Court File Number: 2016-CV-213
Ontario
Superior Court of Justice
Jack Busybody and Jill Busybody and Just For Laughs Inc.
Plaintiffs
v.
Misty Numbers personally and in her capacity as limited liability partner of
Numbers and More LLP
Defendants
FACTUM OF THE DEFENDANT, MISTY NUMBERS
[1] In this case, the directors and owners of Just For Laughs Inc., Jack and Jill Busybody (Busybodys) sued Ms. Misty Numbers and her associated accounting firm, Numbers and More LLP (Numbers) for professional negligence on failing to identifying their underpayment of retail sales tax in time. In order to establish whether Numbers is liable for the loss that Busybodys suffers from their unpaid tax, it is essential to determine that whether the defendant breached a duty owed to the plaintiffs for sales tax payment either in tort or in contract, and furthermore, the existence of damage that was directly caused by the defendant’s action.
[2] Based on these issues, the theory of this factum is to demonstrate that the defendant properly preformed its agreed services to the plaintiffs in accordance to the contract terms and professional standard, and the plaintiffs did not necessarily rely on the advice from the defendant to make proper tax payment and finally, the damages are indirect and remote.
[3] The fact that Ms. Numbers and her firm was retained by the Busybodys only to conduct a “review engagement”, in which Numbers “prepared the company’s financial statements and corporate tax returns on a yearly basis” adds to the favor of the defendant. This engagement contract excluded Ms. Numbers and her firm from the liability for “any errors or omissions in the financial records of Just For Laughs Inc”, which was also aligned with the Guide to Review Engagement from Canada CPA standard (Pg 10, Guide to Review Engagement). Though her monthly bookkeeping activities and preparing of financial reports and tax returns on an annual basis using financial data provided by the plaintiffs’ son Leory, Ms. Numbers completed the tender of performance of her obligation following the contractual terms (Pg 227). The only fault she had if there were any was that “she did notice that Leroy had not been monitoring staff as much as he usually did” but then put her concerns aside due to plaintiffs’ trust in their son and this was a matter of internal control which was not her area to advice.
[4] In their claim against the defendant, the plaintiffs disputed that their loss from underpayment of retail sales tax to CRA from 2002 to 2012 was a result of defendant’s negligence on failing to identify the mismatching tax amount. This statement was not necessary to be true considering that duty exists where legal rights exists (Pg 81). Hiring a professional to rely on her specified area of services is a right, but this right does not extend to every ability of this professional. Although the defendant was capable of checking retail sales tax generated from sales operations, but the responsibility of guaranteeing the tax collecting procedure and providing correct information falls onto the management of the corporation, hence the plaintiffs. Especially after what they had experienced on the same unreported tax issue in 2000 and was able to identify the problem and re-trained their staff for “collecting and remitting sales tax properly” prior to the contract with defendant.