ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 10-2141-SR
DATE: 2012/09/18
B E T W E E N:
FAMME & CO. PROFESSIONAL CORPORATION
Paul Parlee, for the Plaintiff
PLAINTIFF
- and -
PORK TALBOT FARMS LTD., BRENDA JACKSON, HORIZONS FARMS INC., NEW FUTURE HORIZONS LTD., NEW HORIZONS LINE INC., and NEW FUTURE FARMS INC.
Brenda Jackson, on her own behalf and on behalf of the corporate defendants
DEFENDANTS
Heard: September 19 and 20, 2012
Haines J.
[ 1 ] This is a claim by the plaintiff for $62,061.25 for professional services it provided to the defendants. The defendants agree that accounting services were provided but dispute the extent of those services and the amount billed.
[ 2 ] The plaintiff is a firm of chartered accountants with offices in Stratford, London and St Marys. Pork Talbot Farms Ltd. is a corporation that carried on business as a pork producer in the County of Elgin. Brenda Jackson is an officer, director and primary shareholder of Pork Talbot Farms Ltd. On April 14, 2011, Pork Talbot Farms Ltd. changed its name to New Future Horizons Ltd. On May 1, 2012, the plaintiff obtained an order adding New Future Horizons Ltd. and others as defendants. Judgment is sought against Pork Talbot Farms Ltd., Brenda Jackson and New Future Horizons Ltd. It is these parties who are referred to collectively in these reasons as the defendants.
[ 3 ] Since 2001, the plaintiff has provided corporate accounting services to Pork Talbot Farms Ltd. and personal accounting services to Brenda Jackson which included the preparation of tax returns and financial statements. The plaintiff rendered accounts from time to time and were paid. As of April 30, 2009, all outstanding accounts had been paid although a substantial amount of work in progess remained unbilled. Up to this point in time the defendants had not challenged any of the plaintiff’s accounts and the retainer or appointment of the plaintiff by the defendants continued.
[ 4 ] Bernard Linseman, a chartered accountant and a partner with the plaintiff since 1991, was the partner responsible for the defendants’ account. He testified that he was assisted in servicing this account by Peter Mantel, an agrologist who specializes in agricultural financing and Brad Groeneweg, a certified public accountant. Mr. Linseman explained that there was a substantial amount of extraordinary activity from 2008 forward that required their attention in addition to the standard services they had been providing up to that point.
[ 5 ] Mr. Linseman gave his evidence in a straightforward, candid and thoughtful manner. At no time did he appear to be overreaching in explaining the work that the plaintiff had undertaken for the defendants. I found him to be a credible witness and accept his evidence.
[ 6 ] Prior to 2007, the business of Pork Talbot Farms Ltd. was operated by Brenda Jackson and her then husband Walter Jackson. As a result of differences that arose between them Mr. Jackson ceased his involvement in the day to day operations of Pork Talbot Farms Ltd. in December 2006 and the value and disposition of their respective interests in Pork Talbot Farms Ltd. became an issue in their matrimonial litigation.
[ 7 ] The business carried on but, in August 2007, the main barn and the livestock in it were lost to fire. This resulted in insurance claims for loss of the building, livestock and income. The plaintiff provided the necessary accounting services for the successful resolution of those claims which included the detailed analysis required to support the claim for lost income.
[ 8 ] The plaintiff also assisted Brenda Jackson and her counsel with the matrimonial litigation. Mr. Linseman and Mr. Mantel were expert witnesses at the trial in September 2009 where Ms. Jackson’s position was sustained and she was able to purchase Mr. Jackson’s interest in Pork Talbot Farms Ltd. for a modest amount.
[ 9 ] Mr. Linseman further testified that during this period of considerable financial turmoil the defendants were faced with claims by unpaid suppliers. With the plaintiff’s advice and assistance, a new corporation was set up to protect the assets of Pork Talbot Farms Ltd. and the lawsuits by suppliers were ultimately resolved on favourable terms to the defendants.
[ 10 ] The financial difficulties of the defendants left the plaintiff concerned for its own account. Subsequent to April 30, 2009, the plaintiff rendered the following accounts to Pork Talbot Farms Ltd.:
June 17, 2009 $ 36,750.00
August 27, 2009 $ 3,990.00
December 21, 2009 $ 2,100.00
April 4, 2010 $ 19,398.75
May 12, 2010 $ 3,622.50
Total $ 65,861.15
The addition of $5,997.01 in interest charges brought the total to $71,858.26 by May 31, 2010. The plaintiff had received payment of $3,800 from the government for work done for Pork Talbot Farms Ltd. with respect to the “Growing Forward” program. The balance owing after crediting that payment was $68,058.26. The plaintiff has since waived the interest charges which reduces the balance to $62,061.25.
[ 11 ] The plaintiff had discussions with the defendants and their lawyer in April 2010 about payment of their outstanding account. As a result of those discussions the following letter dated April 7, 2010, was sent to Mr. Linseman by the defendants:
Attention: Bernie
This letter is regarding the outstanding balance owed to Famme & Co.
I have been speaking with Mark Shields my lawyer regarding a lien to “cover” the outstanding balance. Pork Talbot Farms Ltd is prepared to make the following offer.
Pork Talbot Farms Ltd. will direct Mark Shields of Gloin Hall and Shields to write a mortgage to the unencumbered property owned by Pork Talbot Farms Ltd. The amount of the mortgage will be sufficient to cover the outstanding account.
This offer is conditional on the following 3 conditions:
Pork Talbot Farms Ltd. receives a detailed statement of account.
The interest portion of the outstanding balance be waived.
Continue to provide accounting services to Pork Talbot Farms Ltd., complete the 2009 financial statements and Tax returns
If Pork Talbot Farms Ltd. has not secured alternated [sic] financing by Mary [sic] 7, 2010 a mortgage will be registered. The amount of the mortgage will be the outstanding balance owed May 7, 2010.
Sincerely,
“Brenda Jackson”
Brenda Jackson
Pork Talbot Farms Ltd.
The mortgage did not materialize, nothing was paid and this action was commenced October 21, 2010.
[ 12 ] The defendants contend that they were assured that their balance was nil as of April 30, 2009, and that the accounts rendered thereafter are grossly excessive. One of the conditions for providing the mortgage to secure the plaintiff’s account was the provision of a detailed statement of account. The accounts as rendered included a perfunctory description of the services provided. Prior to commencing this action and during the course of the proceedings the plaintiff provided copies of its “Work in Progress Detail” which is a record of the time docketed by the individuals who worked on the defendants’ account. These dockets record the date, the amount of time, the dollar value of that time, the hourly rate of the individual and the identity of that individual. A numerical code describing the type of work is also recorded. For example, 08 is identified as processing personal tax returns; 20 is notice to reader financial statement preparation; and 64 is tax planning. These codes may be useful for identifying the type of work being undertaken but are unhelpful in describing with any specificity the actual work being done.
[ 13 ] Although the evidence suggests that there may have been some errors in recording the appropriate code, I have no reason to believe that the time dockets represent anything other than a reasonably accurate record of the time that the plaintiff had invested in the defendants’ account. However, absent agreement to the contrary, an appropriate fee for professional services is not necessarily the product of multiplying time docketed by the applicable hourly rates. All of the time charged may not have been necessary or productive and a client is entitled to challenge an account on that basis. Unfortunately the incomplete description of the work being carried out during the time identified and charged makes such an analysis impossible in this case.
[ 14 ] The terms of engagement agreed to by the defendants states the following with respect to fees:
Our professional fees will be based on our regular billing rates plus direct out-of-pocket expenses and applicable GST and are due when rendered.
I see nothing in the terms of engagement that indicate that the defendants are agreeing to pay whatever amount that the time recorded multiplied by the applicable billing rates might yield.
[ 15 ] During submissions Ms. Jackson declined my invitation for her to suggest what a proper fee might be.
[ 16 ] The onus, of course, is on the plaintiff to prove its claim. I have no doubt based on the testimony of Mr. Linseman and the several volumes of documents referred to in evidence that the plaintiff delivered substantial professional services to the defendants over an extended period of time and it is entitled to be paid. I am not, however, satisfied that the plaintiff has demonstrated entitlement to the full amount of its claim of $62,061.25.
[ 17 ] In my view, based on Mr. Linseman’s description of the work undertaken and the time records provided, a reasonable and proper assessment of the amount due to the plaintiff for its services is $53,000. This represents a reduction of approximately 15% which I believe fairly addresses any shortcomings in the billing process.
[ 18 ] Brenda Jackson is not responsible for payment of the accounting services provided to Pork Talbot Farms Ltd. and Pork Talbot Farms Ltd. should not be responsible for paying for the services provided to Ms. Jackson in relation to the matrimonial litigation. Again, it is difficult to determine with any precision just how much of the account should be attributed to Ms. Jackson personally but based on Mr. Linseman’s testimony I am satisfied that a significant amount of time and effort was expended by both him and Mr. Mantel on the dispute between Mr. and Mrs. Jackson. I fix that amount at $8,000.
[ 19 ] In the result there will be judgment for the plaintiff in the amount of $45,000 against the defendants Pork Talbot Farms Ltd. and New Future Horizons Ltd. and judgment against Brenda Jackson personally for $8,000.
[ 20 ] The parties may make brief written submissions with respect to costs within 30 days.
Justice R. J. Haines
Released: October 18, 2012
COURT FILE NO: 10-2141-SR
DATE: October 18, 2012
ONTARIO
SUPERIOR COURT OF JUSTICE
FAMME & CO. PROFESSIONAL CORPORATION
Applicant
- and –
PORK TALBOT FARMS LTD., BRENDA JACKSON, HORIZONS FARMS INC., NEW FUTURE HORIZONS LTD.,NEW HORIZONS LINE INC., and NEW FUTURE FARMS INC.
Defendants
REASONS FOR JUDGMENT
HAINES J.
Released: October 18, 2012