2019 QCCQ 4119, 2019 QCCQ 4119

Warner c. 9181-5712 Québec inc. 2019 QCCQ 4119 COURT OF QUÉBEC Small Claims Division CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division No: 500-32-147037-156 DATE: March 20, 2019 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L.

CAMERON, J.C.Q. ______________________________________________________________________ CAROL WARNER Plaintiff v. 9181-5712 QUÉBEC INC. and LA GARANTIE ABRITAT INC. and ALLAN SCHACHTER and PATRICIA NAVARRO Defendants ______________________________________________________________________ JUDGMENT ______________________________________________________________________ The parties [ 1 ] The Plaintiff, Carol Warner seeks, in these proceedings, compensation for a down payment she deposited for the purchase of a unit in a residential condominium project that did not proceed.

She sues the developer, which is an insolvent numbered company, the directors of this company and the administrator of the guarantee that she was led to believe would protect her deposit. [ 2 ] Only the administrator of the guarantee and one of the directors brought defenses. Chronology [ 3 ] Mrs. Warner, a lab technician, was looking for a condominium for her elderly mother and herself in January 2011.

Her mother had health problems and the acquisition of a new residence with an elevator would have been of benefit. [ 4 ] Having found the type of project she was seeking, she entered into a preliminary contract dated January 26, 2011 with the Defendant 9181-5712 Québec inc. (doing business under the name “Bois des Caryers”) for the purchase of a condominium unit and one parking space in a project to be built in LaSalle known as Phase II of “le Monaco”. The total price was $ 239,888.00.

The occupancy date was stipulated in the contract as July 1, 2012 [1] . [ 5 ] The preliminary contract bears the logo of the, Association provinciale des constructeurs d’habitations du Québec inc. (APCHQ). A

section of the preliminary contract is the guarantee contract of the APCHQ. Mrs. Warner gave a down payment of $ 12,000.00, and received a Down Payment Attestation also bearing the APCHQ logo, which appeared to be an important document in connection with the protection of down payments [2] . [ 6 ] For Mrs. Warner, it was an essential feature of this contract that her deposit would be protected by the ACHQ in case the project was not built.

Like other purchasers of residential condos, she could not bear the risk of losing the deposit if the developer failed to build. [ 7 ] Persons working for the project, including Gilles Tremblay, Director of Sales approached her for further deposits, but she refused, because construction had not commenced in a timely manner. [ 8 ] She started making enquiries and was informed by the City of Montreal that no building permit had been issued for phase II. [ 9 ] On January 10, 2013, Mrs.

Warner wrote to Gilles Tremblay, Director of Sales for “Projet Bois des Cayers” to request the return of her down payment as construction of the project had not yet started [3] . On May 16, 2013, Gilles Tremblay wrote informing her apologetically “our accounting department is presently and diligently working towards issuing your refund.” He promised reimbursement in full during the third week of June 2013.

[ 10 ] Mrs. Warner received and signed on June 22, 2013 a Confirmation of cancellation form [4] and received a cheque drawn by 9181- 5712 Québec inc. dated July 31, 2013 in reimbursement of her down payment. There were other purchasers lined up to receive their cheques at the sales office, the day she signed the document and received the cheque from Gilles Tremblay. [ 11 ] Despite receiving the cheque, no payment was forthcoming. The bank on which the cheque was drawn informed her that the account did not have sufficient funds.

Eventually after several consecutive attempts to cash the cheque, the bank told her the the account was closed. [ 12 ] Gilles Tremblay informed her that the directors, Patricia Navarro and Allan Schachter were the two people from whom they were waiting to get the money. She last spoke to him or others in the office one day when she was expulsed from the sales office.

It was confirmed to her that day that she would receive payment, “in time”. [ 13 ] In December 2013, upon contacting the administrators of the guarantee, the Defendant La Garantie Abritat inc. (“Abritat”) she corresponded with the contact person, paid a fee of $100.00 and enclosed documentation concerning her situation. On January 14, 2014 she signed a document given to her by the Service of conciliation of Abritat, a “Demande de remboursement d’accomote” [5] .

At the hearing it was confirmed that Abritat administers guarantee plans, including the one mentioned on the Preliminary Contrat. [ 14 ] The representative of Abritat present at the hearing explained to the Court that the preliminary contract form signed by Mrs. Warner and 9181-5712 Québec Inc. probably came from a pad of such forms that the developer had on hand from a previous project. This was a form to be used only for projects with la Garantie des bâtiments résidentiels neufs de l’APCHQ, a programme the administration of which is assumed by la Garantie Abritat inc.

That programme only covered projects for residential buildings having no more than four stacks of residences (quatre unités superposées). The developer, 9181-5712 Québec inc. acted wrongfully in using this form for the Phase II of le Monaco project, a six-level building. The regulation creating the coverage, which operates like a suretyship (hence the use of the word guarantee) therefore excluded the protection that Mrs.

Warner, in her dealings with 9181-5712 Québec inc. was led to believe she had obtained. [ 15 ] Hence, the reply to her claim given by the Decision of the Administrator dated May 12, 2014 was made on the basis of the non- applicability, under the applicable regulations, of the provisions of the preliminary contract and guarantee contract to his type of project [6] .

The proceedings [ 16 ] Unsuccessful in that claim, she brought the present proceedings against 9181-5712 Québec inc. and, La Garantie Abritat inc. for $15,000.00 consisting in damages for the $12,000.00 deposit she had lost, for lawyer’s fees of $500.00, for the costs of $20.50 for a registered letter and for moral damages of $2,479.50. [ 17 ] At the hearing of November 7, 2016, the judge sitting permitted an amendment to add as additional defendants the two directors of the developer corporation and postponed the hearing of the case.

She stated the reason for the amendment as follows: Le Tribunal statue ce qui suit: Puisque la preuve démontre que la compagnie 9181-5712 Québec. a illégalement utilisé le logo de l’APCHQ pour son projet le Monaco Phase 2 alors qu’elle savait que ce projet n’était pas couvert par la Garantie des maisons neuves de l’APCHQ; Puisque la preuve démontre que les fausses représentations de la compagnie 9181-5712 Québec. sont à l’origine du dépôt de 12000$ fait par Mme Carol Warner pour l’achat d’un condo; Considérant que la compagnie 9181-5712 Québec. agit par l’entremise de ses administrateurs, Allan Schachter et Patricia Navarro; Considérant qu’aucun représentant de la compagnie 9181-5712 Québec. n’est présent aujourd’hui et la compagnie 9181-5712 Québec. semble être inopérante; Le Tribunal accueille la demande d’amendement de Mme Carol Warner pour joindre à l’action les défendeurs Allan Schachter et Patricia Navarro; Ordonne que les procédures amendées soient signifiées à aux défendeurs Allan Schachter et Patricia Navarro et qu’une nouvelle date d’audition soit fixée.

Les procédures devront être signifiées aux 2 adresses de ces 2 nouveaux défendeurs lesquelles sont : Allan Schachter, […] Mont-Royal, Qc […] Allan Schachter 4898 De Maisonneuve O, 3 e étage, Westmount, Qc H3Z 1M8 Patricia Navarro, […], Lachine, Qc […] Patricia Navarro, 4898 De Maisonneuve O, 3 e étage, Westmount, Qc H3Z 1M8 Frais à suivre [ 18 ] One of the directors, Patricia Navarro, failed to contest the case and the matter proceeded by default insofar as she is concerned. The other director, Allan Schachter instructed lawyers to seek leave to appear in the file in accordance with the provisions of

article 542 of the Code of civil procedure , because of the complexity of the trial. At the hearing of October 10, 2017, the Court dismissed the

petition brought by these lawyers on Mr. Schachter’s behalf. The lawyers remained active in the file however, as witnesses. The civil action against Mrs. Warner [ 19 ] Mr. Schachter also brought a case against Mrs. Warner in the Civil Division in file no. 500-22-241656-175 seeking damages in the amount of $ 25,000.00 for what is characterised in the Introductory Motion as damages for “clear abuse of the legal process”. On being advised of these proceedings, the Court gave act to an undertaking from the attorneys to suspend proceedings in that case. [ 20 ] It would seem difficult, in the least, to fault Mrs.

Warner for making the amendment that was authorised by one of the judges of this Court, acting upon the evidence she had heard. My colleague commented at the hearing that permission to amend would be the only way to attempt to obtain relief. Judge Lavigne referred to the actions of 9181-5712 Québec inc. as fraudulent. She stated the self-evident principle that a corporation acts through its directors. [ 21 ] In this context, the idea that the proceedings whereby Mr.

Schachter’s liability is thus foreshadowed by the Judge’s reasons given to allow the amendment, constitute an abuse and a reason to obtain damages is not an obvious one, to say the least. [ 22 ] The claim for legal expense is hard to grasp: the cost to Mr. Schachter of contesting the present case was the court stamp of $200.00. [ 23 ] The claims for moral damages and defamation are equally obscure. [ 24 ] The civil action against Mrs. Warner is simply pressure to drop her claim. That is why the Court recommended to the attorneys to put a stay on the proceedings.

Issues in the case as amended [ 25 ] It is obvious that the developer, which is insolvent, is in default, having never build the project for which part of the price was paid and having failed to honour the cheque given at the time of the cancellation of the preliminary contract. The illegal use by the corporation of a contractual form that applied to another type of project, with a view to inducing buyers to give deposits is clearly the cause of the financial loss suffered by Mrs.

Warner and by others [7] , judgment will be rendered by default against 9181-5712 Québec inc. [ 26 ] With respect to Abritat, the question is simply whether it is liable under the regulatory regime of the guarantee programme it administers to reimburse the partial payments lost by the Plaintiff.

The evidence in that case is essentially documentary. [ 27 ] With respect to the Defendant Navarro, who did not make a defense, the question on which liability depends is whether there is prima facie evidence that she committed a fault having a causal connection to the financial and moral prejudice suffered by the Plaintiff. [ 28 ] The focus of the hearing, which took place on a series of dates, was that of the liability of Mr. Schachter, as a director of the developer, for the Plaintiff’s prejudice. Did his status director protect him from liability?

Was he simply a victim, along with others, of the demise of the project and of the developer? [ 29 ] Mr. Schachter’s testimony makes it clear that, when he became involved in the project, first as a lender in 2008 and then as a director of 9181-5712 Québec inc. he took an enormous risk, simply having confidence in his friend, the chartered professional accountant Mr. Hyman Griner. When he became a director of 9181-5712 Québec inc. in 2009, he agreed, without thought for what the roles and duties of a director are.

He refers to this step as becoming a “partner” in the business, getting a share of the profits as shareholder. He says he may have known that he was a director, but claims to have no understanding of what that title means. [ 30 ] Yet he took no interest in the enterprise of the corporation of which he was a director, that of building and selling a condominium project. He made no inquiry into the management of sales, and the conduct of the persons acting in the sales and operations.

His degree of neglect was absolute, his willful blindness to the risks the project was transferring to consumers who had entered into preliminary contracts was tantamount to intention. He knew it was a business building residential condominium projects.

Apart from that, he simply knew that he was funding the project through the various loans he was making, that he stood to gain a profit as shareholder and that there was another principal, Tony Magi, acting with Patricia Navarro, persons with whom he had no direct contact and communication. [ 31 ] He refers to Patricia Navarro, the person who held the licence with the Régie du Bâtiment, (presumably he meant “qualified” the developer) as the “mistress” and “front” of the true alter ego of the corporation, Tony Magi. Ricardo Magi would have also fronted at some point as a person qualifying a construction permit.

While he states that he only learned this later, he admits that he knew at the time he became a director that he was acting as part of a group that included Tony Magi, though the other director was Patricia Navarro. [ 32 ] In a judgement on a prescription issue in a case [8] (500-17-083730-146) in which the Plaintiff is Mr.

Schachter’s federally incorporated company 4210310 Canada Inc., Justice Babak Barin, J.S.C. wrote : [18] Schachter explains that because his past business experience was in the field of textiles and not construction for which the loan was being sought, he had asked Griner to look after the day-to-day management of the various companies involved. [19] Navarro, whose construction license was apparently being used for the Quebec Inc. projects and who was also doing the bookkeeping for that company, testifies that she never conducted any business with Schachter directly. [ 33 ] The facts that the Court heard in the present case establish that it was less a case of asking Griner to manage the companies as a case of blindly accepting that Navarro and Magi would manage it, with no apparent supervision.

The Court knows of no reason why he

should have blindly trusted these people, who were strangers to him. [ 34 ] By using a guarantee form that did not apply, thereby inducing members of the public to give down payments on the false representation that their money was safe, the directing mind of the corporation, who, in law, are the directors, committed a fraud, or at the very least a gross negligence. The fact that those involved in the day-to-day work of the sales department were acting in bad faith is apparent from the numerous requests that were made to Mrs.

Warner to make additional progress deposits when the construction project was nowhere near to commencing. It is not probable that these subordinate employees acted on their own initiative. It is, however probable that these day-to-day operatives where following instructions from Magi and Navarro, the persons in authority in a situation where Mr. Schachter was grossly negligent. [ 35 ] Patricia Navarro, acting as bookkeeper and the prêt-nom of the alto ego of the company, and having the status of director, has provided no explanation for how the fraud was carried out despite due diligence on her part.

Her liability is obvious. [ 36 ] A director who was fulfilling the very basic duties imposed by the civil and corporate law would have inquired into the management, the product being sold and would have, at the outset and on a regular basis, assured himself that there was a legitimate business being carried out by honest and competent people. [ 37 ] Mr. Schachter admitted that, as director, he signed financial statements without reading them, and that he would not have understood them anyway. He asserts having no competence whatsoever in any business other than marketing thread.

He did not ask for any reports or opinions, nor did he obtain any. [ 38 ] Mr. Schachter states that a financial player in the project, “Centria”, pulled the plug when reports came out in the media alleging facts that would link the project to an organised crime family. At the point where the project’s insolvency became irreversible, the persons upon whom Mr.

Schachter, was relying to protect his interests, including Griner and a notary, came up with a workout of the debts. [ 39 ] This involved selling on July 12, 2016 the remaining immovable asset of 9181-5712 Québec inc., from among the parcels of the land to be developed. Mr. Schachter did not state this, but the land had been transferred by 9181-5712 Québec inc. to a company of which Mr. Schachter was the director, on December 4, 2013. The land had been used in the complex financial structure of 9181-5712 Québec inc. [ 40 ] Mr. Schachter asserts that he was told that he had to sign the papers.

There was to be no reservation in the workout to protect the would-be buyers who had made progressive payments toward their sale price. [ 41 ] Mr. Shachter’s exposure as creditor of 9181-5712 Québec inc. had been in excess of 11 million dollars, reduced from time to time through payments to around 6 million dollars. At the time of the disposition his liabilities as surety of certain loans was, in his own estimation, approximately 3.2 million dollars.

He estimates that by bringing about the workout that included the sale of the land, his own liability on these suretyships was reduced to approximately one million dollars. [ 42 ] He asserts that his overall loss on the venture was approximately five million dollars. [ 43 ] In many respects, the testimony of Mr. Schachter was forthright. Because he sees himself as a victim, not as a participant in the rise and fall of the project, he is candid as to his own passivity.

On the specific question of whether the sale of the land that he approved, by signing, among other documents, corporate resolutions, reduced his own exposure as guarantor of loans, he candidly answered in the affirmative, assessing the reduction of his liability as 3.2 million to 1 million dollars. On the equally specific question concerning the loss to the promising purchasers who had signed preliminary contracts, he answered that he did not know that there were deposits in the company’s hands.

On that answer, the Court could not accept his sincerity. [ 44 ] It is a well-known practice in new condo sales to obtain partial payment at the outset and, often, as the construction advances, to support the finances of the project. It is hard to conceive of a project where a buyer would make no payments upon signing the preliminary contract. Mr. Schachter was not a real estate expert, having made his fortune in the clothing industry, but any reasonably informed person such as Mr. Schachter would know that it is likely, on a project of this type, that deposits would have been made.

It is precisely for this reason that new housing developers, through associations, have put in place guarantee arrangements to give financial security to consumers in respect of their deposits. [ 45 ] Mr. Schachter, as an educated business person, could only be ignorant of the situation of persons like Mrs. Warner if he maintained a willful blindness to their plight. He had an advantage to cause the company of which he was a director to disregard their interests and to act in his own personal interest to reduce his liability as guarantor.

The opportunity to use his powers as director to make this possible at the time of the liquidation of the project’s remaining asset eclipsed any concern for the company’s integrity, and his own as a director of it, to act in the company’s best interest in honoring the obligation to return the deposits of which it was the custodian. This is really just the tail end of a gross neglect, as a director, for the duty to act in the company’s best interest.

That duty would have involved becoming aware of the marketing of the condo units in keeping with the guarantee arrangements that are so vital to these types of ventures. His testimony makes it clear that he treated his status of director as creating no obligation, and no role, a mere formality that others had asked him to acquiesce to. [ 46 ] The excuse, that he was trusting his best friend, is purely subjective. It may well be that this friend, through his personal and professional conduct has incurred liability to Mr. Schachter and his companies.

Objectively, however, reliance on a friend is not, in regard to the duties of a director, a defense of objective and reasonable reliance. [ 47 ] Mr. Schachter’s attorney testified to explain the complex transactions surrounding the workout of the company’s debt of which she was aware with a view to convincing the Court that Mr. Schachter simply lost money in the process and in no way benefited from the proceeds of the sale. She produced the documentation and give a point by point synopsis, as follows: 1. Copy of the Index to Immovables for the Phase X property (lot number 4 605 587).

As the Court can observe from the Index to

Immovables, our client, through his holding company 4210310 Canada Inc. had a hypothec registered against the Phase X property for $ 5 000 000.00, for the advances that 4210310 Canada Inc. had made to 9181-5712 Quebec Inc., and said hypothec was registered against the Phase X property on August 26th, 2013 (inscription number 20 211 165). 2. Copy of the Deed of Loan and Collateral Hypothec in favor of 9103-3175 Québec Inc. (Point Zero), for an amount of $ 7 500 000.00, which included the Phase X property in the security. 3.

As the Court can see from the Index to Immovables, there were proceedings with Utopia Towers concerning sums that were still owed to Point Zero, and Mr. Schachter’s company 8453012 Canada Inc. had to borrow $ 950 000.00 at the rate of ten percent (10%) from Mr. Michael Martin and Mr. George Weisz, as can be seen from copy of said Hypothecary Loan. 4. Mr. Schachter could no longer assume the payments for that Hypothecary Loan, and 8453012 Canada Inc. had to sell the Phase X property on July 12th, 2016, to 9229-8926 Quebec Inc. (Immojad Lasalle), as per copy of the Deed of Sale is attached hereto.

As you can see from said Deed of Sale, in order for Mr. Schachter’s company 4210310 Canada Inc. to permit the transfer of Phase X, 4210310 Canada Inc. had to radiate the hypothec in the amount of $ 5 000 000.00 which had been granted to it. 5.

Notwithstanding that the sale was for an amount of $ 1 250 000.00, those proceeds went directly to reimburse the loan of $ 950 000.00, and a loan of $ 300 000.00 that was contracted by 4210310 Canada Inc. to pay amounts which were owed by 9181-5712 Quebec Inc. to creditors other than 4210310 Canada Inc., a payment which did not even remotely cover the losses that were sustained by 4210310 Canada Inc., and Mr. Schachter through his advances to 410310 Canada Inc. 6. Copy of the 4210310 Canada Inc. Calculated Overall Shortfall prepared by accountant Morton Garellek detailing loans and further advances made by Mr.

Schachter to the project and its deficit, with Mr. Schachter’s holding company 4210310 Canada Inc. in an overall shortfall of $4 709 849.05, excluding interest. In view of the foregoing, we respectfully submit that neither Mr. Schachter nor his holding company 4210310 Canada Inc. derived any financial benefit whatsoever from the project or the transfer of the Phase X property, and in fact suffered major and substantial financial losses.

There was no fault, and certainly no fraud, abuse of right or contravention of any rule of public order in any of the transactions entered into. [ 48 ] Her text is an accurate description of the various documents she refers to except in respect of one omission: that which was the subject matter of Mr. Schachter’s candid admission that his liability on suretyships was reduced as a result of the flow of funds upon the sale. [ 49 ] More particularly, Mr. Schachter intervened as surety in the loan of $950,000.00 made to Mr. Schachter’s company 8453012 Canada inc. by Messrs.

Martin and Weisz mentioned in paragraphs 3 and 5 of the lawyer’s synopsis. [ 50 ] The lawyer states in paragraph 5 of her memo that part of the proceeds went to reimburse a loan of $300,000.00 that had been extended to Mr. Schachter’s holding company, 4210310 Canada inc. to pay creditors of 9181-5712 Québec inc. [ 51 ] While it is true that he did not personally obtain liquidities from the sale, it is patent that his monetary liability diminished and that he thereby benefited to the extent of at least the amounts indicated.

He, as director, caused this benefit to accrue to himself as creditor, to the exclusion of other more innocent creditors such as Mrs. Warner. [ 52 ] The duties of a director are owed to the moral person. These duties are defined at articles 321 and 322 C.c.Q. as analogous to those of a mandatory: 321. A director is considered to be the mandatary of the legal person. He shall, in the performance of his duties, conform to the obligations imposed on him by law, the constituting act or the by-laws and he shall act within the limits of the powers conferred on him. 322. A director shall act with prudence and diligence.

He shall also act with honesty and loyalty in the interest of the legal person. [ 53 ] The corporate law sets out a more specific set of duties at articles 119, 122 and 123 of the LSA [9] (English version): 119. Subject to this division, the directors are bound by the same obligations as are imposed by the Civil Code on any director of a legal person. Consequently, in the exercise of their functions, the directors are duty-bound toward the corporation to act with prudence and diligence, honesty and loyalty and in the interest of the corporation.

In their capacity as mandataries of the corporation, the officers are bound, among other things, by the same obligations as are imposed on the directors under the second paragraph. 120. Subject to the provisions of

section 214, no provision of the articles, the by-laws, a resolution or a contract may relieve directors from their obligations, or from liability for a breach of their obligations. 121.

A director of a corporation is presumed to have fulfilled the obligation to act with prudence and diligence if the director relied, in good faith and based on reasonable grounds, on a report, information or an opinion provided by (1) an officer of the corporation who the director believes to be reliable and competent in the functions performed; (2) legal counsel, professional accountants or other persons retained by the corporation as to matters involving skills or expertise the director believes are matters within the particular person’s professional or expert competence and as to which the particular person merits

confidence; or (3) a committee of the board of directors of which the director is not a member if the director believes the committee merits confidence. [ 54 ] This is primarily the duty to act in the best interest of the moral person. There are situations where a director, acting in that capacity, incurs liability toward third parties, under the general regime of extra-contractual liability of

article 1457 C.c.Q. The obligations of the director toward the moral person provide the context relevant for the evaluation of the conduct of a director as constituting a fault toward a third person. [ 55 ] In the present context, the duty to act with prudence and diligence and with honesty and loyalty and to avoid conflicts of interest are certainly relevant to our case. They are the context in which Mr. Schachter’s conduct must be assessed. [ 56 ] Mr.

Schachter cannot rely upon reckless lack of concern and total passivity cannot be considered as reliance “in good faith on reasonable grounds”. [ 57 ] The misuse of a non-applicable contract form to extract down payments from purchasers who mistakenly believed they had financial protection shows fraud or gross neglect on the part of Patricia Navarro. She was the person holding the construction permit and responsible for accounting. As director, she was carrying out duties on a direct daily basis.

In light of this status and the confidence placed in her by the Régie du bâtiment du Québec, she failed in the basic duty of diligence and honesty. Persons such as Mrs. Warner suffered a loss as a direct result of her disloyalty to the interests of the moral person, which was also a fault in the sense of art. 1457 to persons relying upon the good faith of the moral person and those directing it. [ 58 ] In the case of Mr. Schachter, while his involvement was passive, it was a passivity that did not exonerate him from the liability flowing from his total neglect of his duties as director.

Even the most basic of gestures of prudence and diligence on the part of an outside director would have included gaining basic knowledge of the marketing of the product being sold, in this case condo units backed by guarantees of down payments and of quality construction. In the case of a director who is also a shareholder, as is the case here, the duty is even more intense. [ 59 ] By totally neglecting to enquire into the marketing and administration of the project, whether it be with Griner or his co-director, Mr.

Schachter committed a fault of omission that enabled and facilitated Navarro and the employees involved to implement the misuse of the guarantee forms that has caused Mrs. Warner’s loss. [ 60 ] Then, by seeing to it that the workout of the company’s insolvency gave benefit to himself without regard for the moral person’s clients, he acted in a conflict of interest. The director owes the duty of loyalty to the moral person.

By bringing about a settlement of debts that was to the detriment of these depositors’ rights, he acted against the moral person’s interest to act ethically toward the most vulnerable of its creditors, those who became even more vulnerable by the corporation’s fraud or gross negligence in the misuse of the guarantee forms. [ 61 ] The moral damages that Mrs. Warner can claim in this case are limited to the difference between the small-claims limit of $15,000.00 and the $12,000.00 deposit. If it were not for that limit, the amount the Court would award would have been significantly more. [ 62 ] Mr.

Schachter did not raise prescription in his written defense, but mentioned it at the hearing. The liability here is solidary, so the institution of the proceedings against 9181-5712 Québec inc. interrupts prescription for all. [ 63 ] Subsidiarly, the non-applicability of the APCHQ guarantee was only apparent to Mrs. Warner when she received the decision of Abritat on May 12, 2014. This was the earliest date that she could know that she had a claim because of this non-applicability stemming from the misuse of the forms.

Prior to that date she could not know she had a claim against the directors because she did not know of the misuse of the forms. In fact, before the witness present at the hearing explained the misuse of the forms, it would not have been apparent that the denial of the claim against Abritat stems from this misuse. Her claim in the case against the directors is not a claim on the unpaid cheque, but on the fraud or gross neglect that caused her to enter into an unfair contract to her detriment.

Her knowledge of the fault and causality was acquired less than three years from the addition of the directors as defendants through the amendment ordered by the judge on November 7, 2016. [ 64 ] Abritat’s defense is a valid application of the very technical and precise provisions of the regulation applicable to the guarantee programme the administration of which it is charged.

It is unfortunate that institutions such as Abritat apparently have an inadequate control of developers’ improper use of such forms, as Abritat’s representative stated at the hearing, but this would be a question for another place and time. BY THESE REASONS, THE COURT: CONDEMNS the defendants 9181-5712 Québec inc., Patricia Navarro and Allan Schachter solidarily to pay to the Plaintiff the amount of $15,000.00 together with interest at the legal rate together with the additional indemnity provided by

article 1619 of the Civil Code of Quebec , calculated from July 1, 2012; WITH legal costs to the Plaintiff; DISMISES the claim against La Garantie Abritat inc.; WITOUT legal costs.

_________________________ David L. Cameron, J.C.Q. Date of hearing: November 6, 2016, October 10, 2017, February 13, 2018. Deliberations after supplementary written submissions.