2013 QCCQ 1342, 2013 QCCQ 1342

Bitaraf c. 4435176 Canada Inc. 2013 QCCQ 1342 COURT OF QUÉBEC CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTRÉAL « Civil Division »

N°: 500-22-184552-118 DATE: FEBRUARY 26, 2013 ______________________________________________________________________ PRESIDED BY THE HONOURABLE JULIE VEILLEUX, J.C.Q. ______________________________________________________________________ BABAK BITARAF -and- NARGES REZAIE JAVID -and- MARCO MARCIANO -and- DANIELA CAMBONE -and- VLADIMIR YERMOLAEV -and- KARINA PINSONNEAULT -and- HONGYE SU -and- SIMON-BO ZHU -and- HONG GUO WU -and- YAFEI DING -and- HARRY PERISTERAKIS -and- KATHERINE VINUEZA -and- PADIGULI MAIHESUDI -and- YUSUO LIU Plaintiffs vs. 4435176 CANADA INC. -and- JEROME WINIKOFF Defendants ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Plaintiffs ask the Court to declare null and void the contracts signed with Defendant 4435176 Canada Inc. (Canada Inc.), the

reimbursement of the deposits made with respect to the purchase of a townhouse in the Marc Chagall Townhouses project (the project), together with compensatory and punitive damages. [ 2 ] In addition, Plaintiffs ask the Court to condemn Jerome Winikoff (Winikoff) personally on the basis that he is the alter ego of Canada Inc. THE PARTIES AND THEIR CLAIM [ 3 ] Plaintiffs are six couples and two individuals who have made deposits to Canada Inc. following a preliminary contract and guarantee contract (the contracts) with respect to the purchase of a unit in the project.

The claim is detailed as follows: The couples – Babak Bitaraf and Narges Rezaie Javid: $14,285 – Marco Marciano and Daniela Cambone: $14,285 – Vladimir Yermolaev and Karine Pinsonneault: $14,285 – Hongye Su and Simon-Bo Zhu: $14, 285 – Hong Guo Wu and Yafei Ding: $14,285 – Harry Peristerakis and Katherine Vinueza: $14,285 The individuals – Padiguli Maihesudi: $14,285 – Yusuo Liu: $15,470. [ 4 ] The couples and the individuals also claim for moral and punitive damages both in the amount of $4,700. [ 5 ] Canada Inc. was incorporated on June 21 st , 2007 as a real estate development firm.

Co-defendant Winikoff is the President, Secretary and Shareholder of Canada Inc. THE REPRESENTATIONS [ 6 ] Plaintiffs Bitaraf, Su, Cambone, Yermolaev, Wu and Peristerakis have testified on their behalf and on behalf of their spouse. Mrs. Maihesudi and Mr. Liu have also testified. [ 7 ] The Court summarizes their testimonies with respect to the representations made by Winikoff prior to the signing of the contracts as following: – Plaintiffs saw a publicity board of the project at various dates in the fall of 2009 and winter of 2010.

They met with Winikoff either in the trailer located on the land of the project or at Winikoff’s residence. – Winikoff told them that the project was to be built in the spring and summer of 2010 with delivery of the units in October 2010. – Winikoff represented himself as the owner, developer and constructor with substantial experience in the construction business. – Winikoff requested a first deposit in the amount of $7,142.50 for each unit at the signing of the contract and a second deposit in the same amount following the cutting of trees on the land. – Winikoff explained to Plaintiffs that Canada Inc. was a member of l’Association provinciale des constructeurs d’habitation du Québec (APCHQ) which guaranteed their investment. – Plaintiffs noticed the APCHQ logo on the front page of the contract and explained that said warranty was important to all of them as it gave them additional confidence in the project. – Winikoff, “the big boss”, also gave them confidence as his involvement and experience in the construction business increased their interest in the project. – None of the Plaintiffs was explained the possibility that the project would not be built. – Some of Plaintiffs (Mrs.

Maihesudi and Mrs. Wu) were told that there were only two units left and that they did not have much time to make up their mind. – After their first deposit, most of Plaintiffs noticed that trees were cut. It did not take long that Winikoff requested their second deposit, which they all made. – In the weeks and months following their second deposit, Plaintiffs were anxious to see the construction but there was no sign of life on the land. They all became worried, some early in the spring and others, later in the summer of 2010, as there was no equipment on the land, no activity whatsoever going on.

– Plaintiffs testified that they called and/or met with Winikoff in order to find out what was going on. They were first given information with respect to an issue with the City of Côte Saint-Luc; then there was an issue with the construction workers but at one point, Winikoff stopped answering the phone and the door at his residence. – Plaintiffs were informed by Winikoff in early 2011 that the project would not be built.

They all asked the reimbursement of their deposits and none of them was successful, not even partially. [ 8 ] Letters of default were sent to both Defendants in the winter and spring of 2011 and the Motion to Institute Proceedings was filed in August 2011. THE DAMAGES [ 9 ] The consequences of the non-delivery of the units were different from one Plaintiff to another.

However, the following are examples of the damages suffered by them: – Stress in the spring of 2010 and the following months resulting from the inactivity on the land. – Anxiety resulting from the fact that the units would not be delivered in October 2010, which led to a change of plans as to where they lived. – Withdrawal of home from the market considering that the new home was not built. – Living with a newborn in a one-bedroom apartment instead of a much larger residence. – Frustration resulting from the representations made by Winikoff with respect to the guarantee provided by the APCHQ. – Deception when they realized, a year later, that another project was being built where people now live. – Astonishment when Plaintiffs learned that Canada Inc. and Winikoff were not the owners of the land. – Financial stress resulting from the investment of most of their savings in a project which was never built. – Loss of time and energy trying to reach Winikoff by phone or in person. – Embarrassment with friends, relatives and discouragement. – Distress caused by the feeling that Plaintiffs were robbed, violated.

THE CONTRACTS [ 10 ] The contracts between every single Plaintiff and Canada Inc. refer, on the first page, to Canada Inc. as being the “holder of a license granted pursuant to the Quebec Building Act , under RBQ license number [...]”. The documentary proof shows that said license was granted on February 2, 2010 to Canada Inc. as the “constructeur-propriétaire”. [ 11 ] In addition, all contracts signed by Plaintiffs show the APCHQ logo on the front page and the mention “garantie maison neuve APCHQ”.

Section 10 of the contract reads as follows: GUARANTEE PLAN 10.

The promissory purchaser represents having ascertained that the vendor is accredited with La Garantie des bâtiments residentiel neufs de l’APCHQ Inc. and that the property is covered by the Guarantee Plan. (Exact quote) [ 12 ] Cross-examined by Defendants’ attorney, Plaintiffs explained that they relied on the information given by Winikoff in that respect as none of them made additional verification regarding Canada Inc.'s accreditation with l'APCHQ. [ 13 ] Most Plaintiffs, except Yermolaev, Pinsonneault, Liu, Wu and Ding, sent Defendants letters of default between January and April of 2011.

PLEA [ 14 ] Defendants filed a plea which specifically refers to the fact that Canada Inc. had an option to purchase the land where the project was to be built, that Defendant Winikoff at no time personally benefited from the deposits and that said deposits were spent by Canada Inc. to cover fees and costs. This is documented by documentary proof. [ 15 ] Defendant Winikoff filed an Affidavit in Lieu of Testimony which can be summarized as follows: – His personal career and reputation in the residential development business. – He is the President, Secretary and Shareholder of Canada Inc.

– All expenses incurred by Canada Inc. were covered by the deposits made by Plaintiffs. – He did not engage himself personally in the project as Canada Inc. is the signatory of the contract. – At all times, he acted honestly as a representative of Defendant Canada Inc., no false representations were made to Plaintiffs prior to the signing of the contracts. [ 16 ] The documentary proof offered by Defendants consists of documents regarding the RBQ license, the financing of the project, the offer to purchase the land, the expenses incurred with respect to the project and an exchange of correspondence with the City of Côte Saint-Luc between August 2007 and July 2008.

ANALYSIS Canada Inc.’s liability [ 17 ] The following Sections of the Civil Code of Québec are relevant to the present matter: 1399. Consent may be given only in a free and enlightened manner. It may be vitiated by error, fear or lesion. 1400. Error vitiates consent of the parties or of one of them where it relates to the nature of the contract, the object of the prestation or anything that was essential in determining that consent. An inexcusable error does not constitute a defect of consent. 1401.

Error on the part of one party induced by fraud committed by the other party or with his knowledge vitiates consent whenever, but for that error, the party would not have contracted, or would have contracted on different terms. Fraud may result from silence or concealment. 1407.

A person whose consent is vitiated has the right to apply for annulment of the contract; in the case of error occasioned by fraud, of fear or of lesion, he may, in addition to annulment, also claim damages or, where he prefers that the contract be maintained, apply for a reduction of his obligation equivalent to the damages he would be justified in claiming. [ 18 ] The proof offered brings the Court to the conclusion that Plaintiffs did not give a valid consent when they contracted with Canada Inc.

The representations made by Winikoff as Canada Inc.’s representative were false on the following issues: – Canada Inc. was the owner of the land where the project was to be built. – Canada Inc. held a RBQ license to build and sell units of the project (which is different from a “constructeur-propriétaire” licence [1] ). – Canada Inc. was a member of the APCHQ which guaranteed Plaintiffs’ deposits. [ 19 ] Considering the testimonies given by eight of the fourteen Plaintiffs and their credibility, the Court is convinced that these false representations related to essential elements of the contract.

Had Plaintiffs known the relevant and true information with respect to this project, they would have never accepted to invest their savings. Their consent was vitiated by error occasioned by fraud. [ 20 ] Considering the wording of

section 1407 C.C.Q , the circumstances and facts of the present case, the Court declares null and void the contracts signed between Plaintiffs and Canada Inc. [ 21 ] In addition, it is clear from the testimonial proof offered that all Plaintiffs suffered moral damages. The stress, inconveniences, anxiety, deception, discouragement and financial worry resulting from the non-delivery of their unit convince the Court that Plaintiffs' claims for moral damages in the amount of $4,700 are reasonable.

Considering that the claims are all in the same amount and that no specific representations were made in that respect, the Court grants $4,700 per couple and $2,350 to the individuals. [ 22 ] As for punitive damages, Plaintiffs invoked Sections 6 and 49 of the Québec Charter of Human Rights and Freedoms (L.R.Q., c. C-12) which reads as follows: 6. Every person has a right to the peaceful enjoyment and free disposition of his property, except to the extent provided by law. 49. Any unlawful interference with any right or freedom recognized by this Charter entitles the victim to obtain the cessation of such

interference and compensation for the moral or material prejudice resulting therefrom.

In case of unlawful and intentional interference, the tribunal may, in addition, condemn the person guilty of it to punitive damages. [ 23 ] According to Plaintiffs, there was unlawful and intentional interference with their right to the peaceful enjoyment of their property, namely the deposits given to Canada Inc. [ 24 ] Considering the jurisprudence [2] regarding the definition of “property”, it is clear from the Court's standpoint that Plaintiffs have not had the peaceful enjoyment of their property between the time of the deposits, spring of 2010, and the time of the trial. [ 25 ] Again, the Court finds that the claims for punitive damages are well founded and allow in that respect $4,700 per couple and $2,350 to the individuals.

Winikoff’s liability [ 26 ] It is Plaintiffs’ contention that although they contracted with Canada Inc., there is also liability on the part of Winikoff. Accordingly, Plaintiffs ask the Court to lift the corporate veil and condemn Winikoff jointly and solidarily with Canada Inc. [ 27 ] In that respect, the Court finds most appropriate to cite Sections 309 and 317 of the Civil Code of Québec : 309. Legal persons are distinct from their members. Their acts bind none but themselves, except as provided by law. 317.

In no case may a legal person set up juridical personality against a person in good faith if it is set up to dissemble fraud, abuse of right or contravention of a rule of public order. [ 28 ] Considering the proof offered regarding the false representations made by Winikoff and summarized above, the Court has no hesitation to lift the corporate veil [3] . [ 29 ] Winikoff, sole officer, shareholder and alter ego of Canada Inc., made the false representations to Plaintiffs and was the only person who negotiated with them. [ 30 ] He committed fraud when he gained Plaintiffs' confidence on his reputation, knowledge and involvement in the residential development business and when he gave them false information pertaining to the project.

He acted fraudulently and in bad faith and cannot invoke now the legal person of Canada Inc. to escape personal liability. [ 31 ] In view of the foregoing, the Court condemns Winikoff jointly and solidarily with Defendant Canada Inc. for the reimbursement of the deposits, the moral and punitive damages suffered by Plaintiffs. IN VIEW OF THE FOREGOING, THE COURT: DECLARES all preliminary contracts and guarantee contracts null and void ab initio, as of their date of signature.

CONDEMNS 4435176 Canada Inc. and Jerome Winikoff jointly and solidarily to pay Babak Bitaraf and Narges Rezaie Javid the amount of $23,685 with interest at the legal rate together with the additional indemnity provided by

Section 1619 C.C.Q . as of February 4, 2011; CONDEMNS 4435176 Canada Inc. and Jerome Winikoff jointly and solidarily to pay Marco Marciano and Daniela Cambone the amount of $23,685 with interest at the legal rate together with the additional indemnity provided by

Section 1619 C.C.Q . as of April 11, 2011; CONDEMNS 4435176 Canada Inc. and Jerome Winikoff jointly and solidarily to pay Vladimir Yermolaev and Karine Pinsonneault the amount of $23,685 with interest at the legal rate together with the additional indemnity provided by

Section 1619 C.C.Q . as of August 18, 2011; CONDEMNS 4435176 Canada Inc. and Jerome Winikoff jointly and solidarily to pay Hongye Su and Simon-Bo Zhu the amount of $23,685 with interest at the legal rate together with the additional indemnity provided by

Section 1619 C.C.Q . as of January 19, 2011; CONDEMNS 4435176 Canada Inc. and Jerome Winikoff jointly and solidarily to pay Hong Guo Wu and Yafei Ding the amount of $23,685 with interest at the legal rate together with the additional indemnity provided by

Section 1619 C.C.Q . as of August 18, 2011; CONDEMNS 4435176 Canada Inc. and Jerome Winikoff jointly and solidarily to pay Harry Peristerakis and Katherine Vinueza the amount of $23,685 with interest at the legal rate together with the additional indemnity provided by

Section 1619 C.C.Q . as of April 11, 2011; CONDEMNS 4435176 Canada Inc. and Jerome Winikoff jointly and solidarily to pay Padiguli Maihesudi the amount of $18,985 with interest at the legal rate together with the additional indemnity provided by

Section 1619 C.C.Q . as of January 25, 2011; CONDEMNS 4435176 Canada Inc. and Jerome Winikoff jointly and solidarily to pay Yusuo Liu the amount of $19,970 with interest at the legal rate together with the additional indemnity provided by

Section 1619 C.C.Q . as of August 18, 2011; THE WHOLE , with costs.

____________________________ JULIE VEILLEUX, J.C.Q. Me David Ettedgui Plaintiffs' attorney Me Joseph Neudorfer Defendants’ attorney Hearing dates: January 23 and 24, 2013