Executive Summary: Key Legal and Evidentiary Issues

• QDS argued that recruitment fees were not payable since the hired individuals were independent contractors, not employees.

• The Agreement clearly stated that fees applied to hires on a “permanent, contract or consulting basis,” which included CM and MI.

• The Court found QDS acted in bad faith and never intended to honour its contractual obligations to Gold.

• Gold’s invoices totaling $89,700 were based on a 20% fee of the recruits’ first-year compensation and were supported by evidence.

• The Court awarded $30,000 in punitive damages due to QDS’s dishonest, high-handed, and dismissive conduct.

• QDS’s request for a trial adjournment was denied due to its failure to act diligently in retaining replacement counsel.

Background of the dispute

Gold Recruitment Services Inc. (“Gold”), a Nova Scotia-based recruitment firm owned by Fraser Muir, entered into a written recruitment agreement with QDS Holdings Inc. (“QDS”), a federally incorporated cybersecurity company based in Québec. The Agreement was signed on November 16, 2022, by Serge Racine, then Chief Legal Officer and Chief Compliance Officer of QDS. It obligated QDS to pay Gold a 20% fee based on the first-year compensation of any candidates hired on a “permanent, contract or consulting basis.”

In early 2023, Gold successfully recruited two individuals, CM and MI, who were hired by QDS under 12-month consulting agreements. Gold invoiced QDS on February 23 and March 31, 2023, for amounts of $51,750 and $37,950 respectively, totaling $89,700. QDS made no payment and did not provide a reason at the time. Gold filed a Notice of Action on May 8, 2023.

The policy terms and disputed clauses

Key provisions of the Agreement included:

• Contingency Recruitment Clause: “The fee for our services is earned if an applicant is hired by Client or any of its affiliates on a permanent, contract or consulting basis at any time within one year of the date the applicant is submitted to Client.”

• Fee Clause: “Client agrees to pay Recruiter a fee equal to 20% of the first-year Compensation (‘the Fee’) for each applicant hired by Client.”

QDS later claimed the Agreement applied only to "employees" and that because CM and MI were hired as independent contractors, no fee was payable. However, the Court found that the Agreement's language expressly encompassed such arrangements and that no distinction was made requiring employee status. The term "employee" did not appear in the Agreement.

Credibility findings and conduct

Justice Rosinski found Mr. Muir’s testimony credible and consistent with the documentary evidence. In contrast, QDS’s witnesses, particularly Mr. Racine and Mr. Kunz, were found to be evasive and their explanations implausible. The Court concluded that QDS misled Gold from the outset and never intended to pay for the recruitment services, even though the individuals were hired under agreements that matched the conditions of the contract.

The Court accepted that Mr. Muir spent over 200 hours sourcing candidates, CM and MI met QDS’s criteria, and QDS extended offers which were accepted. QDS’s assertion that fees would only be triggered by employee hires was a post hoc justification introduced only after litigation commenced.

Trial management and adjournment issue

In September 2024, QDS’s counsel McInnes Cooper withdrew from the case citing non-payment of $17,131.71 in legal fees and a breakdown in the solicitor-client relationship. QDS paid $7,000 on September 12, 2024, but failed to resolve the outstanding balance. QDS, represented by Serge Racine, then sought an adjournment of the November 4–5, 2024 trial, citing lack of counsel. Justice Rosinski denied the adjournment, finding that QDS was not reasonably diligent in securing alternate representation and had not demonstrated a serious intention to proceed with trial as scheduled.

Judgment and award

On November 22, 2024, the Court released its decision (2024 NSSC 354):

• Damages: $89,700

• Punitive Damages: $30,000

• Prejudgment Interest: at 5% per annum

• Costs and Disbursements: to be determined

Following cost submissions, a separate decision on January 22, 2025 (2025 NSSC 26), awarded:

• Party and Party Costs: $18,250

• Trial Day Costs: $2,000

• Prejudgment Interest: $7,479.71

• Disbursements: $1,706.85

• Costs in the Cause (Motion to Amend Pleadings): $500

• Total Costs Awarded: $29,936.56

Justice Rosinski also noted concerns about QDS’s willingness or ability to satisfy the judgment and reminded QDS of its responsibility to comply with the Court’s order.