2014 QCCQ 4253, 2014 QCCQ 4253

Akram c. Indiport inc. 2014 QCCQ 4253 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division No: 500-22-208643-133 DATE: May 8, 2014 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ NASIR AKRAM PLAINTIFF v. INDIPORT INC.

DEFENDANT ______________________________________________________________________ JUDGMENT ______________________________________________________________________ Parties and proceedings [ 1 ] The Plaintiff, Nasir Akram, C.A., sues his former client, the Defendant Indiport Inc. ("Indiport") for a balance of account of $12,172 for professional services. [ 2 ] In its oral defence, Indiport pleads that it gave the Plaintiff a cheque for $5,748.75 in full and final payment and that the Plaintiff cashed the cheque, thereby renouncing any greater amount. [ 3 ] The defence also states that some of the amounts allegedly owed are prescribed. [ 4 ] At the hearing, it was not contested that, of the total amount of $35,584.83 claimed in the letter of demand (P-4), a significant amount was prescribed. [ 5 ] The amounts claimed in the motion related only to invoice #828 for the fiscal year ending June 30, 2011 in the amount of $5,194.48 and invoice # 877 for the fiscal year ending June 30, 2012 in the amount of $6,977.52 (P-6 en liasse).

The parties agreed that these amounts would not be prescribed if they are owed, and the defence was therefore limited to the issue relating to the cheque allegedly given in full and final payment. Issue [ 6 ] The Court must answer the following question: Is the obligation with respect to the balance of account claimed extinguished in whole or in part by the payment made with the cheque, as annotated? Facts [ 7 ] Mr Akram has an accounting practice. He had a review engagement with Indiport for a number of years.

The trial balances and other materials necessary to perform the review would typically be provided in September, after the June 30 th year end, and work would be carried out to complete the financial statements and income-tax documents required for December 31, in order to comply with the six- month time limit. [ 8 ] Mr Akram testifies that for many years, Indiport would pay less than the full amount of his invoice. Typically, after a meeting, Mr Arvid Soni, the principal of Indiport, would give him a sealed envelope containing a cheque, insisting that he (Mr Akram) would find it to be satisfactory.

Later, when he opened the envelope, Mr Akram would call Mr Soni to complain that the amount was insufficient and Mr Soni would suggest a meeting to settle the matter in a mutually-satisfactory way. In fact, however, from fiscal 2006 to fiscal 2012, a balance was outstanding on each annual account, cumulating $35,584.83 when the statement was prepared on March 21, 2013

[ 9 ] Mr Akram testifies that he tolerated these failures to pay the full amounts as Mr Soni was a friend of many years and a certain confidence and loyalty had developed between them over the years. [ 10 ] Mr Soni also speaks of the longstanding friendship between not only the two men, but also their respective families. His understanding of the billing situation is, however, different. In his recollection, each year an amount would be agreed upon as a payment, and this settled the obligation for the year.

He does not recognise the validity of the invoices referred to in the statement of account. [ 11 ] In particular, on October 30, 2012, when the review engagement work was ongoing for the fiscal year ending June 30, 2012, he met with Mr Akram. Business had declined for Indiport. Times were tough. The parties agreed to a payment of $5,000 and a cheque for this amount plus applicable taxes ($5,748.45) was made.

According to Mr Soni, it was clear that this was a final payment for all work done up until then and inclusive of the work required to complete the review engagement and other required work to be completed before the end of the year. [ 12 ] Mr Soni denies that the cheque was put into an envelope. It was given by hand and accepted as a final payment. [ 13 ] Mr Akram's testimony contradicts this. He states that the envelope was given to him, to be opened later, as had been the case in the previous years.

When he arrived back at his office, he opened the envelope, saw the amount and read the manuscript annotation: " Final payment year ending June '12 + before-no balance owing" [ 14 ] He testifies that he understood this to be a reference to an amount for fiscal 2012, for work that had not yet been completed. It was impossible for him to imagine doing the review engagement for that price, given the rather stringent compliance with GAAP required and other standards applicable to review engagements by professional accountants. Indiport had a substantial line of credit.

Disclosures were required to be made to the bank. There were more than thirty book entries to be done to add to the trial balance. He testifies that he called Mr Soni right away and told him that it would be impossible to complete the work for that amount and Mr Soni answered that he would pay more. Mr Akram then had the cheque deposited. [ 15 ] Mr Akram, when asked, spontaneously denied in his testimony having understood that the inscription also referred to all amounts owed for periods before the fiscal year ending June 30, 2012.

He did not understand the words "+ before" to mean this. [ 16 ] In his testimony, Mr Soni denies having received this telephone call. [ 17 ] After the completion of the work, Mr Akram received an additional cheque for $2,000 dated December 24, 2012. The check bears no inscription as to the subject matter. [ 18 ] Mr Akram testifies that he told Mr Soni that he would apply it to the 2012 invoice. [ 19 ] Mr Soni denies this: his testimony is that the $2,000 was given as an advance on the work to be done eventually for the next fiscal year, ending June 30, 2013.

It can be inferred that this work would have commenced in September 2013. [ 20 ] The invoice for the work related to fiscal 2012 is dated March 7, 2013. It is for $16,010 less a " friendly discount (20%)" of $3,202.06, plus taxes for a total of $14,726.27. An amount of $7,748.75, equal to the two cheques received, is deducted, leaving a balance of $6,977.52. [ 21 ] At this point, Mr Akram has decided that he cannot continue to work for Indiport unless the arrears are settled.

He sends the invoice and the March 21 st statement (P-2) with a letter in which he insists upon full payment of the amount of $6,977.52 (P-3).

He makes an offer to " settle the past outstanding balances […] for 20K, and write off the balance of 15K in your favor to show our good will ". [ 22 ] This attempt being fruitless, he sends an email from his Ipad on April 4, 2013 resigning as C.A. and expressing his profound regret (P-5). [ 23 ] He follows this up with a letter of demand through an attorney dated December 11, 2013 (P-4) and the present action on December 27, 2013. [ 24 ] Having not accepted an engagement for the fiscal year ending June 30 2013, he nevertheless receives no word from Indiport.

Mr Soni does not communicate with him, simply accepting the inevitability of the end of the professional relationship. Analysis [ 25 ] Ordinarily, the burden of proving the right to be paid the amounts of the two invoices would be borne by the Plaintiff. [ 26 ] The Defendant, however, does not contest the quality of the work nor does he question the manner in which the fees are calculated.

His defence is based on the allegation that an agreement was reached to settle any outstanding balance owed before October 2012 as well as the current and future obligation for the work that would be completed by the end of December 2012 for a lump sum of $5,000 plus applicable taxes. [ 27 ] This alleged agreement did not follow a dispute about the fee obligation; it is essentially related to the incapacity of Indiport to pay the fair price of the professional services, past, and future. [ 28 ] The parties are in agreement that the effects of receiving and cashing a cheque in full and final payment depend upon a determination of fact.

[ 29 ] An author [1] cites Day v. McLea [2] , as being the « première décision importante sur le sujet ». [ 30 ] Day c. McLea is a decision of the English Court of Appeal of 1889. The Supreme Court of Canada referred to it in 1925 in The Brilliant Silk Manufacturing Co. Inc. [3] , per Duff, J., as follows : The rule laid down in Day v. McLea , has been adopted and given effect to in the Province of Quebec, first in a decision of La Compagnie Paquet v. Paquin and more recently in Royal Trust v.

White , when such a condition is indorsed upon or inserted in the body of the cheque, it is a question of fact in each case whether the creditor has, by words or by conduct, agreed to that condition. (footnotes omitted) [ 31 ] Day v. McLea sets out the classic debate as to whether the principle is a rule of law or a question of fact. Citing a 1879 decision of the Court of Appeal, Miller v.

Davies [4] , Lord Esher, M.R. wrote : It was contended there as in the present case that the fact of the plaintiff keeping the cheque was conclusive in law that he had taken it in accord and satisfaction of the claim, inasmuch as it had been sent in satisfaction and the plaintiff was bound either to keep it upon the terms on which it had been sent or to return it. This Court, however, held that the fact of keeping the cheque was not conclusive in law, that the question was one of fact, and that the jury having found that there was no accord and satisfaction the Court would not interfere.

That case is clearly in point. The question, therefore, whether there has been an accord and satisfaction is one of fact. It was for the judge to decide whether the plaintiffs agreed to take 102 l .18 s . 6 d . in satisfaction of their claim.

The learned judge has found that fact in favour of the plaintiffs and consequently this appeal must be dismissed. [ 32 ] The plea of « accord and satisfaction » [5] corresponds to the more familiar civil law vocabulary : Le défendeur soutient toutefois que l'acceptation par les demandeurs de son chèque marqué in full for rent to first of August , l'empêche de recouvrer même cette somme. L'acceptation d'un tel chèque peut comporter, mais ne comporte pas nécessairement par elle-même, un acquiescement de la part du demandeur aux prétentions du débiteur.

Les circonstances de chaque espèce doivent décider en pareille matière. Dans celle-ci, il est manifeste que les employés de la demanderesse n'ont pas remarqué cette mention et que s'ils l'eussent fait, ils auraient renvoyé le chèque. [6] [ 33 ] In Quebec law as well as in the English common law by which Quebec law was influenced, the debate was resolved in favour of the issue being a question of fact, and not a strict legal principle based on a final release or an estoppel [7] . [ 34 ] Jurisprudence has developed solutions to the recurring problem of the mechanics of the treatment of such cheques.

According to Morin: La solution la plus prudente serait de retourner purement et simplement le chèque en demandant l'émission d'un nouveau chèque ne portant pas la mention litigieuse. Cependant, on admet aujourd'hui que le fait d'expédier une lettre avisant le débiteur du refus de la condition qu'il a exprimée sur le chèque et lui laissant l'opportunité de donner un contrordre de paiement est une réserve suffisante pour empêcher l'application de la mention libératoire.

Si l'auteur du chèque n'en ordonne pas l'arrêt de paiement à la banque dans un délai accordé, cela signifie généralement qu'il renonce à la mention libératoire inscrite sur le chèque. [8] [ 35 ] An abundant jurisprudence, from Balcano [9] to Groupe I-Com inc. [10] , via Standard Life [11] is often studied with reference to the time that should be allowed to the maker of the cheque to stop payment if he does not accept the cashing of the cheque under reserve of the payee’s rights.

But that is not the problem in the present case. [ 36 ] Here it is rather the question whether the cashing of the cheque can be seen as an acceptance of a renunciation or as a transaction which, as the jurisprudence since 1910 indicates, is a question to be determined on the facts of each case [12] . [ 37 ] In the present case, Mr Soni's testimony is complex.

He affirms that a meeting was held to discuss the Plaintiff's request for payment, that the difficult financial position of Indiport was obvious, and that an agreement was reached to settle both the arrears and the future billing for work not yet completed for a global amount of $5,000. If the Court accepts this testimony as credible, it is sufficient to establish the defence, and the inscription on the cheque is simply non-essential corroboration.

There can be no rebuttal to the defence if the Court does not accept Mr Akram's testimony to the effect that no such deal was struck, and that he immediately objected to the inscription and was given the comfort that an additional amount would be paid before the cheque was cashed. [ 38 ] On the whole of this evidence, the burden of proof is on the Defendant, because it is attempting to prove the modification of the legal relationship between the parties by the consensual extinction of obligations that would otherwise exist:

Article 2803. A person seeking to assert a right shall prove the facts on which his claim is based. A person who claims that a right is null, has been modified or is extinguished shall prove the facts on which he bases his claim . [Underlining added for emphasis] [ 39 ] In the Court's view, the Plaintiff's version of the facts is more plausible than that of Mr. Soni. It does not seem likely that Mr Akram would accept to settle the unpaid balance of the 2011 account, plus the total fee for 2012, an aggregate of almost $20,000, for such a small fraction of the total.

This is the sort of thing a creditor would do only if there were a serious dispute about the quality of the work, or a severe insolvency where 25 cents on the dollar is better than nothing. [ 40 ] As well, the payment of $2,000 would not likely be an advance on the work to be done in regard to fiscal 2013, work which would have only started in September 2013. It is more probable that is was a partial payment on the 2012 engagement. This is implied

in the date of the payment, in late December 2012, which corresponds to the time when the work was completed. [ 41 ] If, in fact, this was an advance, Indiport would have claimed it back. No work was ever done for the 2013 fiscal year because the professional relationship was ended. Mr. Akram's resignation from the account occurred in April, well in advance of the end of the financial period to which the review engagement would have related.

The fact that Indiport did not claim back the amount leads to the inference that it did not consider the amount to be an advance on future work. [ 42 ] Why would a professional resign from an account where he had settled all receivables and obtained an advance? Why would a professional resign from an account where there had never been a problem with work done, for a longstanding client, except when his fees were not properly acquitted? [ 43 ] Objectively then, the testimony of Mr Soni, not being plausible, cannot be probable. He fails in his burden of proof of the extinction of the obligation of arrears.

He also fails to counter Mr Akram's credible testimony that he had not made an agreement to accept a small amount in full and final settlement, that he had told Mr. Soni as much, and that he continued to work on the 2012 engagement only after receiving his friends expression of a willingness to pay more.

The Court accepts the Plaintiff's testimony that the $2,000 payment was a partial payment on the 2012 obligation, not an advance on the 2013 engagement that had not yet begun. [ 44 ] Even if the Plaintiff had shouldered the burden of proof on all aspects of the case, the Court would have accepted his testimony as effective in meeting that burden, because is was entirely consistent with the objective elements of fact consisting in the payments and documents, and in accordance with common sense.

BY THESE REASONS, THE COURT: CONDEMNS the Defendant to pay the Plaintiff the sum of $12,172, together with interest at the legal rate of 5% per annum and the additional indemnity provided at

article 1619 of the Civil Code of Quebec , calculated from the date of institution of the proceedings. THE WHOLE with costs. __________________________________ DAVID L. CAMERON, J.C.Q. Maître Stephan Cliche Maître Anne-Marie Bonin Lavoie DS WELCH BUSSIÈRES Attorneys for Plaintiff Maître Robert A. Tobgi Attorney for Defendant Date of hearing: April 17, 2014