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January 24-28, 31, February 1-4, 7-11, 14, March 16, 17 and 20, 2000 |
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| Prodigy Graphics Group Inc. vs. Fitz-Andrews |
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Between
Prodigy Graphics Group In. and Andy Patel, plaintiffs, and
Kenneth Gregory Derry Fitz-Andrews, Gina Suzanna Fitz-Andrews
and Ampito Investments Inc., defendants |
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And between
Kenneth Gregory Derry Fitz-Andrews, Gina Suzanna Fitz-Andrews
and Ampito Investments Inc., plaintiffs by counterclaim, and
Prodigy Graphics Group Inc., Andy Patel, Prodigy Printing
Services (1993) Inc. and Sulekha Patel, defendants by
counterclaim |
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[2000] O.J. No. 1203
Court File No. 94-CQ-58835 |
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Ontario Superior Court of Justice
Cameron J. |
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Heard: January 24-28, 31, February 1-4, 7-11, 14, March 16, 17
and 20, 2000.
Judgment: April 10, 2000.
(170 paras.) |
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Messod Boussidan and James Diamond, for the plaintiffs.
Kenneth Fitz-Andrews, on his own behalf. |
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| Professional occupations — Accountants — Compensation — Duty to keep time records — Fraud and misrepresentation — Fraudulent misrepresentation (deceit) — Fraudulent conveyances and preferences — Conveyances and preferences impeachable by creditors or others — Company law — Nature of corporations — Lifting the corporate veil — Injunctions — Remedies — Damages. |
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| Action by Prodigy Graphics Group against Kenneth and Gina Fitz-Andrews for damages of $180,000 for fraud and conversion. Counterclaim by Kenneth Fitz-Andrews for damages from unpaid accounts for professional services and an improperly-obtained certificate of pending litigation and Mareva injunction. Prodigy operated a printing business. Its principal was Patel. The Fitz-Andrews emigrated to Canada in 1989. Kenneth was hired by Prodigy's accountant, a firm called Savage and Moles, and eventually became a partner. Gina was the sole shareholder of a company named Ampito. Kenneth eventually became a sole practitioner and continued to do accounting work for Prodigy. In November 1992, Patel paid Ampito $130,000, which Kenneth claimed was payment for an outstanding account. Kenneth was able to produce billing records totalling 645 hours, although he did not produce any time dockets or computer records. Patel claimed that the money was to be remitted to Revenue Canada to satisfy unpaid employee withholding taxes. Patel did not see Kenneth's billing records before the litigation started, and claimed that the records were prepared after the action began in order to justify Kenneth's appropriation of these funds. Kenneth also received $25,500 from Prodigy, which were deposited in his account at the Royal Bank. Patel claimed that the funds were for a payroll computer program and to convince the Bank that Prodigy was profitable. Kenneth contended that the money was payment for his services. On March 26, 1993, Kenneth and Gina purchased their rented home as joint tenants. Kenneth transferred his interest to Gina on the same date because he was a defendant in litigation with his former partner. Prodigy claimed that the transfer was a fraudulent conveyance. In 1994, Kenneth had billed Prodigy $46,000 for unpaid services during the previous three years. To obtain payment, he appropriated to himself two Revenue Canada refund cheques payable to Prodigy totalling $24,000. He claimed he was permitted to do this by the terms of his retainer, but Patel asserted that the authorization was a forgery. Revenue Canada assessed Prodigy for $58,000 in unremitted source deductions. Kenneth produced five receipts from Revenue Canada to show that remittances were made, but Patel claimed that these also were forgeries. After the action was commenced in 1994, Prodigy obtained a certificate against Gina's home and an injunction to freeze Kenneth's assets. The certificate and the injunction were in force for six years, until the trial. Prodigy sued Gina to void the conveyance of the home, and to make her personally liable as a director of Ampito for the company's fraud. Kenneth counterclaimed for outstanding fees of $46,000 and for damages from the continuation of the certificate and injunction. |
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| Held, Both the action and the counterclaim were allowed in part. |
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| Kenneth was ordered to repay the $130,000. Prodigy's claim for $25,500 was dismissed. Prodigy was ordered to pay Kenneth $31,000 for unpaid services. Kenneth was required to repay Prodigy the tax refunds. Kenneth's counterclaim for damages was dismissed. The conveyance to Gina was void. The claim against Gina was dismissed. As a professional, Kenneth was obligated to provide credible evidence to justify his accounts. The Ampito account was not valid and was highly inflated. His back-up records were not credible. The receipts were not genuine. The account was not delivered before Kenneth received the $130,000. The funds were intended for Revenue Canada. Prodigy did not prove that it was entitled to the $25,500. The accounts for $46,000 were inflated and were reduced. Considering Kenneth's lack of credibility, it was likely that the authorization to appropriate the refunds was a forgery. Gina had no knowledge or involvement of the Ampito account, nor did she authorize her husband's activities on behalf of Ampito. It would have been unjust to pierce the corporate veil to make her personally liable. There was no evidence that any of Prodigy's funds were used for the house purchase. Gina was therefore not liable for any of the funds appropriated by Kenneth. However, the conveyance to Gina was intended to defeat creditors, including Prodigy. Title to the home reverted to Kenneth and Gina as joint tenants. Kenneth failed to prove his damages from the imposition of the certificate and the injunction. |
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