2017 QCCA 998, 2017 QCCA 998

Forestier SL inc. c. Gestion Unibec inc. 2017 QCCA 998 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF QUEBEC No.: 200-09-009235-166 (155-17-000020-145) DATE : June 19, 2017 CORAM : THE HONOURABLE FRANCE THIBAULT, J.A. MARIE-FRANCE BICH, J.A. JEAN BOUCHARD, J.A. FORESTIER S.L. INC. APPELLANT – Plaintiff v. GESTION UNIBEC INC. and CORPORATION DE DÉVELOPPEMENT WASWANIPI RESPONDENTS – Solidary defendants DECISION [ 1 ] The appellant appeals from a judgment rendered February 18, 2016 by the Superior Court, District of Roberval (the Honourable Sandra Bouchard), which allowed in

part its action on account, ordered the respondent Gestion Unibec inc. (hereinafter “Unibec”) to pay it $248,572.20 and dismissed its application against the respondent Corporation de développement Waswanipi (hereinafter “CDW”). [1] 1- Background [ 2 ] The appellant and Unibec work in logging. CDW offers support services to businesses. [ 3 ] On April 30, 2013, Unibec and CDW signed a joint venture agreement. The two partners each made an initial investment of $250,000.

They pooled their respective expertise with a view to taking over the operation of the Nabakatuk sawmill – owned by Nabakatuk Forest Products, a general partnership formed by Mishtuk Development Corporation and CDW – according to the terms and conditions contained in the agreement. The profits were distributed on a percentage basis, with 51% going to CDW and 49% to Unibec. [ 4 ] On June 20, 2013, the appellant and Unibec entered into a verbal agreement under which the appellant undertook to cut trees on Unibec’s behalf. They agreed on a price of $17.50 per cubic metre of wood.

The appellant left the cut trees on the side of the road and Unibec transported them to the sawmill for processing. [ 5 ] The appellant began cutting trees on June 21, 2013. [ 6 ] Unibec made payments totalling $210,000, that is, $25,000 on August 12, 2013; $25,000 on August 19, 2013; $25,000 on August 26, 2013; $25,000 on September 5, 2013; $35,000 on September 11, 2013; $50,000 on October 1, 2013; and $25,000 on October 25, 2013.

[ 7 ] On October 10, 2013, the appellant had to remove a piece of equipment from the site because it needed to be repaired. Unibec then owed the appellant $232,833.78. The appellant demanded to be paid before continuing the work. [ 8 ] The appellant remained unpaid and therefore removed its machinery from the site. On December 18, 2013, it sent Unibec a notice of default for $232,833.78. [ 9 ] On March 12, 2014, the appellant instituted an action on account of $248,572.20 against Unibec. CDW was impleaded as a client doing business with Unibec. The proceedings did not include any conclusion with regard to CDW.

On August 29, 2014, the appellant amended its proceedings. It added CDW as a defendant. It had learned of the existence of the joint venture agreement between Unibec and CDW during the examination after defence of Unibec’s representative Hervé Renaud. [ 10 ] The appellant claimed the $248,572.20 unpaid balance solidarily from Unibec and CDW. The action was based on the liability of Unibec and CDW, partners in an undeclared partnership, as well as on unjust enrichment. [ 11 ] Unibec did not present a defence. CDW invoked the absence of a legal link with the appellant.

In addition, it argued that the conditions of unjust enrichment had not been met. 2- Judgment in first instance [ 12 ] The judge concluded that the action instituted by the appellant against Unibec was well-founded. She ordered Unibec to pay the appellant $248,572.20.

However, she dismissed the action with respect to CDW. [ 13 ] The judge noted that: (1) a joint venture agreement is of the same nature as an undeclared partnership within the meaning of articles 2250 and following of the Civil Code of Québec ; (2) a partnership of this type may be undisclosed or apparent; and (3) the liability of the partners varies depending on whether the partnership qualifies as a undisclosed or an apparent partnership. [ 14 ] In this case, the judge was of the opinion that the partners in the joint venture agreement were acting within the framework of an undisclosed undeclared partnership.

Until the examination after defence, the appellant was unaware of the existence of the joint venture agreement and the undeclared partnership between Unibec and CDW. The appellant had negotiated and contracted with Unibec. Nothing led it to believe that it was doing business with anyone other than Unibec. The cheques remitted to it were drawn on Unibec’s bank account. CDW did not know the terms and conditions of the agreement between Unibec and the appellant. No common name was given to the partners in their joint venture agreement. The agreement was not published.

Nothing attested that third persons were aware of the existence of the undeclared partnership that existed between Unibec and CDW. [ 15 ] The law stipulates that each partner in such a partnership contracts in his or her own name and is alone liable to third persons. Therefore, the judge concluded that CDW could not be ordered to pay the appellant the unpaid balance of the account arising from the agreement between it and Unibec. [ 16 ] The first instance judge also assessed the appellant’s claim against CDW from the angle of unjust enrichment.

She concluded that the appellant had not established CDW’s enrichment. [ 17 ] Lastly, the judge dismissed the argument put forward by the appellant to the effect that CDW’s operating deficits arose from its negligence and carelessness in managing the joint venture agreement. Whether the undeclared partnership was poorly managed or not did not change the fact that it was an undisclosed partnership. In such cases, each partner is liable for its debts. [ 18 ] The appellant’s action against CDW was therefore dismissed.

3- Issues [ 19 ] The appellant asks two questions: - Did the first instance judge err in concluding that the respondents, who signed the joint venture agreement, acted in the context of an undisclosed undeclared partnership? - Did she err in analyzing the criteria for unjust enrichment? 4- Analysis 4.1. Undisclosed undeclared partnership [ 20 ] The appellant argues that the judge erred in her assessment of the evidence when she concluded that the nature of the relationship between Unibec and CDW was that of an undisclosed undeclared partnership.

According to the appellant, the evidence showed that its representative knew that the cut trees would be shipped to the Nabakatuk sawmill. The representative also knew that Unibec was working in collaboration with CDW, the sawmill’s owner. On the basis of these elements, the judge could have concluded that an apparent undeclared partnership existed.

The judge’s error consisted in confusing knowledge of the existence of an undeclared partnership with knowledge of a written agreement providing for the terms and conditions of that partnership. [ 21 ] Undeclared partnerships are governed by articles 2250 and following C.C.Q.

Article 2253, relevant to this appeal, stipulates: 2253. Chaque associé contracte en son nom personnel et est seul obligé à l'égard des tiers. Toutefois, lorsque les associés agissent en qualité d'associés à la connaissance des tiers, chaque associé est tenu à l'égard de ceux-ci des obligations résultant des actes accomplis en cette qualité par l'un des autres associés. 2253.

Each partner contracts in his own name and is alone liable to third parties. [sic] However, where the partners act in the quality of partners to the knowledge of third persons, each partner is liable to the latter for the obligations resulting from acts performed in that quality by any of the other partners. [ 22 ] The law provides that each partner contracts in his or her own name and is alone liable to third persons (art. 2253, para. 1 C.C.Q. ).

A partnership thus exists only with respect to the relationships between the partners, with the result that [ translation ] “there is no apparent partnership, but only a manager with whom third persons contract without knowing the real truth of the partnership”. [2] This manager acts in his or her own name and, therefore, [ translation ] “third persons have no direct recourse against the partners”. [3] [ 23 ] The second paragraph of

article 2253 C.C.Q . provides for the case where an undeclared partnership becomes apparent. The partners then act in their capacity as partners and to the knowledge of third persons. [ 24 ] Two liability regimes exist depending on whether a partnership is undisclosed or apparent:

[ translation ] - When a partner (manager) acts alone with respect to third persons without disclosing his or her status as a partner, the partnership is unknown or undisclosed to third persons : • Only the partner (manager) is liable to third persons. - When partners qua partners to the knowledge of third persons, the partnership is disclosed to third persons and becomes apparent : • All of the partners become liable to third persons . [4] [ 25 ] The legislator contemplates two different consequences depending on the nature of a partnership: (1) if a partnership is undisclosed , each partner contracts in his or her own name and is alone liable to third persons; (2) if a partnership is apparent , all of the partners are liable to third persons for the obligations resulting from acts performed by any of the other partners acting as such, and are solidarily liable in the case of debts contracted for the operation of a common enterprise (arts. 1525 and 2254 C.C.Q. ). [5] [ 26 ] In the case at bar, the grounds of appeal require that it be determined whether it was apparent and to the knowledge of the appellant that Unibec acted as CDW’s partner.

In that case, the partnership was disclosed or apparent.

Unibec and CDW would then be solidarily liable for each other’s obligations with respect to the appellant. [ 27 ] Conversely, if Unibec acted in its own name with the appellant, without disclosing its status as a partner of CDW, the undeclared partnership was undisclosed and Unibec alone was liable for its acts. [ 28 ] The parties do not question the fact that the joint venture agreement was characterized as an undeclared partnership. [6] Their difference of opinion is based on whether the nature of the partnership between Unibec and CDW was undisclosed or apparent. [ 29 ] As the first instance judge pointed out, [7] the evidence showed that Unibec contracted with the appellant directly and in its own name, without disclosing its contractual link to CDW.

The appellant thus fulfilled its obligations without knowing that a link existed between CDW and Unibec and, therefore, without knowing that the joint venture agreement existed between them. [ 30 ] As the appellant acknowledged in both its amended motion to institute proceedings [8] and its factum on appeal, it learned of the existence of the partnership between Unibec and CDW and the joint venture agreement for the operation of the Nabakatuk sawmill during the examination after defence of Unibec’s representative. [ 31 ] According to the trial judge’s assessment, the evidence did not establish that the appellant knew a joint venture agreement or an undeclared partnership existed between Unibec and CDW during the time that they were doing business together. [ 32 ] The appellant did not point to any palpable and overriding error in the judge’s analysis that would justify the Court’s intervention. [9] The fact that it knew the wood was to be shipped to the Nabakatuk sawmill, owned by CDW, is not sufficient to demonstrate the existence of a partnership between Unibec and CDW and to make their partnership apparent.

Similarly, the fact that Unibec did business with CDW is not sufficient to prove that a partnership existed between them. [ 33 ] The judge did not confuse the notion of [ translation ] “knowledge by third persons of a partnership” with that of [ translation ] “knowledge by third persons of a written contract providing for the terms and conditions of the said partnership”. Paragraph [34] of the first instance judgment demonstrates that the judge looked for evidence of the appellant’s knowledge of the partnership and not of its knowledge of the partnership contract.

[ 34 ] Consequently, the first ground of appeal must be dismissed. 4.2 Unjust enrichment [ 35 ] The appellant submitted that, without its work, the felled wood could not have been transported and processed at the Nabakatuk sawmill owned by CDW. In its opinion, the sale of the wood that it had cut generated revenues for CDW.

The presence or absence of a deficit in the latter’s statement of earnings is not relevant to determining the existence of enrichment. [ 36 ] The judge allegedly committed a palpable and overriding error in concluding that CDW had not been enriched, given that the latter’s president had declared during her testimony that the sale of wood processed at the sawmill had brought in $100 per cubic metre for the 23,773 cubic metres of wood the appellant had delivered. [ 37 ] The appellant said that CDW’s difficult financial situation was due to its poor management and negligence.

The latter cannot invoke its own turpitude to demonstrate that it was not enriched at its expense. [ 38 ] Articles 1493 and following of the Civil Code of Québec codify the criteria for unjust enrichment. The plaintiff must establish the enrichment of the person being sued, his or her own impoverishment, a correlation between the enrichment and the impoverishment, the absence of justification, the absence of fraud and the absence of any other remedy. [ 39 ] In the case at bar, the judge concluded that the appellant did not prove CDW’s enrichment.

That factual determination was based on the evidence and the appellant did not establish the existence of a palpable and overriding error. [ 40 ] The appellant proposes the following syllogism. It delivered wood to CDW. After processing, the latter sold the wood at a price it calculated by simple multiplication (sale price x quantity sold). CDW thus made a profit on the wood sold. [ 41 ] It is probable that the sale of the processed wood brought in sums of money. But that does not constitute proof of enrichment within the meaning of the Civil Code of Québec .

Based on the case law, [10] the appellant had to establish the extent of CDW’s enrichment. It failed to do so. Although it established the sale price of the wood, it did not prove the portion associated with the cost of transporting and processing the wood, with the result that it is impossible to know whether and to what extent enrichment occurred. [ 42 ] In addition, the evidence revealed that CDW did not receive any income from the sale of the wood. According to the testimony of CDW’s representative, no bank account was opened for the undeclared partnership and, therefore, no sums of money could be deposited.

Similarly, no proceeds from the sale were deposited in CDW’s bank account. In fact, it was Unibec that received and benefited from income from the sale of the wood. [ 43 ] Lastly,

article 1495 C.C.Q. stipulates that an indemnity is due only if the enrichment continues to exist on the day of the demand. The evidence showed that CDW did not derive any benefit from the venture with Unibec. The statement of earnings attests that it incurred major losses. The appellant does not deny this fact, but argues that CDW cannot plead this because it results from CDW’s negligent administration of the joint venture agreement.

Even if the appellant was right in saying that CDW was marginally involved in administering the joint venture agreement, nothing indicates that its inaction constituted negligence, or that this caused or contributed to the losses suffered. [ 44 ] At the hearing, the appellant filed a motion to adduce new evidence in order to establish Unibec’s insolvency. The motion will be granted. THEREFORE, THE COURT: [ 45 ] GRANTS the motion to adduce new evidence, without legal costs;

[ 46 ] DISMISSES the appeal, with legal costs. FRANCE THIBAULT J.A. MARIE-FRANCE BICH J.A. JEAN BOUCHARD J.A. Mtre. Éric Le Bel Fradette & Le Bel For the appellant Mtre. Simon Corriveau Cain, Lamarre For the respondent Corporation de développement Waswanipi Date of hearing: June 15, 2017