ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-13-2729-SR
DATE: 2013 12 18
B E T W E E N:
BENEFACT CONSULTING GROUP INC.
Ryan Zener, for the Plaintiff
Plaintiff
- and -
NANOTEK COMPUTERS CORP.
Noted in default (no one appearing)
Defendant
HEARD: December 16, 2013
REASONS FOR JUDGMENT
F. Dawson J.
[1] This is an uncontested trial dealing with the assessment of damages for breach of contract. The defendant Nanotek Computers Corp. has been noted in default for failing to file a statement of defence.
[2] The plaintiff, BeneFACT Consulting Group Inc. is a company which prepares and submits documents to the Canada Revenue Agency (CRA) and to provincial government authorities claiming scientific research and experimental development (SR & ED) tax credits on behalf of its customers. The plaintiff’s customers enter into a contract to pay a contingency fee plus applicable taxes in relation to any tax credits received as a result of its work on their behalf.
[3] In this case the defendant company entered into a contract (Exhibit 1) agreeing to pay a contingency fee of 20 percent plus HST in relation to claims for such tax credits. It is a term of the contract that the defendant will cooperate fully with the plaintiff’s efforts to obtain tax credits on the defendant’s behalf by providing all necessary information and signing all required documentation. The contract was entered into on January 21, 2013. It provides that the defendant “shall engage” the plaintiff to prepare and submit SR & ED claims for its 2011, 2012 and 2013 fiscal periods.
[4] The evidence before me establishes that employees of the plaintiff with both technical knowledge and knowledge of the tax credit program, met with representatives of the defendant and identified two projects that they concluded would qualify for such tax credits. Work was undertaken by the plaintiff to prepare the claims but ultimately the defendant failed to cooperate or provide certain information that was needed for the plaintiff to complete its work and earn its fee.
[5] The evidence led on the uncontested trial satisfies me that for the 2011 fiscal period the value of tax credits would probably have been $101,000.00. It is unknown whether the defendant has taken advantage of the situation to submit a claim for tax credits on its own behalf as CRA protects the confidentiality of claimants unless a third party representative has obtained and filed a consent to be provided with such information. The plaintiff does not have such signed authorization.
[6] The evidence satisfies me that the plaintiff should have judgment against the defendant for the lost fees in relation to the 2011 fiscal period. There is evidence before the court of two projects that probably qualified for SR & ED tax credits. There is evidence as to work performed, the costs associated with that work and the likely amount of the tax credit. Consequently there is sound evidence to support the damages claimed for 2011.
[7] I am not able to reach the same conclusion for the 2012 and 2013 fiscal periods. While the contract obligates the defendant to engage the plaintiff to prepare claims for 2012 and 2013, the plaintiff is not able to provide any evidence of projects the defendant is or will be engaged in during those fiscal periods. There is no evidence, therefore, of any amount of tax credit which is likely to be available to the defendant to which the 20 percent contingency fee would be applied.
[8] The plaintiff submits that claims for SR & ED tax credits for the defendant’s 2012 and 2013 fiscal periods should be calculated on the same basis as the claims for the 2011 period, with minor adjustments related to the fact that the plaintiff has not incurred any costs for those periods. In my view that would be speculative. I am not satisfied on a balance of probabilities by the evidence available that it would be accurate to project likely successful claims in 2012 and 2013 on the same basis and in the same amounts as for 2011.
[9] The terms of the contract must govern. I observe that the contract, which contains an “entire agreement” clause, does not include a provision for the calculation of a fee in relation to any SR & ED credits the value of which have not yet been ascertained. As I have said, that difficulty is overcome for 2011 because I have evidence which satisfies me on a balance of probabilities of the value of the claim the plaintiff was actively working on. The claim was valued by the plaintiff based on its skill and experience applied to technical and other information obtained from the defendant. I am not satisfied that the contract provides for the application of the 20 percent fee to speculative unascertained claims for 2012 and 2013 that are not supported by evidence.
Conclusion
[10] The plaintiff shall have judgment against the defendant in the amount of $22,387.95 plus pre and post judgment interest in accordance with the Courts of Justice Act, R.S.O. 1990, c. C.43. This figure is arrived at as follow: 20 percent of $101,000.00 plus 13 percent HST, less certain costs of $438.05 which the plaintiff agrees must be deducted.
Costs
[11] The plaintiff shall have its costs on a partial indemnity basis. I have reviewed the Costs Outline provided which I find to be reasonable. I fix costs payable by the defendant to the plaintiff in the amount of $ 4,284.80 inclusive of taxes and disbursements.
F. Dawson J.
Released: December 18, 2013
COURT FILE NO.: CV-13-2729-SR
DATE: 2013 12 18
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
BENEFACT CONSULTING GROUP INC.
Plaintiff
- and –
NANOTECK COMPUTERS CORP.
Defendant
REASONS FOR JUDGMENT
F. Dawson J.
Released: December 18, 2013