2018 QCCQ 5731, 2018 QCCQ 5731

To c. Heng 2018 QCCQ 5731 COURT OF QUÉBEC Small Claims Division CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division No: 500-32-700048-160 DATE: July 24, 2018 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ JACKLINE TO Plaintiff v.

SINATH HENG Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] The Plaintiff, Jackline To sues the Defendant, Sinath Heng for the balance of $ 12,500 on a loan of an amount of $ 20,000. [ 2 ] Mr Heng contests owing the balance, stating that Mrs. To is in default because of the failure to provide good title to restaurant equipment that he purchased, the true business relationship between the parties being the sale of a business for $ 20,000, not a loan.

He makes a cross demand for $15,000 alleging that he was unable to resell the restaurant because he could not establish his ownership of the restaurant equipment, which was supposed to be part of the restaurant assets he purchased. Facts [ 3 ] The purported loan is evidenced by a notarised deed entered into on October 26, 2013 (P-2). The borrowers are Mr. Heng and another individual, Sophal Teav. [ 4 ] The document is, however a simulation, as both parties admit under oath that the contract entered into on that date was not a loan, it was the sale of a restaurant business to Messrs. Heng and Teav. Mrs.

To and her husband, Mr. Van Lam Nguyen, had been operating the business, known as Restaurant Samourai 2013 , up until that time. No money was advanced to the borrowers, despite what was declared to the notary. Upon signing the deed of loan, they were given the keys to the restaurant. [ 5 ] The building in which the business was carried out had been sold By Mrs. To and her husband to a corporation, 9206-8410 Quebec Inc., the principal of which is a certain Kevin Donovan, under a deed of sale dated September 5, 2012 (P-1). After the sale, Mrs.

To and her husband continued to operate the restaurant, having a lease for the premises with the new owner. [ 6 ] Neither Mrs. To nor Mr. Heng can explain why the document is in the form of a loan. Mr. Heng testifies that his understanding of English was not sufficient to grasp what he was signing. One possible explanation is that a deed of loan would make it more difficult for Revenue Québec to establish that there was the sale of a business, with potential capital-gains or business-revenue tax implications for Mrs.

To and her husband, than would be the case with a dead showing a price of $ 20,000 for specific assets. A loan would look like a tax-neutral transaction. However, this is conjecture. [ 7 ] After purchasing the restaurant, Mr. Heng and his business partner, Mr. Teav entered into a lease with 9206-8410 Quebec Inc. under private writing on October 25 2013 (D-2). [ 8 ] After operating the restaurant for around six months, paying rent to the lessor and using the equipment and furniture in the premises, Mr. Heng acquired the interest of his partner, the deal taking the form of the sale by Mr. Teav to Mr.

Heng of his share in a general partnership. ( Vente d’une part dans une société en nom collectif (P-3)) [ 9 ] The deed describes the business of the partnership, listing the elements of the restaurant, including the equipment and furniture. Mr. Heng assumes Mr. Teav’s liability under the loan agreement (P-2) and Mrs. To intervenes in the agreement to accept this. [ 10 ] Mr. Heng carried out the restaurant on his own until abandoning it, leaving the equipment and furniture in place, around February 2015. He ceased payments of $ 500 that he had been making until then totalling $ 12,500.

The reason he gives is that, when he attempted to sell the restaurant business to a third party, Mr Donovan, refused to permit the deal, claiming to be the owner of the equipment, having purchased it from Mrs. To and her husband. Both Mrs. To and her husband testified to deny having sold the equipment to Mr Donovan, confirming that it was part of the sale of the restaurant business to the Plaintiff and Mr. Teav. [ 11 ] Mr. Donovan was not called as a witness by either party.

Analysis [ 12 ] It is particularly surprising that Mr Heng replaced much of the equipment in the course of his operation of the restaurant before abandoning it, defaulting under the lease and ceasing payments to Hydro Quebec. [ 13 ] Given that Mr Heng did not lease any equipment from 9206-8410 Quebec Inc. under the lease (D-2) and that he freely disposed of some of the equipment and replaced it with other equipment at his own cost, it is extremely unlikely that Mr. Donovan could make a plausible claim to be the owner of the equipment. It is more likely that Mr.

Heng abandoned it, turning it over to the lessor, since he was defaulting under the lease. [ 14 ] As well, the dead of sale of the building makes no mention of equipment or furniture being included in the sale of the immovable. Since Mrs. To and her husband were continuing to run the restaurant, it would be normal not to sell the equipment and to turn it over to the new operators of the restaurant at the termination of their lease. [ 15 ] Mr.

Heng could not assert that he was not able to sell the restaurant, at least not in law, because the lease clearly states that the lessor cannot refuse an assignment of the lease unreasonably (D-2 paragraph 8 ASSIGMENT AND SUBLETTING). [ 16 ] If Mr. Donovan opposed a sublet or assignment, it may have been for other reasons, such as the insolvency of the proposed new operator. [ 17 ] One plausible explanation of Mr.

Heng’s abandonment of the equipment was that he had no other use for it, which is consistent with his testimony in this regard. [ 18 ] The defense and cross-demand is therefore unfounded, and the admission that the business was purchased for $ 20,000, of which only $12,500 was paid, is sufficient to establish the debt, not as a balance of loan, but as a balance of price for the sale of a business.

The defense to the claim for the balance is not proved because the pretention that the property was also sold to Mr Donovan was not established by credible and probative evidence. [ 19 ] There is no interest stipulated on the monetary claim, the “loan” being without interest. The Plaintiff is entitled only to legal interest and the additional indemnity. BY THESE REASONS, THE COURT : CONDEMNS the Defendant to pay the Plaintiff the amount of $ 12,500 with interest at the legal rate of 5 % per annum and the additional indemnity of

article 1619 of the Civil Code of Québec , calculated from November 23, 2016; WITH LEGAL COSTS in favour of the Plaintiff. __________________________________ David L. Cameron, J.C.Q. Date of hearing: April 23, 2018