COURT FILE NO.: CV10-401902SR
DATE: 20121115
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
CDN SR&ED CONSULTANTS INC.
Plaintiff
– and –
JIM BENSIMON, SEARCHLINQS INC. REUBEN BENQUESUS, RACAD TECH INC., and JACK BENQUESUS also known as JACQUES BENQUESUS
Defendants
Counsel: James M. Wortzman, for the plaintiff Larry J. Levine, Q.C., for the defendants Reuben Benquesus, Racad Tech Inc., and Jack Benquesus also known as Jacques Benquesus
HEARD: November 13, 14 and 15, 2012
Stinson J. (Orally)
[1] This lawsuit arises from an unpaid debt. The plaintiff rendered tax consulting services to the corporate defendant, Searchlinqs Inc. When Searchlinqs failed to pay those invoices, the plaintiff sought to collect them from the remaining defendants, alleging a variety of legal theories upon which to base its claim. Along with legal issues relating those claims, the case raises issues of credibility in relation to disputed facts.
Overview
[2] Much of the underlying factual background to the dispute is not controversial. The plaintiff is in the business of assisting corporations in preparing applications for tax credits arising from qualifying research and development expenses. Under applicable tax legislation, where corporations spend money on, among other things, developing new products or enhancing and refining production techniques, they may be entitled to tax credits arising from those expenditures. Qualifying taxpayers can receive either cash payments from the government or a credit against other tax liabilities. The program is known as the Scientific Research and Experimental Development program or SR&ED; hence the plaintiff's name.
[3] Receipt of SR&ED tax credits is not automatic. Rather, the taxpayer must submit a formal application, including a detailed description of the nature of the research or development work in question, together with appropriate backup documentation and financial records. The preparation of a successful application for such tax credits is a complex and detailed process. Familiarity with the government's requirements and the correct approach for preparation and submission of such applications is of significant assistance in achieving a successful result.
[4] The plaintiff corporation and its principal, Itzhak Rosenbaum, have developed considerable expertise in the field of SR&ED tax credit applications. Their business, which largely arises by way of referrals from chartered accountants, involves the preparation and submission of tax credit applications on behalf of corporations who seek to take advantage of this program. When retained on behalf of a client, Mr. Rosenbaum and his associates will conduct a series of meetings to become familiar with the client's business and, in particular, the nature of the work undertaken for which the SR&ED tax credit is sought. Based upon that information and its understanding of the requirements of the SR&ED tax credit program, the plaintiff will prepare the necessary written report that forms part of the submission to the government. The plaintiff will also gather the necessary supplementary information and records and complete the required forms to submit as part of the application.
[5] Under the relevant legislation, an application for an SR&ED tax credit must be submitted to the government no later than 18 months following the end of the fiscal year of the corporation within which the expenditure was incurred. If the application is not submitted prior to that deadline, the opportunity to claim the tax credit expires. As a result, there can be some time pressure associated with completing the application process by the required deadline. Although the formal application is prepared by the plaintiff, prior to submission it must be signed by an authorized representative of the claimant corporation.
[6] The plaintiff provides its services on a contingency fee basis. Its standard engagement letter provides that the client will pay fees to the plaintiff based on the amount of the tax credit earned by reason of the plaintiff's work. The fees are calculated on a sliding scale, such that the plaintiff charges 25 percent of the first $100,000 of tax credit and 20 percent of any tax credit earned in excess of $100,000. The fee plus GST/HST is due on receipt of either a notice of assessment or reassessment or a cash refund. Thus, where no tax credit is earned as a result of the plaintiff's efforts, it is entitled to no fee. Where the application is successful, however, a fee is payable whether the client receives an actual cash payment or a credit against the client's other tax liabilities to the government.
[7] According to Mr. Rosenbaum, it is the plaintiff's standard practice to enter into engagement letters with clients when retained to prepare tax credit applications. In addition to setting out the scope and purpose of the retainer, the engagement letter describes the fee structure mentioned above. The standard engagement letter used by the plaintiff also includes provision for personal liability of the principal or principals of the client corporation for the plaintiff's fees.
The Searchlinqs Engagement
[8] In April 2009, the plaintiff was engaged by Searchlinqs to determine whether and to what degree Searchlinqs' expenditures on the development of new products and processes qualified as expenditures eligible for the SR&ED tax credit. Searchlinqs signed two separate engagement letters, both dated April 7, 2009, one each in respect of the fiscal year ending December 31, 2007 and the fiscal year ending December 31, 2008. Each of the engagement letters was also signed by the defendant Jim Bensimon, who was the president of Searchlinqs, in which he acknowledged personal, joint and several responsibility together with the corporation for payment of all fees billed.
[9] It is undisputed that the plaintiff fulfilled the terms of the engagement letters. The plaintiff researched, prepared and submitted applications for SR&ED tax credits for Searchlinqs for both of the fiscal years in question. Those applications were signed by Mr. Bensimon and submitted to the government. Both applications were successful.
[10] As a result of the plaintiff's efforts, in mid 2009 Searchlinqs received tax credits for the 2007 tax year totalling $74,648 and for the 2008 fiscal year totalling $150,590. Based on its agreed-upon contingency fee structure, the plaintiff rendered an invoice to Searchlinqs for the fiscal year 2007 for $18,662 plus $933.10 for GST, for a total of $19,595.10. In relation to fiscal year 2008, the plaintiff rendered an invoice for $35,118 plus $1,755.90 for GST for a total of $36,873.90. Thus the total invoices rendered by the plaintiff amounted to $56,469, inclusive of GST.
[11] There is no dispute that the plaintiff rendered the services. There is no dispute concerning the quality of the services rendered. There is no dispute that the efforts of the plaintiff resulted in Searchlinqs receiving the tax credits indicated for the years in question. There is also no dispute that the plaintiff has been paid nothing for its services.
[12] As I will discuss more fully later, at the time the plaintiff prepared and submitted Searchlinqs' SR&ED tax credit applications, Searchlinqs had significant tax-related liabilities to the government, in the order of more than $300,000. Those liabilities related to employee source deductions that had not been remitted to the government as well as GST that had been collected and not remitted. As a consequence, although its tax credit applications were successful, Searchlinqs did not receive a cash payment; instead, its outstanding liabilities to the government were reduced by an amount equivalent to the tax credits earned through the plaintiff's endeavours. It is common ground, therefore, that notwithstanding it did not receive cash payments, Searchlinqs benefited from the plaintiff's efforts and the plaintiff earned and was entitled to be paid its fees accordingly.
The Relationship Among the Defendants
[13] The business of Searchlinqs was founded by the defendant Bensimon and his business partner Ian Korman. They had previous experience in the field of providing services to owners of Internet websites that involved assisting them in placing ads for their sites on Internet search databases so that they would come to the attention of users who were conducting specific web searches. In general terms, the business of Searchlinqs was of a similar nature. It employed a sales force as well as technical people to provide its services to customers. In so doing, it incurred financial liabilities to among others, such entities as Google and Yahoo in connection with placing customers' ads on those sites.
[14] Mr. Bensimon and Mr. Korman initially incorporated a numbered company to start the business of Searchlinqs. They needed additional capital, however, and decided to approach an acquaintance, the defendant Reuben Benquesus, as a potential investor. Reuben Benquesus is the son of the defendant Jack Benquesus. For ease of reference only, I shall refer to them by their first names. Reuben is in his mid-30s. His further Jack is an experienced businessman and community leader. Reuben often seeks business advice and guidance from Jack.
[15] At the time, Reuben was operating the defendant Racad Tech Inc. It, too, provided Internet-related services to businesses who wished to create websites, set up Internet-based sales, ordering and payment systems and other technical services that required programming and Internet expertise. Reuben was interested in the proposal from Mr. Bensimon and Mr. Korman because he saw potential opportunities to offer the services of Racad to the customers of the new business. He ultimately agreed to help finance the new business. He incorporated a new corporation known as Searchlinqs Inc. and through it obtained a small business loan for $250,000 that he personally guaranteed. He also advanced additional funds to the business out of his personal resources. Although he had been asked by Mr. Bensimon to participate as an investor, most of the funds he provided were by way of loan. In all, his advances totalled more than $300,000,
[16] In due course, Searchlinqs Inc. and the numbered company that had been incorporated by Mr. Bensimon and Mr. Korman were amalgamated into a single corporation that carried the name Searchlinqs Inc. forward. Although Reuben had been a director of the original Searchlinqs Inc., he was not a director or officer of the amalgamated corporation. The amalgamation was effective January 1, 2008.
[17] Mr. Bensimon and Mr. Korman were the ones principally responsible for operating the business of Searchlinqs. From time to time they would meet with Reuben and his father Jack and provide reports on and discuss the status of the business and its financial performance.
[18] As security for the funds that he advanced, Reuben obtained a general security agreement from Searchlinqs. According to his evidence, he was unaware that he had to register that document. It was not registered until late 2008, at a time when Reuben was becoming concerned about the financial performance of Searchlinqs.
[19] As events unfolded, the business of Searchlinqs was unprofitable. By April of 2009, it had liabilities in excess of $700,000, of which more than $300,000 was made up of payroll deductions and GST that the company had withheld or collected but had not remitted to the government. One of the consequences of the failure to remit these sums to the government was the potential for personal liability on the corporation's directors for the unpaid sums.
[20] Quite apart from the foregoing indebtedness to third parties, by early 2009 Searchlinqs had increasing indebtedness to Reuben. In addition to his initial loans to the company, he was providing additional financial support to it on an ongoing basis. Among other things, by the spring of 2009 his credit cards were being used for advertising purchases from Google. He was growing increasingly concerned about the performance of Searchlinqs and the management of Mr. Bensimon and Mr. Korman.
[21] According to the evidence of Reuben, matters came to a head in June 2009. With a view to collecting the outstanding indebtedness owed to the government, Canada Revenue Agency ("CRA") took steps to freeze the bank accounts of Searchlinqs. As a consequence, it was unable to pay any of its bills, including its payroll. A meeting to discuss the situation took place at the home of Jack. There were some controversies on the evidence about what took place at that meeting, a topic to which I will return in due course.
[22] What is not controversial is that, as a result of CRA's actions and decisions taken at that meeting, the operations of Searchlinqs Inc. ceased. Reuben took steps to enforce his general security agreement. By the first week of July, the business of Searchlinqs had been moved into the premises of Racad. From that point forward the Searchlinqs business was operated as a division of Racad.
[23] Mr. Bensimon and his business partner Mr. Korman remained with the Searchlinqs business until the end of 2009, when they were asked to resign. According to both Mr. Bensimon and Reuben, the business of Searchlinqs continued to lose money during that period.
The Dispute and the Litigation
[24] As mentioned, in early April 2009 the plaintiff was retained and signed engagement letters with Searchlinqs in which the company and Mr. Bensimon were the parties liable to pay its fees. In addition to suing those parties when the plaintiff commenced this lawsuit, it included Reuben and Racad as co-defendants. In the original statement of claim the plaintiff alleged that Mr. Bensimon told Mr. Rosenbaum that Reuben and Racad would ensure payment of all payables of Searchlinqs. The original statement of claim also alleged that the transfer of Searchlinqs business to Racad in July 2009 was a fraudulent conveyance. Before me, plaintiff's counsel confirmed that the plaintiff was no longer pursuing the fraudulent conveyance theory of liability.
[25] The action was commenced in April 2010. After the original statement of claim was served the action was defended by Mr. Bensimon, Reuben and Racad. Searchlinqs did not defend and was noted in default. Before me, the plaintiff asked for judgment against Searchlinqs in default of defence. I hereby grant that relief for the full amount of the debt claimed in the amended amended statement of claim, namely, $56,469.
[26] Although Mr. Bensimon filed a statement of defence, in reality he had no defence. In October 2010, the plaintiff moved for and obtained summary judgment as against Mr. Bensimon for the unpaid debt. Mr. Bensimon has so far paid nothing on that judgment. The plaintiff has agreed to defer taking steps to enforce its judgment pending the outcome of the current proceeding. As a result, Mr. Bensimon has deferred for more than 3 years so far the payment of his personal indebtedness to the plaintiff.
[27] After the judgment was granted against him, Mr. Bensimon approached the plaintiff or his lawyer and provided them with copies of several documents relating to the enforcement of Reuben's general security agreement and the transfer of the assets of Searchlinqs to Racad. Subsequently, the statement of claim was amended to add fresh allegations as against Reuben and Racad and to add Jack as a co-defendant. The amended amended statement of claim includes new allegations including the assertion that prior to the plaintiff filing the two tax credit applications for Searchlinqs in 2009, the plaintiff sought and received assurances from the Benquesuses and Racad that they would see to payment of its fees.
[28] The assurances of payment, it is alleged, were made by these three defendants to Mr. Bensimon, who in turn related them to the plaintiff. Absent those assurances, the plaintiff asserts, it would not have completed the work to file the tax credits applications. In reliance on the assurances, the plaintiff further asserts it completed its work, and filed the applications. In turn, the applications were successful, tax credits were forthcoming and it earned its fees as billed to Searchlinqs. The Benquesuses and Racad are therefore liable to pay the plaintiff either on a theory of breach of contract, unjust enrichment, or negligent, innocent or fraudulent misrepresentation.
[29] The theory of the defendants is that no such assurances were made or given by them. They had no direct communication with the plaintiff. Any information upon which the plaintiff may have relied was forthcoming not from them by from Mr. Bensimon. They deny ever telling Mr. Bensimon they would pay the plaintiff's fees. They thus deny any breach of contract or misrepresentation. Finally, they dispute the allegations of unjust enrichment, asserting that they were not enriched because no claim was ever advanced against Reuben by CRA in relation to his supposed liability as a former director of Searchlinqs
Analysis
[30] There is no document that confirms or records the Benquesuses' alleged commitment to pay the plaintiff. As a result, at the heart of this case is the credibility and reliability of the evidence of two key witnesses, Jim Bensimon and Reuben Benquesus. Most of the testimony of the principal of the plaintiff, Itzahk Rosenbaum, was not controversial, subject to one point to which I will return later. Mr. Rosenbaum conceded that he never spoke to the Benquesuses directly regarding their alleged assurance of payment. Rather, his claims are based on what Mr. Bensimon told him regarding the statements of the Benquesuses. As acknowledged by plaintiff's counsel, the case rises and falls on my acceptance of Mr. Bensimon's evidence.
[31] In summary, Mr. Bensimon testified that at the time he retained the plaintiff in early April 2009, he did not disclose the state of Searchlinqs' liability to CRA because it "did not occur to him" to do so. He said that he subsequently realized that Searchlinqs would not receive a cash refund and as a result, he felt morally obligated to inform Mr. Rosenbaum. As a result of that disclosure, he says, Mr. Rosenbaum wanted assurances he would be paid if he did the work. According to Mr. Bensimon, he then met with the Benquesuses at Jack's house and sought and obtained their assurances that the plaintiff's fees would be paid. In turn, he related this information to Mr. Rosenbaum who proceeded with his work.
[32] I note there is some issue as to when – and, indeed, whether – this supposed first meeting with the Benquesuses took place. The engagement letters were signed on April 7, 2009. According to Mr. Bensimon, he told Mr. Rosenbaum about the CRA problem about three weeks later. This would place that disclosure at the end of April. Mr. Bensimon testified that he met with the Benquesuses along with his business partner, Mr. Korman, at Jack's house about two weeks later. That would place this meeting in mid-May. For his part, Reuben denied that this meeting took place. Both Mr. Bensimon and Reuben testified about a meeting at the home of Jack Benquesus in late June. This meeting was convened in the wake of the CRA freeze of Searchlinqs' bank accounts effectively putting Searchlinqs out of business. The principal result was the steps taken by Reuben to enforce his general security agreement. The end product of those steps was a bill of sale dated (and apparently signed) on June 25, 2009. This was done within one or two days of the meeting, which would place the date of the meeting as June 23 or 24.
[33] Mr. Bensimon's evidence was that at the late June meeting, he once again sought and obtained the assurances of the Benquesuses that they would pay the plaintiff's fees. This was a pressing matter because the filing deadline for the 2007 tax year was expiring in a few days, at the end of June 2009. In turn, he says, he relayed the assurances of the Benquesuses to Mr. Rosenbaum, who proceeded to file the 2007 application. The evidence of Mr. Rosenbaum is that he filed the application on June 23.
[34] For his part, Reuben agrees that there was a meeting at his father's house to discuss Searchlinqs' affairs after the CRA froze the accounts. He denies there was any discussion regarding the plaintiff's fees and further that there were any assurances given that those fees would be paid.
[35] The final event of significance for this aspect of the case is alleged to have occurred in late July 2009. According to Mr. Bensimon's testimony the application for the tax credit in relation to the 2008 year had to be filed by the end of July. In late July, Mr. Rosenbaum came to the Racad office where Mr. Bensimon was then working. He again sought assurances that his fees would be paid if he filed the 2008 tax year application. Both Mr. Rosenbaum and Mr. Bensimon testified that Mr. Bensimon left the room and returned a few minutes later and stated that he had spoken with Jack who had said to tell Mr. Rosenbaum not to worry, he will be paid. On this basis, According to Mr. Rosenbaum he made the filing and earned his fee.
[36] As recited previously, given the concession that Mr. Rosenbaum never spoke to the Benquesuses and received their alleged assurances personally, the plaintiff's case hinges on Mr. Bensimon's evidence. Unless I am prepared to accept his testimony on the key communications with the Benquesuses, the plaintiff cannot succeed on this branch of its case. I therefore turn to an assessment of the credibility and reliability of Mr. Bensimon's evidence.
[37] To begin with, I observe that Mr. Bensimon is far from a neutral or disinterested witness. He has a personal stake in the outcome of this trial. So far, despite being adjudged personally to pay the plaintiff's fees, he has paid nothing pending the outcome of this trial. If the plaintiff succeeds in obtaining judgment against his co-defendants, it is very likely that no steps will be taken to enforce the judgment against Mr. Bensimon. He is therefore favourably disposed to assisting the plaintiff, something he has been doing for the past two years.
[38] I note also that Mr. Bensimon initially resisted the plaintiff's claim to the point where the plaintiff had to bring a motion for summary judgment. Based on all the evidence before me, Mr. Bensimon had no proper basis to resist the plaintiff's claim. He had agreed as a principal to pay the plaintiff's fees. The work was done and the result is favourable. His personal defence of the plaintiff's claim would appear to have been tactical only, filed for purposes of delay, and not to raise a good faith response.
[39] Turning to Mr. Bensimon's substantive evidence, in my view, various aspects of it do not ring true. For example, he testified that it did not occur to him when he signed the retainer letters with the plaintiff that he should mention to Mr. Rosenbaum that Searchlinqs owed several hundred thousand dollars to CRA. Plainly, Mr. Bensimon was aware of that liability at the time. Indeed, as President of the company he was complicit in that liability arising through deducting withholdings from employee wages and charging and collecting GST and not remitting those sums to CRA. The amount of the CRA liability was very substantial.
[40] Against that backdrop, I am unable to accept Mr. Bensimon's evidence that it simply "did not occur" to him to mention this topic to Mr. Rosenbaum at the outset of the retainer. Although he described some communication issues with CRA, Mr. Bensimon knew that the default in payments to CRA was unresolved at that time. The retainer of the plaintiff was directly related to tax issues. The purpose was to obtain money from CRA. The letter of retainer expressly mentioned that if the taxpayer owed more than the credit earned, it would be used to reduce the amount owed.
[41] I do not find credible Mr. Bensimon's evidence that it suddenly occurred to him three weeks later than he should disclose the CRA liability to Mr. Rosenbaum because he realized that the plaintiff's fees might not be paid. His testimony that he felt "morally obligated" to do so is self-serving. He knew the facts from the outset and if he genuinely felt he had a moral obligation to disclose them, that was when he should have done so.
[42] Another relevant consideration is that Mr. Bensimon had a compelling personal motivation to have Mr. Rosenbaum do the work. As a lawyer and as Searchlinqs' President and a director, Mr. Bensimon knew that he was personally exposed to a substantial claim by CRA. He had to know that Mr. Rosenbaum would have been reluctant to take on the assignment initially unless he could have expected to be paid. This is consistent with Mr. Bensimon preferring his own interests by not disclosing the problem with CRA initially. It is also consistent with him giving ongoing assurances to Mr. Rosenbaum to see that the filings were made so that he would enjoy their benefit.
[43] The timing of the disclosure to Mr. Rosenbaum regarding the CRA liability is a live issue in this trial. Mr. Bensimon claimed he told Mr. Rosenbaum "around May" and that he went to Jack's house to get assurances of payment for the plaintiff "two weeks later". This evidence is at odds with Mr. Rosenbaum's testimony on his examination for discovery. In that evidence, Mr. Rosenbaum placed the timing of the disclosure "towards the end of June, as we were just about finished." The late June date coincides with the CRA action to freeze Searchlinqs' bank accounts which would have made it impossible for Searchlinqs to pay the plaintiff's bill. It is understandable and logical that this would have forced Mr. Bensimon to tell Mr. Rosenbaum about the CRA problems.
[44] Certainly the CRA action to freeze the bank accounts was a watershed event for all concerned. Mr. Rosenbaum's evidence on discovery was that this was what caused him to be concerned about his fees. I am, of course, aware that Mr. Rosenbaum testified at trial that he learned of this problem much sooner and sought assurances earlier. His discovery evidence was given over a year and a half earlier, however, much closer to the events in question and at a time when they would have been fresher in his mind. Although I largely found him to be a credible witness, I fear that his recollection on this point may have faded and perhaps become coloured by his retrospective view of what transpired and possibly by later discussions with Mr. Bensimon. I prefer and accept his discovery evidence.
[45] Another factor that affects my assessment of Mr. Bensimon's evidence is that, once CRA froze the bank accounts, he knew that the CRA problem was critical. His prospects were poor that he would get out from under his personal liability to CRA. This gave him even more motivation to ensure that the plaintiff completed the work and made the filings so as to reduce his exposure. In particular, the deadline for filing the 2007 application was imminent. He had ever reason to tell Mr. Rosenbaum what he wanted to hear, namely that the Benquesuses would see to payment of his fees.
[46] As for the claimed assurances given by the Benquesuses, Mr. Bensimon testified that he could not recall the exact words they used. I find this unusual, given the importance of the assurances and the fact that he reported them to Mr. Rosenbaum soon after. Given the significance of this event, I would have expected Mr. Bensimon to have been able to describe in greater detail what he said transpired. In relation to the late June meeting, his evidence was phrased in the terminology of a reconstructed memory i.e. "I would have got assurances from them that the plaintiff would be paid". This evidence is also remarkable for its vagueness.
[47] A further concern regarding Mr. Bensimon's credibility arises from his testimony that, in effect, he had previously defaulted on payments due to CRA and had successfully negotiated a resolution of the problem that time. His repeated failure to meet his business tax liabilities as they become due does not reflect well on him.
[48] Mr. Bensimon conceded that the debt to CRA was not the only thing about which he was not candid to Mr. Rosenbaum. While he claims to have been very "open book" with Mr. Rosenbaum, he testified that he did not tell him that Racad had assumed Searchlinqs' assets but not its liabilities because he didn't want to make him nervous. Contrary to his own self-serving assertion about being "open book", this does not reflect candour on his part or consistency in his testimony.
[49] Mr. Bensimon's evidence about the end of July 2009 deadline for filing the 2008 tax credit application does not withstand scrutiny. In truth, the 2008 tax year deadline was not until the end of June 2010. From his personal perspective, however, it was urgent again to strive to reduce his personal exposure.
[50] Based on all the foregoing, I have numerous concerns regarding the credibility and reliability of Mr. Bensimon's evidence.
[51] I now turn to the evidence of Reuben Benquesus. Plainly he, too, has a personal stake in the outcome of the litigation; both he and his father are named as personal defendants and they are exposed to personal liability for the plaintiff's claim. Apart from that, however, I did not perceive Reuben to have the same motivations to testify in a biased fashion that I found with Mr. Bensimon.
[52] Overall, Reuben impressed me as a careful and thoughtful witness. He admitted what he could not recall and offered logical explanations for his and his father's conduct. It was argued that Reuben was very busy and distracted at the time of these events. While that may be so, he had every reason to be focused and attentive in relation to the problems with Searchlinqs, given his sizeable investment in it. I was particularly impressed by his attention to financial details, such as his ability to determine the source of the payments that reduced Searchlinqs CRA indebtedness when challenged on this point.
[53] Reuben conceded that his memory for dates is not terribly good, but that should not be confused with the lack of memory for events. He was adamant that there was only one meeting in the May/June time frame at which Searchlinqs affairs were discussed at his father's house. He was not shaken on that evidence. He was also firm that there was no commitment given to pay Searchlinqs' creditors, either the plaintiff or others.
[54] In relation to the evidence about his father allegedly saying to Mr. Bensimon that he would "help him out", Reuben offered a detailed and logical explanation which I accept. In fact, Jack Benquesus did do so by arranging for legal representation to accompany Mr. Bensimon when he met with CRA in late August.
[55] Another point made against Reuben was his statement on discovery that Mr. Bensimon is longwinded and sometimes he just "tuned him out". I did not perceive that to be a concession that he never listened to Mr. Bensimon. More importantly, the key issue about the late June meeting is not what was said by Mr. Bensimon but what was said by Reuben and Jack. At no time, did Reuben say he did not listen to what his father said, nor would it have been logical for him to do so. His father was involved due to his business expertise. It also makes no sense that Jack would enter into a commitment to Mr. Bensimon in relation to the business in which Reuben had invested, without at the very least informing Reuben and keeping him in the loop.
[56] I therefore found Reuben's evidence to be both credible and reliable. Where it conflicted in any material respect with that of Mr. Bensimon, I prefer and accept the testimony of Reuben Benquesus.
[57] In this regard, I make the following two critical findings of fact:
There was only one meeting attended by Mr. Bensimon and Reuben Benquesus at the home of Jack Benquesus in the May/June timeframe in which the affairs of Searchlinqs were discussed – in late June after CRA had frozen Searchlinqs accounts. The earlier meeting described by Mr. Bensimon did not take place.
At the meeting that did occur, there was no discussion about the plaintiff's fees and, in particular, no assurances were given by either Reuben or Jack Benquesus to Mr. Bensimon that the plaintiff's fees or any of other Searchlinqs' creditors would be paid, nor was anything said by the Benquesuses to suggest that Mr. Bensimon should inform the plaintiff that his fees would be paid.
[58] Mr. Rosenbaum and Mr. Bensimon testified about a meeting at Racad's offices in late July 2009. I have no doubt it occurred. I also accept their evidence that Mr. Bensimon excused himself during the course of that meeting, returned a few minutes later and informed Mr. Rosenbaum that he had received further assurances from Jack that the plaintiff's fees would be paid. The remaining significant question of fact is whether it is true that Jack Benquesus gave the alleged assurance to Mr. Bensimon.
[59] Jack Benquesus did not testify. I was told that he is in Israel where he lives much of the time with his wife and other family members. Thus, the only witness who gave evidence about the alleged late July meeting between Mr. Bensimon and Jack was Mr. Bensimon.
[60] Understandably, plaintiff's counsel urges me to draw an adverse inference arising from Jack's failure to testify. He asked me to infer, as I am entitled to as a matter of law, that the evidence that Jack might have given would not have supported the defendants' case.
[61] Attractive as that submission may be, there is some explanation for Jack Benquesus' absence. More importantly, I am still left with the concerns I have described above at length regarding Mr. Bensimon's credibility. The only basis for making a finding of fact that Mr. Bensimon met with Jack Benquesus at Racad in late July and received the assurances that he described, is to accept and believe Mr. Bensimon's evidence. In light of the conclusions I have reached regarding the accuracy of Mr. Bensimon's testimony about the events in June, I am not prepared to accept or rely on his testimony regarding his supposed late July meeting with Jack Benquesus.
[62] I am therefore not prepared to find that Jack Benquesus gave Mr. Bensimon unconditional assurances in late July that he would see to payment of the plaintiff's fees. In short, the evidence fails to persuade me on a balance of probabilities that the conversation described by Mr. Bensimon took place.
[63] In light of the conclusions I have reached on the key factual issues, namely that I do not accept Mr. Bensimon's evidence that the Benquesuses ever agreed to accept responsibility for the plaintiff's fees or gave assurances that they would be paid, the plaintiff's case on breach of contract and misrepresentation cannot succeed.
[64] The remaining cause of action pleaded is unjust enrichment. In essence, as I understand it the plaintiff asserts that by reason of its efforts Searchlinqs' unpaid liabilities to CRA were reduced as was Reuben's exposure to personal liability for those sums as a director of Searchlinqs. Reuben disputes that he received any benefit due to the plaintiff's efforts and thus denies that there was any unjust enrichment.
[65] In Peel (Regional Municipality) v. Canada; Peel (Regional Municipality) v. Ontario, 1992 SCC 21, [1992] 3 S.C.R. 762 762 at 788, the Supreme Court had the following to say about unjust enrichment:
41 At the heart of the doctrine of unjust enrichment, whether expressed in terms of the traditional categories of recovery or general principle, lies the notion of restoration of a benefit which justice does not permit one to retain. As Goff and Jones, supra, put it [R. Gofff & B.F. Jones, The Law of Restitution, 3d ed. (London: Sweet & Maxwell, 1986).]: "Most mature systems of law have found it necessary to provide, outside the fields of contract and civil wrongs, for the restoration of benefits on grounds of unjust enrichment". Thus for recovery to lie, something must have been given, whether goods, services or money. The thing which is given must have been received and retained by the defendant. And the retention must be without juristic justification, to quote Dickson J. in Pettkus v. Becker [1980 SCC 22, [1980] 2 S.C.R. 834].
[Emphasis added.]
[66] Applying this three part test to the present case. I would agree that something was given, namely the plaintiff's services. As to it having been received and retained by the defendant Reuben Benquesus, in my view, this element is lacking. Reuben Benquesus was never pursued by CRA for any sums not remitted by Searchlinqs. To the extent there may have been a reduction in Searchlinqs' liability to CRA, it is unclear on the evidence as to what portions of the unremitted withholdings and GST Reuben may have been answerable for, if any. He has no extra funds in his pocket arising from the plaintiff's work. I am unable to find any benefit flowing to him.
[67] The final element of a claim in restitution or unjust enrichment is retention of a benefit without juristic justification. At its heart, the claim of the plaintiff is that of an unsecured creditor as against an insolvent corporation. As a general rule, personal liability for the debts of a company is not visited on corporate officers, directors or shareholders. That is the entire premise of a limited liability corporation and is juristic justification for not forcing the directors of Searchlinqs to disgorge this so-called benefit. Other creditors too, went unpaid and employees (such as Mr. Bensimon) were paid their salaries instead, but that is not a proper basis for requiring those payees to reimburse the creditors whose invoices were not paid. In specific situations where personal liability is imposed on officers, directors and shareholders, there is usually a specific statutory provision or rule of law that permits it. No such statute or rule of law applies here. I therefore find that there is a juristic reason for the benefit (if there was one) not to be disgorged.
[68] For this reason, the plaintiff's claim founded on unjust enrichment fails.
Conclusion and Disposition
[69] For these reasons, I grant default judgment in favour of the plaintiff as against the defendant Searchlinqs Inc. for the sum of $56,469. As against the defendants Reuben Benquesus, Racad Tech Inc. and Jack Benquesus, the action is dismissed. The parties are directed to make written submissions regarding costs if they are unable to resolve that issue.
___________________________ Stinson J.
Date of Reasons for Judgment: November 15, 2012
Date of Release: December 4, 2012
COURT FILE NO.: CV10-401902SR
DATE: 20121115
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CDN SR&ED CONSULTANTS INC.
Plaintiff
– and –
JIM BENSIMON, SEARCHLINQS INC. REUBEN BENQUESUS, RACAD TECH INC., and JACK BENQUESUS also known as JACQUES BENQUESUS
Defendants
ORAL REASONS FOR JUDGMENT
Stinson J.
Date of Reasons for Judgment: November 15, 2012
Date of Release: December 4, 2012