DATE: 20021017
DOCKET: C37229
COURT OF APPEAL FOR ONTARIO
RE: DREX ENGINEERING CONSULTANTS INC. (Plaintiff/Appellant) v. JETFORM CORPORATION and WHY INTERACTIVE INC. (Defendants/Respondents)
BEFORE: DOHERTY, LASKIN and GOUDGE JJ.A.
COUNSEL: Douglas R. Adams
for the appellant
Gary G. Boyd
for the respondent
HEARD: October 9, 2002
RELEASED
ORALLY: October 9, 2002
On appeal from the judgment of Justice R.J. Kealey dated October 3, 2001.
E N D O R S E M E N T
[1] The appellant was retained by the respondents to prepare a brief and negotiate with the taxing authorities in support of claims for scientific research tax credits. The credits related to work done by the respondents over several years. The appellant prepared detailed and complex briefs on behalf of the respondents and began discussions with the taxing authorities. According to the contracts, the appellant was to be paid a percentage of any claims advanced by it on behalf of the respondents and allowed by Revenue Canada under the tax credit scheme.
[2] The auditors at Revenue Canada were not initially receptive to the claims as advanced by the appellant. When the appellant’s negotiations with the representatives of Revenue Canada did not appear to be going well, the respondents, without any notice to the appellant, terminated their agreements and looked elsewhere for assistance in advancing their claims.
[3] The trial judge found that by terminating their relationship with the appellant, the respondents breached their contracts. That finding is not challenged on appeal.
[4] The trial judge was satisfied that but for the respondents’ breach of the contracts, the appellant would have “enjoyed some measure of success” in his negotiations on behalf of the respondents. In quantifying that success, the trial judge rejected the appellant’s claim that Revenue Canada would have accepted the claims as advanced by the appellant in their entirety. This conclusion is not unreasonable. The claims were novel and contentious from the outset. The trial judge went on to hold that the respondents’ submission as to the measure of success likely to be achieved should be accepted. On those submissions, the success that the appellant was likely to achieve on behalf of the respondents was best reflected in Revenue Canada’s initial response to the claims as advanced by the respondents. According to that initial response, the appellant’s commissions would have been somewhat less than $45,000. The trial judge awarded damages of $45,000 plus pre-judgment interest of $15,000.
[5] It is argued that the trial judge should have made two separate findings with respect to damages. While it may have been preferable for him to do so, there is no error in substance in the way he proceeded. These were related companies and related claims.
[6] It is also submitted that it was not open to the trial judge to quantify the appellant’s lost chance in the way he did. We cannot agree. There was evidence to support the trial judge’s approach. It was not unreasonable to conclude that Revenue Canada’s actual response to the claims reflected the likely outcome of the negotiations.
[7] Finally, we are not satisfied that the trial judge erred in his approach to the deduction of taxes and interest in determining the quantum of the respondents’ damages.
[8] The appellant challenged the quantum of the pre-judgment interest awarded at trial. In our view, the award of $15,000 pre-judgment interest is consistent with the amount that would have been awarded had the trial judge applied the provisions in the Courts of Justice Act. The appeal is dismissed.
[9] The respondents seek leave to appeal costs on a narrow point. The trial judge left it to the assessment officer to decide whether an offer made by the respondents met the terms of Rule 49. The trial judge should have determined that question himself. Having read the offer, we are satisfied that it is a Rule 49 offer and offers terms of settlement which are better than the terms of the judgment achieved by the appellant. Rule 49.02 should have been applied. We would amend the order as to costs to provide that the plaintiff/appellant is entitled to costs on a party-and-party basis to the date of the offer and the defendants/respondents are entitled to costs on a party-and-party basis after the date of the offer. The trial judge also gave certain directions with respect to the costs assessment. Those directions are not challenged.
[10] Leave to appeal the costs order is granted and that order is varied to the extent described above.
“Doherty J.A.”
“John Laskin J.A.”
“S.T. Goudge J.A.”