $26,358.40 for legal services rendered.

[2]           According to its Motion to institute proceedings, Spiegel’s services were retained jointly by 3901823 and its subsidiary, 3901793 Canada Inc. (“1793”) to make representations on their behalf to Revenu Quebec (“RQ”) with respect to a then ongoing audit (the “Audit”) relating to Input Tax Credits and Input Tax Refunds (together the “ITCs”) for the taxation year 2005 to 2008 (the “Mandate”).

[3]           The Court understands that at the time the Mandate was given to Spiegel, 1793 was carrying-on business under the name of Intelco Communication Inc. (“Intelco”). 1793 ceased using the Intelco name as of September 13, 2010.

[4]           Spiegel also alleged that initially all invoices were addressed to Intelco. Later on and at the request of 1823, its outstanding invoices were reissued to the name of Defendant.

[5]           1823 contests the present claim on the basis that it never gave any mandate to Spiegel. At all relevant times, it was the holding company of Intelco, the latter being the one that actually retained the legal services of Spiegel.

[6]           1823 claims that there is absolutely no link between Plaintiff and Defendant. Moreover, all the amounts due by 1793 formed part of a proof of claim filed by Spiegel with the Trustee to the proposal filed by 1793 and they cannot be claimed from 1823.

[7]           M^tre Aaron Rodgers, a partner of the Spiegel law firm at the time, testified that he was first approached by an accountant, M. Joseph Khoury. Intelco was facing an audit regarding its ITCs. But, as Intelco was also a creditor of RQ for an amount in excess of $1.2 million, the ongoing audit was preventing Intelco from collecting its own much needed funds. Eventually, a notice of assessment in excess of $600,000 will be issued against Intelco. However, in its proposal filed under the Bankruptcy and Insolvency Act, in September 2011, Intelco will list RQ (for GST and QST) as an unsecured creditor for an amount of $1,522,034.68.

[8]           Coming back to the legal services rendered, Spiegel did not prepare a written mandate with respect to the legal services to be rendered and did not seek any guarantee for the payment of its fees.

[9]           Although the services rendered appear to be in connection exclusively with Intelco’s tax audit, Spiegel claims that their file was opened under the names of both Intelco and 1823 who both benefitted from their legal services. Moreover, on October 4^th, 2010, Intelco’s comptroller, Mrs. Nancy Tortorian asked M^tre Rodgers to reissue all outstanding invoices from Intelco to 1823.

[10]        Spiegel also relies on two documents entitled “Power of Attorney, Authorization to Communicate Information, or Revocation (form MR-69-V)” prepared at the outset by M^tre Rodgers. Those documents, to all intents and purposes, authorized Spiegel to communicate with RQ with respect of QST and GST issues involving Intelco and 1823. A first power of attorney dated October 20th, 2008 was signed by Mr. Bassim Kano in his capacity as president of Intelco. A second power of attorney was signed on the same day by Mr. Bassim Kano in his capacity as president of 1823. M^tre Rodgers could not recall precisely why the second power of attorney was prepared for 1823. He pointed out however that such power of attorneys enabled Spiegel to communicate with RQ not only with respect to Intelco, but also its directors as well as its holding company, 1823. According to M^tre Rodgers, Intelco’s directors as well as its holding company, 1823, who may have collected dividends from Intelco, were potentially liable for the tax liabilities of Intelco.

[11]        M^tre Rodgers also produced a set of correspondence (P-4) addressed by Spiegel to RQ. He pointed out that all letters refer to 1823 as follows:

Objet: Intelco Communication Inc.

-  et -

3901823 Canada Inc.

Notre dossier: 87776-1

[12]        However, Mr. Serge Farman, secretary of Intelco at the time, produced a draft letter of opinion (D-2) addressed to RQ that had been submitted to him for his comments, in August 2009. That letter which sets out in great details Intelco’s contestation to the proposed notice of assessment was not included in P-4 and only refers to Intelco. There are no mentions to 1823.

[13]        Spiegel acted in this matter until the end of the summer of 2010. By then, there were legal fees of $24,546.07 in arrears. In September 2010, M^tre Rodgers wrote to Mr. Serge Farman to demand payment of the aforesaid arrears. At the time, Intelco was still facing a potential assessment in excess of $600,000. The emails exchanged at the time (P-5 and P-6) reveal that Intelco was experiencing financial difficulties and was seeking a reduction of the legal fees. The quality of the legal services rendered is not at issue. On September 20, 2010, M^tre Rodgers writes to Mr. Farman to confirm Spiegel’s agreement to reduce the fees to $20,000 payable by way of four monthly cheques of $5,000 each. Mr. Farman denies having ever reached such an agreement with Spiegel. Intelco never responded to this offer nor ever made any payments.

[14]        However, M^tre Rodgers affirms that on October 4^th, 2010, Intelco’s comptroller, Mrs. Nancy Tortorian, called him to ask that the outstanding invoices already sent to Intelco be readdressed to 1823. M^tre Rodgers sent the new invoices addressed to 1823 to Mr. Serge Farman of Intelco. The cover letter is to the following effect:

Dear Serge,

Following my telephone discussion with Nancy on October 4^th, 2010, we are enclosing herewith the invoices that remain outstanding. The invoices were initially issued to Intelco. Nancy requested that the invoices be reissued to 3901823 Canada Inc.

Should you have any questions or comments, please do not hesitate to communicate with the undersigned.

Yours truly,

(S) Aaron Rodgers

[15]        Mr. Farman never authorized the transfer of Intelco’s debt to Spiegel to 1823, adding that he did not have the authority to bind 1823.

[16]        The evidence revealed that all payments (P-9) made on account of the legal services rendered by Spiegel were made by Mr. Bassim Kano, Intelco’s president at the time, who was refunded by Intelco. No further payments were made subsequently by either Intelco or by 1823.

[17]        Other than the readdressed invoices (P-8), all invoices were issued to Intelco exclusively.

[18]        On March 15^th, 2011, 1793 (Intelco’s new name) filed a Notice of intention to file a proposal under the Bankruptcy and Insolvency Act. On September 9^th, 2011, 1793 filed its proposal that was accepted by the creditors and ratified by the Court on November 4^th, 2011.  Spiegel was listed as an unsecured creditor for $26,358.40.

[19]        Spiegel filed a proof of claim in the said amount of $26,358.40 despite the alleged agreement for $20,000. Spiegel’s claim was not contested by either 1793 nor by its Trustee. Spiegel has yet to receive a dividend stemming from the Proposal, but there is no evidence that 1793 is in default of honoring its terms and conditions.

[20]         On December 21^st, 2011, the present legal proceedings were instituted.

ANALYSIS

[21]        This is yet an eloquent illustration of parties who would have greatly benefitted from a written mandate. The identity of the client or of the clients would have been clear. If third parties would have been called to guarantee the obligations of the client(s) toward Spiegel, the document would have confirmed it.

[22]        In the present instance, the preponderant evidence convinces the Court that, to all intents and purposes, Spiegel is trying to claim payment of its legal fees from 1823, the holding company of its client, Intelco, for the simple reason that the latter is under the protection of the Bankruptcy and Insolvency Act and cannot honor forthwith its obligations towards Spiegel.

[23]        With all due respect, the evidence offered by Spiegel is unconvincing as the arguments developed appear to be tailored to justify a link between it and 1823.

[24]        There is no doubt, in the Court’s view, that the legal services were required by Intelco alone who was facing an important notice of assessment. Mr. Farman, its secretary and main contact with M^tre Rodgers, at the time, confirmed it. Spiegel may have decided to open its file under the name of the two corporate entities, as illustrated by the various letters filed under P-4. But, this alone does not create a mandate with 1823. Moreover, from the outset, all invoices were issued by Spiegel to Intelco exclusively who paid for the services via its president, Mr. Kano.

[25]        The fact that M^tre Rodgers requested in October 2008, the execution of two power of attorneys, one for Intelco and the other for 1823, does not establish, in itself, the existence of a mandate from 1823. In fact, M^tre Rodgers could not recall specifically why the second power of attorney was sought from 1823. In cross-examination, M^tre Rodgers acknowledged that at the time, 1823 was not being audited. He volunteered that a holding corporation of Intelco, 1823 had a potential liability toward RQ should Intelco not be able to satisfy RQ’s eventual claim. He explained that this potential liability stemmed from dividends paid in the past by Intelco. However, the Court understands that Intelco never paid such dividends to 1823.

[26]        Finally, if the mandate was given by Intelco and 1823 at the outset, why was 1823 not invoiced before October 5^th, 2010 (P-8)? Why wait for the alleged instructions of Mrs. Nancy Tortorian to do so? Why remove the name of Intelco on the new invoices?

[27]        The evidence that Mrs. Tortorian requested such a reissue is denied by Mr. Farman. Moreover, assuming that such a request was indeed made, a fact that has not been established in a conclusive manner, how could Mrs. Tortorian, the comptroller of Intelco, bind 1823, at the time? No evidence was introduced to that end.

[28]        In conclusion, given the evidence adduced at trial, the Court is not convinced that 1823 ever mandated Spiegel to perform legal services on its behalf, Intelco did. It is not because 1823 could have potentially benefitted from the legal services Spiegel was being called upon to perform for Intelco, that a legal contract or obligation was created between Spiegel and 1823. A written mandate would have dispelled any doubts in connection therewith.

[29]        There is no lien de droit between Spiegel and 1823 that would justify granting Spiegel’s present action.

[30]        However, considering the particular facts in this case, the Court is of the view that it is fair and reasonable to order that each party pay its own costs.

FOR THOSE REASONS, THE COURT:

DISMISSES the present action;

THE WHOLE, each party paying its own costs.