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Legal Ease
Legal Ease, Lawyer
Category: Canada Law
Satisfied Customers: 86856
Experience:  Lawyer
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Corporation X hires Consultant As services for the development/editing

Customer Question

Corporation X hires Consultant A's services for the development/editing of certain pre-existing creative works/assets owned by Corporation X. Corporation X is an Ontario based 'start-up' with a 50/50 equity split b/w two shareholders who've each put 'capital' into the corporation. One of these two shareholders is the President of Corporation X. This President handles dealings with Consultant A (who resides in Ontario too). Consultant A's rates were discussed via email. B/c the nature of the work is 'creative' the 'quote' for Consultant A's work 'changes' over time. However, at no time was a contract ever signed with Consultant A. Everything evolved dynamically over time, based on email and in-person correspondence at coffee shops. Consultant A was paid in 'cash'. Each time he 'commenced' a new 'unit' of work, he was paid a 50% deposit upfront, the balance to be paid when Corporation X accepted the final deliverables as complete.

The cash payment method was Consultant A's proposal b/c he 'doubled' his 'rate' per unit of work early on. The President of Corporation X explained that this rate schedule 'increase' was 'problematic' and would introduce extreme 'time sensitivity' into the execution/launch of the start-up b/c it was outside of the assumed budgetary scope and since certain 'fixed costs/contracts' were in place that would have to be paid monthly, the more 'time' that elapsed before company launch, the less cash would be available to 'pay Consultant A'. This was stressed repeatedly to Consultant A over a 3-month period. Note that Consultant A was doing this work 'part time', as a moonlighting gig. (Consultant A is financially secure, and in high demand.)

Consultant A's work is 'critical' to company launch; he is apprised of this. The last 'unit' he was asked to complete was something that drew upon 'all' of the prior work he had done. As we approached the 'critical date' beyond which, in the absence of an immediate launch, 'funding' the aforementioned 'fixed and outstanding costs', including very ironically payment of the final 50% of Consultant A's work, becomes 'non-viable', Consultant A after having started this last unit receives a very exciting opportunity to work on an unrelated project. So rather than 'finish up' the last unit of work, Consultant A bails to pursue this opportunity.

All of his work has to be transferred to another consultant (which he facilitated), and since this last piece of work which Consultant A had 'started on' before abandoning us required deep 'familiarity' with all the prior units of work Consultant A had done, this new consultant who 'also' had to be paid 50% up-front to commence work, now not surprisingly had to spend 'weeks' and ultimately 'months' of time/effort to complete what would have otherwise taken Consultant A about 1-2 weeks of effort.

As you can foretell, time elapses, the company doesn't launch, fixed costs eat into invested capital; now there is no money available - company coffers are empty, and Consultant A comes calling for the 'second half' of his 50% deposits for work units.

He threatens legal action for non-payment etc. President of X, being of kindly disposition, actually makes some 'additional' payments to Consultant A, but from his 'personal funds'. Non-invested capital. B/c the company itself has no money. He then agrees, via email, to 'personally' try to meet a monthly payment plan to pay what is outstanding b/c he feels badly about the situation.

Now, personally, President X finds himself in serious personal financial distress. He is unable to pay the 2nd 'monthly' installment of payment plan.

He communicates his 'personal problems' to Consultant A, including furnishing 'evidence' of imminent 'house eviction' and 'loss of car' due to non-payment of car lease. This is 'largely' as a result of the failure of the early stage venture. He proposes an extension of the payment plan and will work toward payment the next month. Consultant X becomes highly belligerent and abusive. Behavior escalates to calling a family home with two infants at 3 a.m. on a Saturday.

Threats are made re: imminent legal action and court paperwork. President X says 'go ahead'. Consultant A regains his senses. Says he'll 'accept' payment plan proferred. But then requests a number of things from President X 'or' he is going to take this to court: copy of an ID, proof of your NEW address, home telephone number and vehicle plate info.

The President has not responded. Consultant A seems to believe President X is 'personally liable'. President believe corporation is liable. True or false? What is to be made of the nature of the information request and 'threat' of court action if not provided? Advise please. Basically President X feels as though he is trying to do the 'right thing' in a way most business people would 'never' personally do. And yet Consultant A is spitting in his face, as thanks. Most businessmen would put the company into bankruptcy and walk away.
Submitted: 1 year ago.
Category: Canada Law
Expert:  Legal Ease replied 1 year ago.
Thank you for your question.

Before I begin I want to explain a bit about how the site works.

It may be that I will find that I need to gather further information from you. As well, it's quite possible that you may feel the need to ask me additional questions for further clarification.Please do not worry that you will be charged additionally if I ask you questions or if you need to ask me questions. That is not at all how the site works.

As well, please understand that as a careful lawyer I will always give you an honest answer even if the answer is sometimes not what you were hoping for.

Finally, as we go through the process please do not feel rushed if I ask you a question. You are always free to take your time to gather more information before you post back. As well, please understand that even after you rate me the post will not lock and you could always come back for further clarification if you think of something a bit later on down the road.

It sounds to me that all the agreements/contracts were between the corporation and the consultant.

The President was acting as agent for the corporation when he entered into any agreement with the consultant.

So I don't see how the consultant could sue the President. He would have to sue the corporation.

And if he did the corporation could counter-claim for damages it sustained because of what appears to be a breach of contract on the part of the consultant.

It may be that the best way to approach these threats is to retain a lawyer to reply to the consultant.

You can contact the Law Society and use their Lawyer Referral Service. You will be given the name of a lawyer and can consult with the lawyer and the first half hour will be free.

The number is:

1-800-268-8326 or(NNN) NNN-NNNN(within the GTA)

Let me know if you need further clarification.
Customer: replied 1 year ago.

Thanks for the rapidity of your reply.


 


I believe Consultant A is bluffing on everything but just to be sure, I want to repeat for clarification:


 


In the absence of a signed legal contract, since the work was undertaken 'for' the corporation and moneys paid for 'consultant' came from 'corporate account', there is no grounds to claim that President is personally liable?


 


Consultant A is trying to make the argument that in the absence of a signed contract President IS 'personally' liable.


 


If helpful to know, the work done by Consultant A is demonstrably 'for the corporation' and 'branded' accordingly.


 


Next, Consultant A 'claims' that b/c I 'said' in an email I would try to pay him personally, this is somehow or other 'making me a personal guarantor' on the outstanding sum. I assume that notion is legally preposterous.


 


Also, what do you make of the 'specific' request for those 'specific items'? What do you think is the rationale? Asking me for my 'plate number' and things of that nature? What's that about, in your opinion?


 


" Second, does it not take an 'entire year' for a judgement in small claims court? And what would be the estimated legal expense be for the plaintiff? And what if the other party just declares bankruptcy? "


 


This is from: http://www.carfacontario.ca/page/small-claims-court_59/


 


"However, no court is quick: it will take you the better part of a year to go through the entire Small Claims Court process, have your trial and get judgment. Then you still have to try to collect. Getting a judgment is fairly easy. Collecting is a different story."


 


Also, on average, what kinds of legal fees would be incurred 'over the year' for the Consultant? I understand he can receive a judgement that 'includes' fee reimbursement. But he is a cheapskate, so I wouldn't want to make sure he's apprised of what he is 'risking' going down this path.


 

Expert:  Legal Ease replied 1 year ago.
He wants that information because he thinks he needs it if he has to find you to sue you.

But it's not about whether there is a written contract or not.

The consultant was doing work for the corporation and that corporation is liable to him and not the President.

Your saying you would pay him personally is not the greatest piece of evidence but it doesn't make you the one he contracted with.

In Ontario you will likely get trial in about 6 months.

Small Claims Court is set up for self-representing parties.

So while the Court will order costs it will not order a large sum at all.
Customer: replied 1 year ago.

Thanks. Is it not possibly illegal for a private citizen to 'demand' confidential, private information of the nature requested from another private citizen? I thought there were very strict privacy laws around this. I'm just curious about that aspect to.

Expert:  Legal Ease replied 1 year ago.
It's not illegal to ask for the information.

It's illegal to use illegal means of getting the information.

But you sure do not have to provide any information to this person. He has no authority over you unless he gets a Court Order first.
Customer: replied 1 year ago.

Thank you.


 


Now, should be proceed against the corporation, trial only begins in 6 months. Prior to, what steps are involved? What inconveniences? How does it start and what happens next etc.


 


Also, I assume that if at any time the corporation files for bankruptcy the process comes to a halt, the arrears is dissolved, and the plaintiff receives nothing?

Expert:  Legal Ease replied 1 year ago.
Essentially what happens is as follows.

You would be served with the claim and then you would have to put in your statement defence and you could at the same time put in a counterclaim.

Then there would be an exchange of documents where you would give the contractor and he would give you any documents that were going to be relied upon, if any, in court.

Then there is a mandatory pre-trial settlement conference where a judge who is not the trial judge tries to get you to settle.

Then there is the trial.

If the Corporation declares bankruptcy the lawsuit would be stayed and that would be the end. However, if the Corporation has assets then these assets would be lost.

Let me know
Customer: replied 1 year ago.

Last set of questions - sorry for lateness. And I'll close this out afterwards.


 


1. What's 'required' to serve someone? Physical co-presence? An address? I've heard of shenanigans where people literally have the papers drop on the floor and walk the other way. This is a US tactic, though.


2. Re: personal info request and the need for a court order to enforce compliance, so this statement doesn't backfire, on what grounds would a court order ever be given for such information? I assume none that pertain to this kind of matter.


3. Should I apprise him of the fact that this is a 'corporate' matter, as per your explanation, and that if he wants the 'corporate' info, I am happy to provide that (I'm not sure he knows even that). I'm not sure he is confident in his knowledge of 'anything' to be frank - definitive personal or corporate info (which might explain his odd requests?) Everything was done informally b/c of a mutual referral from a known 3rd party. Or should I provide nothing at all? The rationale for providing this info as a counter to his personal request would be strictly in the sense of appearing to be cooperative, rather than stone walling entirely. Again, he might be bluffing about taking action, but I don't know. Perhaps he needs that info, b/c he actually has nothing. Either way, as you've explained, it's corporate.


4. Should he try to serve 'me', and I'm not the relevant entity, what happens then, for me to rectify his error in 'targeting'?

Expert:  Legal Ease replied 1 year ago.
1. Personal service is required unless a Court orders otherwise. That would mean being given the document though it could be put in front of you.

2.I don't see a Court order you to disclose personal information now. If you were sued personally that would be a different matter.

3. I don't think you should provide anything at all.

4. Keep my name and I wil help you if that happens but essentially you would put in a statement of defence stating you did not have a contract with him.
Customer: replied 1 year ago.

First, thanks for the above. Sorry to be annoying but one last thing has now come to mind: Since I'm a 'nice guy' and do actually 'want to' compensate him (not for 'him', given his behaviour, but b/c it's just how 'I' operate as a human being), even though the company itself can not pay b/c it has no money, is it wrong for me to personally pay down, in instalments, company arrears?

Expert:  Legal Ease replied 1 year ago.
No it's not.

But make sure you are doing this because you think it's right but not because you are legally bound to do so.
Legal Ease, Lawyer
Category: Canada Law
Satisfied Customers: 86856
Experience: Lawyer
Legal Ease and 2 other Canada Law Specialists are ready to help you
Expert:  Legal Ease replied 1 year ago.

Thanks very much for the rating.

Please take the time to participate in the customer satisfaction survey as that will go into my record with the site.

And feel free to keep my name in case you need me again down the road. You can always put my name into the subject line the next time you post so that your question will stand out for me and I will answer it just as soon as I can.

Thanks and take good care!
Customer: replied 1 year ago.

Thanks, XXXXX XXXXX do I take the survey? I'm struggling to find it.

Expert:  Legal Ease replied 1 year ago.
Honestly, I wish I knew!

Maybe you will get an email.

I don't work for the site and I don't really know how the site deals with this issue. I just know the site keeps track of this statistic.

Thanks for trying!
Customer: replied 1 year ago.

Thanks. I remember being emailed a survey , so I will be sure to complete it (and I'll check my spam folder in case it already arrived, unseen). I'm about to act on your advice. Out of curiosity, am I able to cite, as a deterrent, a reference to the penal code in relation to 'harrassment'. Clearly, emailing, texting, and phone calling someone at 3:00 a.m., and then using similar tactics any time an email is not responded to within a few hours crosses the line. Since all of these communications have been directed at me personally, this has also disturbed my entire family.

 

AMENDMENT: Checked my email history from years ago. Last time I was able to 'write up' a positive review, my ability to do so was 'triggered' by an outbound email to me, in which I was rated as a customer. Does that make sense? The text I received went as follows:

 

"Because I really enjoyed working with you, I left positive feedback for you. Now every Expert who works with you in the future will know what a wonderful customer you are.

Here is the feedback I left for you:

Feedback Rating: Positive
Comments: Great Question! Thank-you and best wishes.
Question:



I also want to let you know that Just Answer's feedback system allows you to comment on the service I provided you. By giving me feedback you not only help me, but you also help future customers. So if you have not had a chance to leave feedback yet and you've got a second, click here to leave me feedback now. I look forward to helping you again in the future; be sure to request me the next time you ask a Canada Law question
."

 

The link above took me somewhere to write a review. I have no idea if this mechanism still exists. Maybe I'll get an automated email like this from the system, but one hasn't arrived yet. No idea. Just letting you know, in case this is helpful, in general :-).

Expert:  Legal Ease replied 1 year ago.
I've worked on this site for 4 years and it's the first time I've ever seen what is sent out.

I don't know how it works now but we cannot rate the customers anymore.

So I guess you will have to see what happens.
Customer: replied 1 year ago.

Received '5 question survey', via email, on the 16th at 9:41 a.m.. Site appears to wait approximately 36-48 hours after payment is deployed to trigger survey. Just thought I would let you know, from the customer's end. I completed the survey :-).

Expert:  Legal Ease replied 1 year ago.
Thanks very much for letting me know.

I had just learned of the surveys a short while ago and so decided I should ask my customers to fill them out.

I just this afternoon wrote the admin and asked where they could be found but you got back to me first!

I guess I should become a customer at come point and see how that works.

Thanks again!

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