2018 NLSC 230, 2018 NLSC 230

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Fields of Athenry Resort Corporation v. Grey , 2018 NLSC 230 Date : November 21, 2018 Docket : 201801G0557 Between: Fields of Athenry resort corporation Plaintiff/first applicant AND: RYAN MANSION INC. SECOND PLAINTIFF/SECOND APPLICANT AND: NOLAN HALL REAL ESTATE SERVICES LIMITED THIRD PLAINTIFF/THIRD APPLICANT/ DEFENDANT BY COUNTERCLAIM And: natasha grey t/a the organizers business solutions first Defendant/first respondent AND: THE ORGANIZERS BUSINESS SOLUTIONS LTD. SECOND DEFENDANT / SECOND RESPONDENT/ PLAINTIFF BY COUNTERCLAIM Before: Justice Vikas Khaladkar

Place of Hearing: St. John’s, Newfoundland and Labrador Dates of Hearing: November 8 and 9, 2018

Summary: A dispute arose between the parties surrounding the provision of bookkeeping services by the Second Respondent. The Applicants applied to have the matter resolved by way of a

summary trial. The Court had the benefit of sworn affidavits from a number of witnesses and their viva voce cross-examinations. The Applicants have not displaced the burden upon them to prove their case on a balance of probabilities. The Applicants admitted the Second Respondent’s claim for monies owing. Judgment was awarded to the Second Respondent. The claim against the First Respondent is dismissed. Both Respondents shall have their costs of the action calculated under Column III of the Tariff of Costs.

Appearances: Daniel Bennett Appearing on behalf of the Plaintiff Sheri Wicks Appearing on behalf of the Defendant Authorities Cited: RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sched. D.; Income Tax Act , S.N.L. 2000, c. I-1.1 REASONS FOR JUDGMENT KHALADKAR, J. : INTRODUCTION [ 1 ] The Plaintiffs applied to have their dispute with the Defendants determined by way of a

summary trial. For the purposes of this decision I will refer to the Plaintiffs as “the Clients” and the Defendants, corporate and individual, as “the Bookkeeper.” [ 2 ] The Bookkeeper provided bookkeeping services to the Clients from 2008 until 2011.

Natasha Grey testified that, as a result of the Clients’ level of disorganization, her company resigned as their bookkeeper and, at the time of doing so, organized all of their paperwork in bankers boxes, and provided them with an electronic record consisting of files made in Simply Accounting – an accounting software program. [ 3 ] In 2013 the Bookkeeper resumed working for the Clients. There are two significant facts arising from the resumption of this activity. Firstly, the Clients had boxes of piled-up, unopened, mail from the two intervening years.

The Bookkeeper had to open all of this mail and deal, significantly, with actions taken by agencies such as the Canada Revenue Agency (CRA), Worker’s Compensation Board (WCB) and the Harmonized Sales Tax (HST) authorities owing to the complete cessation, by the Clients, of any reporting to those agencies during the period of the Bookkeeper’s absence. [ 4 ] Secondly, the Bookkeeper advised the Clients that she would not be able to do any bookkeeping work for them without the electronic Simply Accounting files that she had earlier given to them in 2011.

A representative of the Clients, Robert Hall, had no knowledge of the whereabouts of the Simply Accounting files and it took the Bookkeeper three weeks of searching to locate the disk – which had been misplaced, it would seem, in a credenza in Mr. Hall’s home office. [ 5 ] Simply Accounting is a software program in which daily entries can be made for revenues and expenditures.

It is a tool that bookkeepers use to keep track of a business’ financial activities so that, at year end, a record of all transactions, supported by paper documentation, can be provided to an accounting firm for the preparation of financial statements. The financial statements, in turn, are variously used by businesses for the filing of income tax returns and, generally, as reporting instruments to shareholders, bankers and

others pertaining to the business’ financial activities consisting of its profits, losses and balance sheet. [ 6 ] Simply Accounting uses the closing figures from the previous year (which are crystallized at yearend and cannot be tampered with) to populate the necessary fields for the ensuing fiscal year. Since the advent of computerization all of the work that bookkeeper’s used to do in accounting ledgers is now recorded by electronic means on a computer. It is essential, therefore, that the electronic copy of the work undertaken be protected so that it is not lost.

The Bookkeeper testified that she took daily backups of all of her work on behalf of all of her customers, and that she weekly took electronic backups of her Clients’ records and stored them off site – to prevent loss from fire or other perils. [ 7 ] The Bookkeeper maintained the Clients’ records from 2013 – when she resumed providing bookkeeping services, until November 2015 when she elected to stop providing services on account of non-payment of her invoices for several months. [ 8 ] At the time that she ceased providing services to the Clients for the second time she arranged all of the paper records in bankers boxes, provided an index of the contents of each of the boxes, and attended when the Clients’ representative, Mary Parsons, came to pick up the accounting records.

The bookkeeper and her employee at the time, Megan Norris, testified that the boxes were open when Ms. Parsons arrived and that she was asked whether she wished to check the contents to ensure that everything listed in the index was, indeed, present inside the box. Ms. Parsons declined to check the contents of the boxes against the indices, whereupon the boxes were sealed with tape. Ms. Parsons then signed each index and her signature was attested to by Ms.

Norris. [ 9 ] One of the boxes so delivered stated, in the index, that it contained electronic records (the Simply Accounting files). [ 10 ] The Clients were unable to locate the electronic files provided by the Bookkeeper and sued for the return of all monies paid to the Bookkeeper from 2013 until she resigned from her post in 2015. [ 11 ] The Bookkeeper counterclaimed for the amounts that the Clients had failed to pay for bookkeeping services. [ 12 ] The central issue in this case is one of fact: have the Clients proved, on a balance of probabilities, that they did not receive the Simply Accounting files from the Bookkeeper?

If so, are they entitled to damages and in what amount? If not, is the Bookkeeper entitled to damages and to what extent? [ 13 ] For the reasons that follow, I find that the Clients were not justified in suing the Bookkeeper for the amounts claimed by them, or any amount, and that the Bookkeeper is entitled to a judgment against the Clients for the amount of the unpaid invoices on account of bookkeeping. FINDINGS OF FACT [ 14 ] Megan Norris was an entirely independent witness. Although she had, at one time, worked for the bookkeeper, she was not employed in that capacity when she testified.

She began working for the Bookkeeper as an administrative assistant in 2013. She was present when Mary Parsons came to pick up the Clients’ documentation. [ 15 ] Ms. Parsons testified that she came to get the boxes after work one day and that it was between 5:00 p.m. and 6:00 p.m. when she attended the Bookkeeper’s offices in Conception Bay South. However, both Megan Norris and the Bookkeeper testified that Ms. Parsons came around lunch time. Ms. Parsons did go to the Bookkeeper’s premises about a week later to pick up a filing cabinet, and that was in the evening. It is possible that Ms.

Parsons has confused the two attendances. [ 16 ] Ms. Norris testified that it was her unwavering practice to leave between 4:30 and 5:00 in the afternoon, and she would not been there after 5:00 p.m. when Ms. Parsons said that she attended the office. She recalled that it was daytime when Ms. Parsons picked up the boxes. She said she helped Ms. Parsons load them in her half ton truck. She knew what kind of vehicle Ms. Parsons was driving – a fact that would only be known to her if she was present when Ms. Parsons picked up the bookkeeping records. [ 17 ] Ms. Norris said that the boxes were all open when Ms.

Parsons attended. She indicated that Ms. Parsons skimmed the contents of the boxes but did not really look inside. She testified that they pointed out the CD that was in one of the boxes. She testified that she saw it there and that she taped up the box (and all of the other boxes) in Ms. Parsons’ presence. [ 18 ] Ms. Parsons acknowledged receipt of each box and its contents by signing the form affixed to the box. Ms. Norris signed each of these receipts as a witness. [ 19 ] Ms. Norris gave her evidence in a fair, forthright and consistent manner. She had a good grasp of details, unlike Ms.

Parsons, who not only didn’t remember that Ms. Norris was present at the time that she picked up the boxes, but denied that she was there and, ultimately, was unable to explain how Ms. Norris’ signature came to be on the receipts taped to the boxes. [ 20 ] Wherever there is conflicting evidence between Ms. Norris and Ms. Parsons, I accept the evidence of Ms. Norris. I find, as a fact, that Ms. Norris pointed out the CD to Ms. Parsons, who saw it in the box before the box was taped shut. [ 21 ] I accept the evidence of the Bookkeeper, Natasha Grey, that the CD given to Ms.

Parsons contained the bookkeeping records of the Clients. [ 22 ] I find, as a fact, that the Bookkeeper provided more than bookkeeping services to the Clients and, in particular, that she was instrumental in reversing and/or successfully negotiating adverse assessments made by the Canada Revenue Agency on account of payroll deductions, Worker’s Compensation Board on account of WCB levies and the Department of Finance on account of Harmonized Sales Tax.

I find as a fact that this occupied a large part of her workload on behalf of the Clients in 2013 and 2014. [ 23 ] I find, as a fact, that there is ample evidence that the Bookkeeper contracted to provide services to the Clients in its corporate capacity, namely The Organizers Business Solutions Ltd., and not in Ms. Grey’s personal capacity. This is evidenced in an email sent to

the Clients on March 2, 2013, in which the Bookkeeper, in its corporate capacity, requests certain information, prime among which the disk (of Simply Accounting information) given to them in 2011 which had been misplaced, if the Bookkeeper is to commence work on their files again. It is bolstered by another email on May 2, 2013, in which the Bookkeeper outlines the general terms of its engagement – including a start date, the nature of some of the work that would be involved and the hourly rate to be charged for the work undertaken. Ms.

Grey signed this email on behalf of The Organizers – Business Solutions Ltd. and, in fact, all of her emails to the Clients show this representative capacity. [ 24 ] If some of the invoices to the Client were sent out from “The Organizers” instead of “The Organizers – Business Solutions Ltd.” that does not, in my opinion, have the effect of changing the parties to the contract. The Clients knew, or ought to have known, that they were dealing with a corporate persona and that Natasha Grey was its representative. [ 25 ] Mr. Robert Hall testified on behalf of the Clients.

He deposed, in his affidavit, that if they had been provided with the Simply Accounting files, he would not have lost it “as it was so critically important to the Nolan Hall group of companies.” He testified to the same effect in cross-examination. His evidence begs the question, then, if the information was so critically important, why was Ms. Parsons not given specific instructions to secure the Simply Accounting CD when she attended to pick up the boxes of paperwork? And, not having done so, why did Mr.

Hall, or some other representative of the Clients, not immediately look in the box containing the Simply Accounting CD to verify its existence? The boxes sat in storage from the time Ms. Parsons obtained them on November 18, 2015 until early January 2016 without being opened. [ 26 ] I find that it was the Bookkeeper’s practice to back up client files onto their office server daily. In addition, a set of CDs containing client files was burned weekly. After about four weeks (sometimes longer if holidays intervened) the CD backups were shredded.

It was not the Bookkeeper’s practice to keep client information longer than the existence of the backup CDs once the bookkeeper/client relationship ceased to exist. As stated, the life expectancy of backup CDs was approximately four weeks. [ 27 ] I find that by January 2016 the Clients’ backup CDs of Simply Accounting files had been shredded. [ 28 ] Mr. Hall’s evidence was replete with suppositions and was not internally consistent. He testified under cross-examination that he knew, in 2011, that the electronic accounting files were critically important to his firm’s business.

Yet, he acknowledged that the Simply Accounting CD given to the Clients in 2011 by the Bookkeeper had been mislaid. And he took no steps to ensure that, in 2015, the electronic accounting files be secured in some fashion. [ 29 ] Mr. Hall testified that because so much time had elapsed since the audits for CRA, WCB and HST had been completed, that they would have to be done over again. This statement belies a lack of understanding of the work that the Bookkeeper did on behalf of the Clients.

When pressed he admitted that the Bookkeeper did all of the work relating to the audits and that the Clients received the benefit of that work. He admitted that none of the assessing agencies had indicated any desire to review the already completed audits. Mr. Hall, on behalf of the Clients, did not advance any evidence as to what it would cost to re-do the accounting work that was contained on the Simply Accounting CD. [ 30 ] Mr. Hall admitted, on behalf of the Clients, that there were outstanding invoices that had not been paid to the Bookkeeper. ISSUES 1. Was there a contract between the parties? 2.

What were the terms? 3. Are there any implied terms? 4. Was the contract breached? 5. By whom? 6. What is the measure of damages suffered by the aggrieved party? [ 31 ] I propose to deal with each of these issues in turn.

My findings can be summarized as follows: ⋅ There was a contract between the parties by virtue of which the Bookkeeper agreed to provide Bookkeeping and other services to the Clients in consideration of the payment of an hourly fee of $40.00 per hour. ⋅ The Clients agreed to pay the amounts invoiced by the Bookkeeper from time to time. ⋅ The Clients breached the agreement by failing to pay the Bookkeeper $6,099.32. ⋅ The breach entitled the Bookkeeper to cease providing services to the Clients.

The Bookkeeper would have been justified in asserting a lien upon the fruit of her labours, namely the Simply Accounting electronic files, until she received payment. ⋅ However, she voluntarily relinquished possession of the electronic files to the Clients and, thereafter, she was not obligated to provide any further services to the Clients. Was there a contract between the parties? [ 32 ] The formation of the agreement between the parties is evidenced in the email exchanges that occurred between them on May 2, 2013.

It was acted upon by both parties inasmuch as the Bookkeeper commenced working for the Clients, and the Clients paid the Bookkeeper in respect of those services. The relationship between the parties deteriorated as a result of the Clients’ inability to continue to pay for the Bookkeeper’s services. There was neither any dispute with respect to the nature of the work performed by the Bookkeeper,

nor with respect to the amount that was charged the Clients in respect of that work. What were the terms? [ 33 ] The Bookkeeper was to provide bookkeeping services, including ad hoc services such as the handling of audits by CRA, WCB and HST. The Clients were to pay the Bookkeeper a rate of $40.00 per hour for the work performed (subject to increases in subsequent years – and with which the Clients took no issue – some of the invoices were billed out at a rate of $45.00 per hour). The length of the contract was open ended.

Were there any implied terms? [ 34 ] Based upon the parties’ earlier contractual relationship and the manner in which they conducted themselves, I find that there was an implied term of the contract that, at the termination of the contract, the Bookkeeper would return all files belonging to the Clients, including electronic files.

This implied term is subject to the Bookkeeper’s common law right to maintain a legal or possessory lien pending payment to it of all invoices due and owing to the date of termination of the agreement. [ 35 ] Since the Clients are still delinquent with respect to the payment of the Bookkeeper’s invoices, the Bookkeeper has no obligation to provide the electronic files. Despite that, however, I have found that the Bookkeeper did, in fact, provide the Clients with all of their paper files and the electronic Simply Accounting file.

As such, the Bookkeeper has satisfied the implied term to provide the documentation despite the Clients’ breach of contract and has no further obligations vis-à-vis the Clients. [ 36 ] There is no implied term to provide duplicate electronic copies of Simply Accounting files once the original set of electronic Simply Accounting files have been provided. Upon the provision of the hard copy files and the CD containing the electronic bookkeeping files, the Bookkeeper’s legal obligations to the Clients ceased for all intents and purposes. Was the contract breached? [ 37 ] Yes. By Whom? [ 38 ] The Clients.

What is the measure of damages suffered by the aggrieved party? [ 39 ] The sum of $6,099.32 is payable by the Clients to the Bookkeeper as follows: 1. $1,228.89 from Fields of Athenry Resort Corporation. 2. $4,870.43 from Nolan Hall Real Estate Services Limited; [ 40 ] It is not possible to say what happened to the disk containing the Simply Accounting files after it was delivered to Mary Parsons on November 18, 2015. For the purposes of my decision it is immaterial.

Once delivered, as I have found to be the case, the Bookkeeper’s legal obligations were terminated. [ 41 ] Mary Parsons was the agent of the Clients for the purposes of obtaining receipt of their records from the Bookkeeper. She acknowledged receipt of the documentation by signing each and every box of documents delivered to her possession.

She had the apparent, ostensible and actual authority to obtain the possession of the accounting records and did so. [ 42 ] The Clients are bound by the action of their agent. [ 43 ] There is no need for the Court to engage in a conjectural analysis concerning the ultimate disposition of the Simply Accounting disk if there is a finding of fact that it was delivered to the Clients’ agent. [ 44 ] Midway through the

summary trial, counsel for the Clients asked to make an oral application to amend the pleadings by adding a claim for conversion. Counsel for the Bookkeeper consented to the amendment and the Court allowed the application.

It was argued, on behalf of the Clients, that the Bookkeeper’s actions in destroying the electronic records of the Clients’ Simply Accounting files (both on the office server and in the CDs burned as backups) amounted to the tort of conversion and, therefore, that the Bookkeeper should be liable in tort for converting the Clients’ property. [ 45 ] The same logic applies to this argument as it does to the notion that there was an obligation to provide the Simply Accounting files.

Once the property is delivered to the Clients, it cannot be said that the deliberate destruction of a copy of that property amounts to conversion. The Clients had no proprietary interest in the copies of the information that the Bookkeeper maintained after one copy of same had been delivered to them. The Bookkeeper’s practice of destroying client files once the client/bookkeeper relationship ceased to exist is quite proper. There is no reason for the bookkeeper to continue to hold confidential information belonging to another. [ 46 ] Contrary to Mr.

Hall’s assertions that the Bookkeeper is obligated, by law, to hang onto accounting records for a period of years due to legislation such as the Income Tax Act , S.N.L. 2000, c. I-1.1 , the obligation is the Clients’ not the Bookkeeper’s. This was attested to by Mr. Gerald Taylor, the chartered accountant who had been the Clients’ accountant since the 1990s. [ 47 ] I was urged by counsel for the Bookkeeper to award costs on a solicitor and his client basis pursuant to Rule 17A.05(2) since the Clients will be obtaining no relief pursuant to my decision. I decline this invitation on the basis that the use of the

Summary Trial procedure was effective in cutting down substantially the number of days that would have been required had the matter proceeded to a full blown trial. To that extent the procedure chosen had a reasonable outcome and I am loathe to penalize the Clients by ordering the higher level of costs. Under the circumstances, the Bookkeeper shall have costs under

Schedule III of the Tariff of Costs.

[ 48 ] Judgment for The Organizers Business Solutions Ltd. as follows: 1. $1,228.89 against Fields of Athenry Resort Corporation. 2. $4,870.43 against Nolan Hall Real Estate Services Limited. [ 49 ] The Claim against Natasha Grey is dismissed. [ 50 ] The Organizers Business Solutions Ltd. and Natasha Grey shall each have their costs of the action under Column III of the Tariff of Costs against each of the corporate Plaintiffs. _____________________________ Vikas Khaladkar Justice