2016 QCCQ 8865, 2016 QCCQ 8865

Marianer c. Yehezkel 2016 QCCQ 8865 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-32-143785-147 DATE: July 7, 2016 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ MICHAEL MARIANER Plaintiff v.

TAL YEHEZKEL and MARLA ROSEN Defendants ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Michael Marianer, an accountant, sues the Defendants Tal Yehezkel and Marla Rosen, alleging that, as directors of 9219-2442 Québec Inc. (“9219”), they acted to use corporate funds for their own benefit, enabling 9219-2442 Québec Inc., thereby to avoid payment of a judgment he obtained for unpaid professional fees. [ 2 ] The judgment in case no. 500-32-134131-129 awarded Mr Marianer $ 2,607.31, with interest and the additional indemnity and costs. [ 3 ] The judgment gave rise to a partial recovery. [ 4 ] Mr Marianer’s total claim of $ 6,536 breaks down to compensatory damages of $ 2, 536, the amount which he did not collect from the execution proceedings, and moral damages of $ 4,000. [ 5 ] One of the Defendants, Marla Rosen, brought a Cross-claim against Mr Marianer, seeking $ 5,000 in damages for trouble, inconvenience, and legal costs associated with the proceedings. [ 6 ] On the day of the hearing, the Plaintiff and Ms Rosen informed the Court of a settlement whereby each party agreed to discontinue proceedings against the other.

The transaction agreement dated May 2, 2016 was produced in the Court record. [ 7 ] The case against Tal Yehezkel proceeded by default as she had never filed any contestation and was not present at the hearing. ISSUE [ 8 ] The issue to be decided in the case was whether Tal Yehezkel, as a director and the directing mind or alter ego of 9219, engaged in dishonest conduct resulting in Mr Marianer’s claim being avoided in the seizure process, and whether compensatory and moral damages should be awarded as a result. FACTS [ 9 ] The judgment in the amount of $ 2,607.31 was rendered on January 14, 2015 by default.

It gave rise to a partial recovery of

$ 826.22, through the process of a garnishment of a bank account, in February 2013. [ 10 ] The subsequent writ of seizure of movable property issued on December 10, 2013, shows a partial payment of $ 826.22. The amount on the bottom line of that seizure, in item 14, was $ 2,662.76.

The document mentions that this is the fourth writ, so it is evident from the file that the Plaintiff engaged in several execution processes between the time of the judgment on January 14, 2013 and the initiation of the present lawsuit on August 15, 2014. [ 11 ] The default judgment related to professional services carried out by the Plaintiff in favour of 9219 during 2011. 9219 operated a daycare business. [ 12 ] Mr Marianer’s allegation is that Tal Yehezkel, during the time that the company was insolvent and was not paying its judgment debt toward him, was herself taking money out of the company to the detriment of other creditors. [ 13 ] His source of information for this allegation is the co-defendant with whom the case is settled, Marla Rosen. [ 14 ] Mrs Rosen testified that she managed the two daycares operated by 9219 from around 2008 until the demise of the business, around 2014. [ 15 ] In that capacity, she made no financial decision of her own, but carried out Tal Yehezkel’s instructions as to the disposal of funds in the business’ bank account. [ 16 ] In the period that is relevant to this case, she would be instructed to pay certain creditors, such as the teachers; payroll was more or less covered; government debts were not paid on time and rent was in default.

As well as Michael Marianer, other creditors who had provided services were not paid. [ 17 ] This state of affairs degenerated over the last two years of the business’ operations, until the landlord acted in July 2014 to resiliate the lease. [ 18 ] Mrs Rosen testified that, during that period, Tal Yehezkel would instruct her to make transfers to Tal Yehezkel’s personal account, under the pretext that she wanted to recover what she had invested in the company, in preference to the payment of the current obligations of the business. [ 19 ] Mrs Rosen states that she tried as much as possible to insure that employees would be paid, but she was not in a position to prevent Tal Yehezkel from withdrawing sums which she estimates to be in the neighbourhood, of at least, $ 10,000 to $ 20,000, as a sort of a reimbursement or return on her initial investment.

ANALYSIS [ 20 ] The evidence establishes, although not with great precision as to the amounts, at least a very definite pattern of activity that constituted fraud against the company’s assets to the detriment of certain of its creditors. [ 21 ] By controlling the banking, in her capacity as a director, and through her control of her employee, Tal Yehezkel made a series of payments to herself to the detriment of the creditors using funds that belonged not to herself personally, but to the corporation. [ 22 ] This is a breach of the fiduciary duties she owed as a director, and is sufficiently dishonest to prevent her from setting up as a defence to the claim the limited liability of the corporation.

Mr Marianer’s claim is, therefore, well founded in the terms of the financial loss he claims the shortfall of his recovery after judgment, which he establishes at $ 2,536 in his allegations. [ 23 ] The rest of the amount claimed in the conclusions consists in $ 4,000 in moral damages. [ 24 ] In the Court’s estimation, the Plaintiff should be entitled to damages for the loss of time, inconvenience and frustration of dealing with a debtor whose directing mind was deliberately acting in such way that his claims would be frustrated. [ 25 ] It is not possible to arrive at a quantification of such damages scientifically, but the Court is of the view that the Plaintiff was inconvenienced and subjected to stress for which $ 1,000 compensation would not be unreasonable.

FOR THESE REASONS, THE COURT: GIVES effect to the settlement between the Plaintiff and the Defendant Marla Rosen trough the discontinuance of their claims one against the other; CONDEMS the Defendant Tal Yehezkel to pay the Plaintiff the amount of $ 3,536, plus interest at the annual rate of 5%, and the additional indemnity provided for by

article 1619 of the Civil Code of Québec , as of August 15, 2014; CONDEMNS the Defendant Tal Yehezkel to pay the Plaintiff’s judicial costs for the Court stamp of $ 169. __________________________________ DAVID L. CAMERON, J.C.Q.

Date of hearing: May 3, 2016