2018 QCCQ 1553, 2018 QCCQ 1553

Source: Court of Québec

Date: 2018-02-28

Jurisdiction: Quebec

Citation: 2018 QCCQ 1553

Opinion

C.D. Barcados Co. Ltd. c. 9192-7228 Québec inc. 2018 QCCQ 1553 COURT OF QUÉBEC CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTRÉAL “ Civil Division” No: 500-22-238332-178 DATE: February 28, 2018 ______________________________________________________________________ BEFORE THE HONOURABLE MARIE-JULIE CROTEAU, J.C.Q. ______________________________________________________________________ C.D. BARCADOS CO. LTD. Applicant v. 9192-7228 QUÉBEC INC. -and- BASAL DIAMONDS INC.

Respondents ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] C.D. Barcados CO. Ltd. (“ Barcados ”) is asking the Court to homologate a transaction allegedly entered into with 9192-7228 Québec inc. (“ 9192 ”) and Basal Diamonds inc. (“ Basal ”) on or about December 6, 2016. [ 2 ] Barcados claims that the outstanding balance of $31,541.07 for goods delivered and unpaid for was settled in consideration of a full and final payment of $15,000. 00.

Barcados contends that the essential elements of the transaction were agreed upon verbally before there were any written documents exchanged. [ 3 ] 9192 and Basal argue that the draft of the Receipt and Release submitted by Barcados changed the essential elements and reopened the negotiations, thus allowing them to withdraw from the discussions and preventing any transaction to be completed. QUESTION AT ISSUE [ 4 ] Was a transaction entered into by the parties and if so, what were its terms and conditions?

CONTEXT [ 5 ] Barcados is a company specialized in selling coloured stones mainly in Canada. [ 6 ] As part of its business, Barcados sells and delivers coloured stones to Basal , a company that supplies stores in C anada with diamonds and diamond jewellery. [ 7 ] 9192 is a company that operates under the name of Northern Creations and is a mutual client of Barcados and Basal. [ 8 ] Between 2009 and 2011 , Mr. Alex Barcados , one of Barcados' administrator s , exchanged several emails with Mr. Peter Gray , President of Northern Creations , concerning unpaid invoices. During this period , Mr. Barcados sent Mr.

Gray different “Statement and Aged Receivables ” [1] . [ 9 ] On November 21, 2011, Mr. Barcados sent an email to Mr. Shay Basal from Basal, with a copy to Mr. Gray and Mrs. Susan Barcados (another of Barcados’ administrators) [2] : Dear Shay, It was good to see you last week. Thank you for your commitment to deal with Northern Creation’s balanc es owed to C.D. Barcados Co. Ltd. and Paragon Fine Jewellery Ltd. I reviewed our conversation with my business partners, and we would like to accept your offer to transfer half of the outstanding Northern Creations balances owed to C.D. Barcados Co.

Ltd. and Paragon Fine Jewellery Ltd. to Basal Diamonds at this time. In late December I look forward to addressing the remaining balance s owed by Northern Creation s, and creating a payment plan. I have attached a letter to this email, please sign and fax it back to my office at 416-863-6263. Thank you. [ 10 ] On December 8, 2012, Mr. Barcados and Mr. Gray exchanged emails [3] : Hi Alex, I hope Shay is taking care of the past and all is well for you. […]

Hi Peter, We’re still only part way there in regards to Shay. I’m hoping to get more post-dates soon, as the first set is about to run out. […] [ 11 ] On January 8, 2013, Mr. Barcados sent an email to Mr. Basal and Mrs. Meg McCallum , on e of Basal’s employees, along with a “

Summary of Account ” outlining the balance respectively owed by Northern Creations ($31,541.07) and by Basal ($12,110.95) [4] . [ 12 ] On April 24, 2013, Mr. Barcados sent an email to Mr. Basal [5] : Dear Shay, Thank you for your phone call today. I look forward to receiving the post-dates you mentioned starting in late May. Thank you for repeating you r commitment to clear the outstanding balance in full this year. I have attached a copy of the January 8th letter outlining the account balance for your reference. [ 13 ] On November 7, 2013, Mr. Barcados wrote to Mrs.

McCallum [6] : Hi Meg, I spoke with Shay this morning and he asked me to send you a current statement in preparation for his visit next Thursday. I have attached a PDF outlining the balance. [ 14 ] On January 31, 2014, a follow-up email is sent by Mr. Barcados [7] : Hi Shay, I hope things are going well. I’m following-up on your conversation with Susan. Meg and you were going to review our account a t the end of January in order a [ sic ] arrange a new set of cheques to clear up the account this year. Please let me know when we should expect to receive the cheques. Thank you. [ 15 ] On March 27, 2014, Mr.

Barcados sent a “

Summary of Account ” to Mrs. McCallum [8] : Dear Meg, As per y our telephone request with Susan, please find attached the

Summary of Account. [ 16 ] On January 20, 2015, Mr. Barcados sent to Mr. Basal and Mrs. McCallum another “

Summary of Account ” in order to confirm t he total outstanding balance [9] : Dear Shay and Meg, As per my conversation with Shay today, please find a copy of the total outstanding balance. Thank you. [ 17 ] The “ Statement of Account ” dated January 20, 2015 outlined the same balance of $31,541.07 due by Northern Creations , while outlining that Basal had no more balance owed to Barcados. [ 18 ] On September 28, 2015, Mrs. Barcados wrote to Mrs. McCallum [10] : Dear Meg, I hope you had a nice weekend. Attached please find the current statement.

I spoke to Shay Basal this morning and he asked me to send you this statement. Shay plans to meet with you this week to discuss our account and says he will send us a series of cheques next week. We look forward to receiving the cheques. [ 19 ] Mr. Barcados testified that in late 2016, Mr. Basal directed him to Mrs. Karen Basal to pursue the discussions concerning the outstanding balance owed to Barcados. [ 20 ] Mr. Barcados then contacted Mrs. Basal who confirmed that she was instructed to deal with the issue since Mr. Basal was no longer in charge of the matter.

They agreed that in exchange of an amount of $15,000.00, Barcados would erase the entire debt. In other words, in exchange of the payment, Barcados would release Basal and Northern Creations . Mr. Barcados declined Mrs. Basal’s invitation to prepare a note to that effect and rather suggested that she take care of it in order to avoid going “ back and forth ” . [ 21 ] Mrs. Basal has a different recollection of the events. Her testimony can be summarized as follows: • Mrs. Barcados called and infor med her that Basal owed $30,000. 00; • Although Mrs.

Basal was “ not aware of the logistic s” , she immediately offered $10,000.00, “in good faith” ; • Mrs. Barcados refused and counter-offered $18,000.00; • She later spoke to Mr. Barcados and they agreed on $15,000.00 . However, during this telephone conversation, she said that

she had to verify with her lawyer beforehand because Barcados is based in Ontario and Basal is situated in Québec. She explained that by doing so she wanted to protect her company from the application of Ontario law . She also wanted to make sure that Barcados could not “ come back ” against Basal. • She then phoned Mtre Joey Zukran and instructed him to prepare a Receipt and Release. The only information she gave Mtre Zukran was the agreed amount of $15,000.00 , the payment by post-dated cheques and the fact that the release had to be in favour of Basal and Northern Creations. [ 22 ] On November 16, 2016, Mrs.

McCallum sent an email to Mr. Barcados [11] : Hi Alex, Can you please sign this document and send it back and then we will get the checks out to you. [ 23 ] The document referred to in the email is the Release and Transaction prepared by Me Zukran [12] . [ 24 ] Mr. Barcados was surprised with the length of Basal ’s d raft because up to that point, discussions with Basal had always been conducted on the basis of a “ handshake and verbal agreement”. [ 25 ] Mr. Barcados sent Basal ’s d raft to Barcados’ attorney. [ 26 ] On December 6, 2016, Mr.

Barcados wrote [13] : Hi Meg, I finally got our lawyer to look over the letter and get it back to me. Of course there are some changes, but the dates and amounts are unchanged. Please confirm that the changes are acceptable and I will get a signed copy out to right away. I look forward to getting the post dated cheques as discussed with Karen and putting this behind us.

Thanks. [ 27 ] As mentioned in this email, Barcados’ lawyer had made changes that were outlined using the “track changes” mode [14] . [ 28 ] In order to illustrate some of the changes that were made, what follows is a partial comparison of the drafts (the modified paragraphs are reproduced in grey in the table below ) : d raft of the r elease submitted by basal draft of the release submitted by B arcados WHEREAS Barcados was providing and selling goods to Northern Creations.

WHEREAS Barcardos claims that the amount of $31,541.07 is owed to it by Northern Creations (hereinafter the “Claim”); WHEREAS Barcados’ Claim is prescribed. WHEREAS Barcados’ Claim is prescribed. WHEREAS Barcados takes the position that Northern Creations is indebted to it for the sum of $31,541.07 (The “Dispute”) ; WHEREAS Basal, owing no sums whatsoever to Barcados, in good faith, intervenes herein to settle the dispute between Northern Creations and Barcados.

WHEREAS in order to avoid the costs and inconveniences of further litigation, Barcados, Northern Creations a nd Basal have agreed to definitive ly resolve and settle all matters between them on the following terms and conditions; NOW THEREFORE, the parties to the present Release and Transaction (hereinafter the “Release”) hereby agree, undertake and represent as follows: […] 1. The

Preamble shall form an integral part of the Release as if recited herein at length; 2. Settlement Payment In consideration of the terms and conditions set out in the present Release, Basal, hereby agrees to pay Barcados the following amounts, in full and final settlement in capital, interest and costs, for any past, present or future claims that Barcados had, has, or may have against Basal or Northern Creations:

i) an amount of $15,000.00 payable as follows […] In consideration of the terms and conditions set out in the present Release, Basal, hereby agrees to pay Barcados the following amounts, in full and final settlement in capital, interest and costs, for any past, or , present or future claims only as they relate to the Dispute that Barcados had or , has, or may have against Basal or Northern Creations:

i) an amount of $15,000.00 payable as follows […] 3. Release

In consideration of the integral and timely payment of the Settlement Payment to Barcados and subject to Basal’s compliance with the terms and conditions set forth herein, Barcados hereby:

i) gives and grants unto Basal, Northern Creations and Peter Gray, a full and final release, in capital, interest and costs, in regard to any right, action, complaint, claim, cause of action, damage, demand or recourse of any nature whatsoever, or any other claims which Barcados directly or indirectly had, has or may in future have with respect to the Dispute only against Northern Creations and Basal together with its parent companies or corporations, subsidiaries, divisions, related companies, partnerships or corporations of the same group as well as their respective partners, directors, officers, administrators, shareholders, employees, representatives and/or professional advisors, regardless of the period during which they held these positions, save and except in regards to any claim stemming from the failure to abide by any obligation or undertaking set out in this Release; ii) in the event that any of the payments by Basal are not honoured, and such default is not rectified within 3 days’ notice by regular mail or email (1255 Robert-Bourassa, #460, Montreal, Quebec, H3B 3B6 shay@basaldiamonds.com), Balsal will consent to judgement in favour of Barcados for the sum of $15,000.00 (FIFTEEN THOUSAND DOLLARS).

Miscellaneous 4. The parties hereby agree that the Release constitutes a binding transaction within the meaning of articles 2631 and following of the Civil Code of Quebec . 5. The payment of the Settlement Payment (or any part thereof) is entered into without any admission of liability on the part of Basal and Northern Creations. 6.

The Release shall benefit to and be and remain binding upon the parties, their legal representatives, successors, heirs and permitted assigns and shall be governed and construed in accordance with the laws of the Province of Quebec Ontario and any action or claim for enforcement of the settlement a provision herein shall be instituted adjudicated before the competent Court sitting in the exclusively in the jurisdiction of the Ontario Superior Court and the parties attorn to the province of Ontario as the forum conviniens Judicial District of Montreal ; 10.

The parties agree that this Release becomes effective once the checks forming the Settlement Payment have been sent by Basal to Barcados. 10.

The parties agree that this Release becomes effective upon receipt by Barcados of the final payment once the checks forming the full Settlement Payment have been sent by Basal to Barcados . d raft of the r elease submitted by basal draft of the release submitted by B arcados [ 29 ] As it appear s from the aforesaid modifications , Barcados withdrew the reference made with respect to the debt being prescribed and added its contention that Northern Creations was indebted to it. Barcados also changed the jurisdiction clause to attorn jurisdiction to Ontario and added a consent to judgment clause.

The clause confirming that Basal was intervening in good faith to the settlement although owing nothing to Barcados remained unmodified. The same goes for the confirmation of a payment of $15,000.00 by Basal in exchange of a full and final release in its favour and in favour of Northern Creations . [ 30 ] Early January 2017, Mr. Barcados phoned Mrs. Basal to follow-up , but he was unable to reach her . After a few calls, he was instructed to contact Mtre Zukran directly. [ 31 ] The conversation between Mtre Zukran and Mr. Barcados was recorded by the latter [15] .

During the discussion, Mtre Zukran said : • You made some chan ges;

• They were submitted to me; • They refuse the changes; • The claim is prescribed; • They tell me they don’t owe you any money . [ 32 ] Right before the end of the conversation, Mtre Zukran suggested that Mr. Barcados hire a lawyer. When Mr. Barcados mentioned the possibility of retaining the services of a collecting agent, Mtre Zukran advised him to be careful because Basal could then sue Barcados and it could end up being liable for damages. [ 33 ] Mr.

Shay Basal testified at trial and explained that Basal could not agree with the changes made by Barcados and that the most important one concerned the jurisdiction clause. That being said, when asked specifically to explain what happened after receiving Barcados’s draft of the release, he said: So when we did the first version, it was strictly for amicably, between parties with a mutual friend, mutual client and we could both say mutual friend, mutual client because like you have seen in one of your exhibits, I think Mr. Gray even reached out to Mr. Barcados with a new venture that he did.

So we have a mutual friend which is Northern Creations, which is Mr. Gray, with the company 9192-7228, that owed Mr. Barcados and Basal Diamonds monies and when Mr. Gray came to us to help him out, which we amicably tried, we came to a decision to buy an amount, $15,000.00, to come and somehow work with Mr. Barcados on behalf of Mr. Gray. But when they came with all the changes, we felt, we felt, that it was a little bit abusive and our amicably became a little bit a business side and that the debt is, is, – the proper word …– will carry the debt on Northern Creations when we did not have any of Mr.

Barcados goods shipped to us directly. So that’s what changed the complete agreement. So that’s why we, at that point, we said, you know what, we don’t owe you guys any money. All of this was amicably done and it’s going too far. I think that’s where we drew the line and that’s why we are here today. […] Today my Lady, I think we, we came just to a position saying all the time we were amicably, we’re trying, we are not even, the debt is not ours and at that point we contact Mr. Gray and told him, listen, the debt is not ours, whatever happened after the Court, you’ll have to settle it with Barcados if need be.

Towards the end, I think that we felt that the position, the debt is not ours, it’s not owed. It’s owed through the 919 company that Peter Gray run, that still owes us also money through the company. ANALYSIS Was a transaction entered into by the parties and if so, what were its terms and conditions? [ 34 ] The Civil Code of Québec (“ C.c.Q. ”), at articles 2631 and 2633 , sets out the definition of a transaction and the effect of same between the parties: 2631 .

Transaction is a contract by which the parties prevent a future contestation, put an end to a lawsuit or settle difficulties arising in the execution of a judgment, by way of mutual concessions or reservations. A transaction is indivisible as to its object. 2633. A transaction has, between the parties, the authority of a final judgment (res judicata).

A transaction is not subject to compulsory execution until it is homologated. [ 35 ] Over the years, the Courts have established the principles applicable regarding transaction: • the agreement between the parties must have three elements in order to be considered a transaction [16] : 1. the purpose of the agreement is to put an end to ongoing litigation or to a litigious situation; 2. each party grants concessions to the other; 3. the parties arrive at a consensus on the essential elements of their transaction; • the consent of the parties and the exchange of their will as to the essential elements of the agreement crystallizes the transaction; • the transaction does not require a particular form, nor must it be in writing.

In other words, verbal consent is sufficient to create a transaction [17] . • the transaction can be evidenced by any exchange of correspondence between the parties or the parties’ attorneys; • the formation of a transaction agreement – a contract – has to be distinguished from the document evidencing such agreement;

• when asked to homologate a transaction, a trial judge must, while keeping in mind the applicable conditions and principles, undertake an evidence-based factual analysis to determine whether there was a meeting of the minds on the essential terms and conditions giving rise to the transaction [18] ; • while the judge may examine the conduct of the parties as a factual indicator of the existence or not of the transaction, it remains a question of fact that is left to the judge’s appreciation of the evidence made at trial. [19] [ 36 ] The Court concludes, based on the preponderance of evidence , that Barcados has met its burden of proving that a verbal agreement was entered into between Mr.

Barcados and Mrs. Basal during a telephone conversation. [ 37 ] The terms of the transaction were rather simple: a payment of $15,000.00 by Basal that would erase the balance of $31,451.07 outlined in the latest “Summary of Account” that Basal received. In exchange of the payment, Barcados would give a full, final and complete release to Basal and Northern Creations. [ 38 ] The Court concludes that there were never any other discussions regarding other essential elements of the transaction. [ 39 ] The Court emphasizes that Mr. Barcados was very credible in his testimony and prefers his recollection to Mrs.

Basal’s regarding the conversation that took place between them at the end of 2016. The correspondence exchanged prior to this telephone conversation corroborates Mr. Barcados’ version. [ 40 ] Conversely, Mrs. Basal’s testimony was far less credible and appeared to be aimed only at demonstrating that the jurisdiction clause was an important element for her. Both companies, although based in different provinces, had been doing business together for several years. If the jurisdiction issue had been so important to Basal, it would certainly have been raised earlier.

The evidence adduced at trial does not establish this. [ 41 ] Furthermore, if the jurisdiction clause had the importance that Basal now wants to give it to justify its refusal to pay the $15,000.00 agreed upon, why is it that Mtre Zukran never mentioned it during his conversation with Mr. Barcados? He did explain that his client refused the proposed modifications, but he put the emphasis on the fact that the debt was prescribed and that Basal believed it did not owe anything to Barcados. [ 42 ] Moreover, Mr.

Basal’s testimony rather demonstrates that Basal’s refusal to acknowledge the transaction is simply motivated by a change in its position after the deal. Whether Basal became of the opinion that Northern Creations should be paying for its own debt, the transaction with Barcados had already been formed.

Basal had no longer the option to change its mind. [ 43 ] Consequently, the analysis of the exhibits and the testimony at trial shows that the three criteria set out by the jurisprudence are met: • The purpose of the agreement was for Basal to pay the outstanding claim owed by Northern Creations to Barcados: o As explained by Mr. Basal, Mr. Gray, through Northern Creations, was a mutual friend and client of Basal and Barcados. o Northern Creations owed monies to Barcados, and Basal as well. o At the time of the discussions, Mr.

Gray was the main buyer for a company that Barcados and Basal both supplied with stones. Consequently, Barcados and Basal both had interest in making Mr. Gray happy. o Mr. Basal’s testimony, as well as the emails exchanged since 2011, clearly demonstrate the intention of Basal to deal with Northern Creations’ balance owed to Barcados and to intervene in its favour. Moreover, the emails sent to Basal from January 20, 2015 were accompanied with a “Summary of Account” addressed to Basal which outlined no balance owed by Basal, but rather only by Northern Creations.

Despite this, an amount of $15,000.00 was agreed upon between Barcados and Basal. • The parties made reciprocal concessions since the settlement was for an amount that was less than the balance owed. Furthermore, for the reasons mentioned earlier, both Barcados and Basal had business interest in making Mr. Gray happy. • The parties arrived verbally at a consensus on the essential elements of their transaction. FOR THESE REASONS, THE COURT: GRANTS C.D. Barcados Co. Ltd.’s Application for homologation of a transaction. HOMOLOGATES the transaction between C.D. Barcados Co.

Ltd., Basal Diamonds inc. and 9192-7228 Québec inc. DECLARES that the terms and conditions of the transaction are as follows: • Basal Diamonds inc. agrees to pay C.D. Barcados Co. Ltd. $15,000.00, in full and final settlement, in capital, interest and costs, of the latter’s claim of $31,541.07. • In consideration of the payment of $15,000.00, C.D. Barcados Co. Ltd. grants Basal Diamonds and 9192-7228 Québec inc., a company doing business under the name Northern Creations, a full and final release, in capital, interest and costs, of its $31,541.07 claim. IN FURTHER EXECUTION OF THE TRANSACTION BETWEEN C.D.

BARCADOS CO. LTD., 9192-7228 QUÉBEC INC. AND BASAL DIAMONDS INC., THE COURT: CONDEMNS Basal Diamonds inc. to pay $15,000.00 to C.D. Barcados Co. Ltd., with interest at the legal rate, plus the additional

indemnity provided by law, accrued from April 13, 2017. THE WHOLE, with legal costs against Basal Diamonds inc. and 9192-7228 Québec inc. on the Application for Homologation of a transaction. __________________________________ MARIE-JULIE CROTEAU, J.C.Q. Date of hearing: September 7, 2017 Mtre Samuel Bachand langlois lawyers, llp Attorney for C.D. Barcados Co. Ltd. Mtre Daniel Brook Attorney for 9192-7228 Québec inc. and Basal Diamonds inc.

Loading document…