2017 QCCQ 14921, 2017 QCCQ 14921

Garage Auto Shaltas inc. c. Construction Martoccia inc. 2017 QCCQ 14921 COURT OF QUEBEC (Civil Division) CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL No: 500-22-218359-159 DATE: December 18, 2017 ______________________________________________________________________ BEFORE THE HONOURABLE ENRICO FORLINI, J.C.Q. ______________________________________________________________________ GARAGE AUTO SHALTAS INC. Plaintiff/Cross-Defendant v. CONSTRUCTION MARTOCCIA INC.

Defendant/Cross-Plaintiff ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Garage Auto Shaltas Inc. (“Garage Shaltas”) claims $18,866.85 from Construction Martoccia Inc. (“Construction Martoccia”) further to a construction contract entered into between the parties whereby Construction Martoccia was retained to perform commercial framing and siding work on a building owned by Garage Shaltas. [ 2 ] The latter argues that Construction Martoccia performed this work poorly and therefore it had no choice but to terminate the contract.

Garage Shaltas claims damages for the costs it incurred to correct the allegedly shoddy work performed by Construction Martoccia. It also claims the reimbursement of an advance paid to Construction Martoccia. [ 3 ] Construction Martoccia argues that it executed the work in conformity with the contract and good practices and adds that Garage Shaltas terminated (resiliated) the contract without cause.

Moreover, it brings a cross-claim in which it claims (i) $9,766.53 representing the value of the work performed up to the date of the termination, and (ii) the reimbursement of legal fees incurred to defend against what it claims is an abusive and frivolous lawsuit. [ 4 ] Construction Martoccia further pretends that Garage Shaltas filed its lawsuit as retribution for the fact that Construction Martoccia first commenced an application against Garage Shaltas before the Small Claims Division of the Court of Québec to recover payment for the value the work it had carried out up to the date of the termination of the contract. [ 5 ] At trial, Construction Martoccia argued that should the Court conclude that Garage Shaltas’ lawsuit is abusive with the meaning of

article 51 Code of Civil Procedure (C.C.P.), then its director, Mr. Feroze Mohamed, should be held personally liable to pay damages for abusive proceedings. QUESTIONS IN DISPUTE [ 6 ] The lawsuit raises the following questions:

a) Did Garage Shaltas cancel the Construction Contract pursuant to its right to terminate for cause (1590, 1604, 1605 Civil Code of Québec (C.C.Q.)) or its right to unilaterally terminate a contract pursuant to

article 2125 C.C.Q.?

b) Was Garage Shaltas’ termination of the Construction Contract lawful?

c) If Garage Shaltas’ termination of the Construction Contract was lawful, what damages is it entitled to?

d) If the Court concludes that Garage Shaltas’ termination of the agreement was unlawful, is Construction Martoccia entitled to the payment of $9,766.53 representing the value of the work performed up to the date of the termination?

e) Is Garage Shaltas’ lawsuit abusive within the meaning of

article 51 Code of Civil Procedure (C.C.P.)? If so, what damages are to be awarded to Construction Martoccia?

f) If the Court concludes that Garage Shaltas’ lawsuit abusive, is its director, Mr. Mohamed, personally liable for the damages awarded to Construction Martoccia?

CONTEXT [ 7 ] Garage Shaltas owns an industrial building located on the corner of Victoria and 2 nd avenues in the borough of Lachine (“Building”). The Building is a one storey property with a flat roof.

Garage Shaltas rents out the space in the Building as premises for automobile repair shops. [ 8 ] Construction Martoccia is a general contractor and holds a license issued by the Régie du bâtiment du Québec . [1] [ 9 ] On October 17, 2013 Garage Shaltas and Construction Martoccia entered into a construction contract whereby Construction Martoccia agreed, for a fixed price of $26,164, to carry out the following work at the Building: • Furnish and install at the most 2 ½” urethane insulation on two of the sides of the Building (Victoria Avenue and 2 nd Avenue); • Furnish and install steel siding (Vic West, model CL 725, colour: beige) on Victoria and 2 nd Avenue sides of the Building; • Correct structural problem in strapping and furnish and install an 8” (height) knee wall; and • Scribe and cut out an opening on one of the exterior walls of the Building. [2] [ 10 ] Garage Shaltas paid a $5,000 deposit to Construction Martoccia upon the signing of the contract. [ 11 ] On November 25, 2013, while the work contemplated in the Construcion Contract was still underway, Garage Shaltas terminated the contract. [3] [ 12 ] By demand letter dated December 4, 2013, Construction Martoccia enjoined Garage Shaltas to pay for the material purchased and the work performed up to the date of the termination of the Construction Contract. [4] [ 13 ] In February, 2014, Construction Martoccia commenced an application against Garage Shaltas before the Court of Québec, Small Claims Division, in which it claimed $11,720.57 representing the value of the work performed up to the date of the termination of the Construction Contract, less the $5,000 deposit (the Small Claims Lawsuit). [5] [ 14 ] On April 4, 2014, Garage Shaltas filed a Contestation and Cross-claim to Construction Martoccia’ Application in the Small Claims Lawsuit, in which it denies owing anything to Construction Martoccia, alleges that the latter did not properly execute the Construction Contract and claims damages of $7,000. [6] [ 15 ] On January 8, 2015, Garage Shaltas filed its Motion to Institute Proceedings against Construction Marctoccia, which the Court will rule on in this judgement, claiming damages of $46,290.20.

This amount includes: • repairs to the roof: $9,237.90 • steelwork by Mario B aluminum: $4,628.95 • insulation: $5,526.85 • steelwork completed on the exterior structure: $16,096.50 • reimbursement of the deposit: $5,000 • loss of business: $5,000 TOTAL: $46,290.20 [ 16 ] At trial, Garage Shaltas reduced its claim to $18,866.85. [ 17 ] The trial in the Small Claims Lawsuit matter has been stayed pending the present judgement. ANALYSIS AND DECISION

a) Did Garage Shaltas cancel the Construction Contract pursuant to its right to terminate for cause (1590, 1604, 1605 Civil Code of Québec (C.C.Q.)) or its right to unilaterally terminate a contract pursuant to

article 2125 C.C.Q.? [ 18 ] The Construction Contract between Garage Shaltas and Construction Martoccia is a contract of enterprise governed notably by articles 2098 to 2129 C.C.Q. [ 19 ] The client in a contract of enterprise may terminate the contract using one of two avenues, namely termination for cause ( résiliation sanction ) or unilateral termination pursuant to

article 2125 C.C.Q. ( résiliation unilatérale ). [ 20 ] In Corporation d'Urgences-santé de la région de Montréal métropolitain c. Novacentre Technologie ltée , the Quebec Court of Appeal explained this distinction as follows: [7] A - Quel est le régime de résiliation applicable en l’espèce? [56] Le législateur a prévu deux régimes de résiliation par le client pour les contrats de service ou d’entreprise. En premier lieu, les dispositions 2125 et 2129 C.c.Q . instaurent un régime de résiliation unilatérale du contrat de service qui permet au client de mettre fin au contrat en tout temps et sans cause.

Par ailleurs, il est établi qu’une résiliation pour cause d’un contrat de service est régie par le droit commun, et notamment par les articles 1590 et 1604 à 1606 C.c.Q. Pour les deux types de résiliation, les dispositions ne sont pas d’ordre public et les parties au contrat peuvent stipuler des conditions d’exercice particulières , ce qui fut le cas en l’espèce. L’intérêt de la distinction entre les deux régimes de résiliation réside notamment dans les modalités d’attribution des dommages. (Footnotes omitted-Underlining added)

[ 21 ] It is important to determine which of the 2 termination regimes the client has opted for (availed itself of) for a number of reasons. Notably, as the Court of Appeal stated in Novacentre Technologie the method of assessing damages differs in either scenario.

Likewise, the implementation of the right to terminate is distinct in both scenarios. [ 22 ] When a client to a construction contract elects to terminate for cause, it cannot reverse its course and later invoke, as a subsidiary argument, its right to unilaterally terminate the contract. [8] [ 23 ] To determine whether the client has elected to terminate for cause or is invoking the unilateral termination, one must look at the language used by the client in the termination notice. If the client does not raise the contractor’s conduct ( i.e. , does not allege the latter’s wrongdoing) and refers to

article 2125 C.C.Q. in the notice of termination, then this is a strong indication that the client is relying on unilateral termination. [ 24 ] Conversely, where the clients raises the contractor’s fault or wrongdoing, then this indicates that the client is relying on termination for cause. [ 25 ] On November 25, 2013, Garage Shaltas sent the following email [9] to Construction Martoccia to inform it that it was terminating the Construction Contract: why do you want to put urethane when you did not finish securing the straping properly before i give this contract you and i found a lot of deficiency in the previous contractor work and you told me you will correct them ail for $2300 including the knee cap, you did not make those changes as you said you Would have done you always came for a few hours and left and make more damages than repairing i did not see any changes you did from the previous contractor work (expect The knee cap on roof and pieces of ply wood around

(4) Windows and (3) doors, I do not think you hâve the knowledge to do this type of work,Today (25/11/2013 I asked you to show me your competence card, and pull out an apprenti card, i said no wander you cannot do the work the way it should be done, you never told me you was an apprenti carpenter I would not had give you this contract, you always work alone and only used ladder never used skyjack or scaffolding ,1 asked you several times to furnish me a report of the work you had done but you never do so, i will send you an official letter very soon for reimbursement/and damages.

ATTENTION please return my keys you are no longer permited on my property at 180 Victoria Lachine, Your contract has been cancelled effected 25th Nov 2013. ( sic ) (Underlining added) [ 26 ] Moreover, in its Contestation and Cross-claim to Construction Martoccia’ Application before the Small Claims Division, Garage Shaltas explicitly alleges that Construction Martoccia did not properly execute the Construction Contract “thus forcing me to an early termination of the contract”. [10] [ 27 ] It is clear from Garage Shaltas’s November 25, 2013 Notice of Termination and its Contestation filed in the Small Claims Lawsuit that it terminated the Construction Contract because it was not satisfied with how Construction Martoccia was performing the contract and, moreover, questioned its ability and qualifications to execute it. [ 28 ] The Court concludes that when Garage Shaltas terminated the Construction Contract on November 25, 2013, it was terminating it for cause.

It was not relying on its unilateral right to terminate without cause. This has important ramifications in terms of the lawfulness of its termination.

b) Was Garage Shaltas’ termination of the Construction Contract lawful? [ 29 ] This issue, analyzed in the context of a termination for cause, raises two sub-issues, namely (

i) whether Garage Shaltas put Construction Martoccia in default prior to terminating the contract and (ii) whether Garage Shaltas had serious reasons justifying the termination of the Construction Contract? (

i) Did Garage Shaltas put Construction Martoccia in default prior to terminating the Construction Contract? [ 30 ] In Novacentre Technologie , the Court of Appeal stated that in addition to the common law ( droit commun ) rules governing the termination of a construction contract, the parties can contract out of the rules governing termination for cause or unilateral termination by providing for a custom tailored termination mechanism in their contract. [11] [ 31 ] In the case at hand, the Construction Contract contains in

section 10 a specific mechanism that addresses the right of the client to terminate the contract : 10. Défaut de l’entrepreneur

Sous réserve de la clause n o 9 ci-dessus relative à l’évaluation anticipée des dommages pour retard dans l’exécution des travaux, le défaut par l’Entrepreneur [Construction Martoccia] de respecter toute autres de ses obligations prévues aux présente permettra au Client [Garage Shaltas], après l’envoi d’un avis écrit lui accordent un délai de 7 jours pour remédier au défaut, de résilier le présent contrat à compter de l’expiration du délai , auquel cas l’Entrepreneur devra remettre au Client les acomptes reçus en excédent des travaux réalisés, le tout sans préjudice tout autre recours. (Underlining added.) [ 32 ]

Article 1439 C.C.Q. states that: 1439. A contract may not be resolved, resiliated, modified or revoked except on grounds recognized by law or by agreement of the parties . (Underlining added.) [ 33 ]

Section 10 sets out the mechanism that Garage Shaltas and Construction Martoccia agreed to in the event that the client wanted to terminate for cause ( défaut de l’entrepreneur ) the agreement. Garage Shaltas had the obligation to follow the rules set forth in

section 10 if it wished to terminate for cause the Construction Contract.

[ 34 ] The words of

Section 10 are clear and unambiguous. Faced with clear words in a contract, the Court’s role is limited to applying them to the facts before it. [12] [ 35 ] In the present case, there is no evidence that Garage Shaltas sent Construction Martoccia the written notice contemplated in

section 10 of the Construction Contract before it terminated the agreement on November 25, 2013. [ 36 ] Indeed, on November 25, 2013 Garage Shaltas abruptly terminated the Construction Contract when it sent the Notice of Termination. [13] Its intention are clear: “ Your contract has been cancelled effected 25th Nov 2013.” [ 37 ] There was no written notice prior to the Notice of termination affording Construction Martoccia the opportunity to remedy the default as

section 10 obliges Garage Shaltas to send. [ 38 ] It is true that by demand letter dated December 10, 2013, Garage Shaltas writes to Construction Martoccia and complains that the latter has not been able to complete the scope of work properly and alleges that its contractor was negligent and inexperienced. [14] Garage Shaltas gives Construction Martoccia 24 hours to complete a series of 6 tasks which it deems were not properly carried out. [ 39 ] The December 10, 2013 letter does not qualify as the written notice that the parties contemplated in

section 10 of the Construction Contract. Firstly, the letter is sent after Garage Shaltas cancelled the contract. Secondly, the 24 hour notice given to Construction Martoccia is shorter than the 7 day notice required by

section 10. [ 40 ] Likewise, Garage Shaltas second demand letter sent to Construction Martoccia and dated January 13, 2014 [15] cannot qualify as the written notice that the parties contemplated in

section 10 of the Construction Contract. [ 41 ] Even if the Court were to apply the common law rules governing termination for cause ( résiliation sanction ), the Civil Code requires the client to put his debtor in default and the demand letter “must allow the debtor sufficient time for performance, having regard to the nature of the obligation and the circumstances” to remedy the alleged defaults. [16] It was not reasonable to give Construction Martoccia 24 hours to remedy the defaults alleged in the December 10 demand letter. [ 42 ] The contract is the law as between the parties.

Garage Shaltas agreed in the Construction Contract that it could only terminate for cause the agreement by giving Construction Martoccia written notice giving it 7 days to remedy the default, and if the default was not remedied within that period, only then is the contract terminated. [ 43 ] Garage Shaltas did not follow the imperative termination mechanism set out in the Construction Contract.

For that reason alone, its termination of the Construction Contract was not lawful and its lawsuit against Construction Martoccia must fail. [ 44 ] The Court would arrive at the same conclusion if it applied the common law rules ( règles du droit commun ) governing termination for cause. [ 45 ] Absent a specific contractual provision, termination for cause of a construction agreement, is governed by articles 1590, 1604 to 1606 C.C.Q. 1590. An obligation confers on the creditor the right to demand that the obligation be performed in full, properly and without delay.

Where the debtor fails to perform his obligation without justification on his part and he is in default , the creditor may, without prejudice to his right to the performance of the obligation in whole or in part by equivalence, (1) force specific performance of the obligation; (2) obtain, in the case of a contractual obligation, the resolution or resiliation of the contract or the reduction of his own correlative obligation; (3) take any other measure provided by law to enforce his right to the performance of the obligation. … 1604.

Where the creditor does not avail himself of the right to force the specific performance of the contractual obligation of the debtor in cases which admit of it, he is entitled either to the resolution of the contract, or to its resiliation in the case of a contract of successive performance.

However and notwithstanding any stipulation to the contrary, he is not entitled to resolution or resiliation of the contract if the default of the debtor is of minor importance, unless, in the case of an obligation of successive performance, the default occurs repeatedly, but he is then entitled to a proportional reduction of his correlative obligation. All the relevant circumstances are taken into consideration in assessing the proportional reduction of the correlative obligation. If the obligation cannot be reduced, the creditor is entitled to damages only. 1605.

A contract may be resolved or resiliated without judicial action where the debtor is in default by operation of law for failing to perform his obligation or where he has failed to perform it within the time set in the demand putting him in default. 1606. A contract which is resolved is deemed never to have existed; each party is, in such a case, bound to restore to the other the prestations he has already received. A contract which is resiliated ceases to exist, but only for the future. (Underlining added.)

[46] A client must meet certain conditions in order to lawfully terminate for cause a construction agreement. As the Court of Appealwrote in Berlan Systems Inc. v. F.L.S. Transportation Services inc.: [53] En l'instance, l'intimée a invoqué les règles générales en matière d'inexécution par le cocontractant de ses obligations. Le premierjuge a effectivement conclu que l'appelante avait fait défaut de remplir ses obligations et cette conclusion ne m'apparaît pas entachéed'une erreur manifeste et dominante. [54] La Cour a décidé dans Société de transport de Longueuil c.

Marcel Lusssier ltée , (QC CA), J.E. 2004-173 (C.A.), qu'en pareil cas, il fallait appliquer les règles relatives à la résiliation pour faute prévues aux art. 1604 et suivants C.c.Q. [55] En vertu de celle-ci, la résiliation peut avoir lieu sans poursuite judiciaire lorsque le débiteur est en demeure de plein droitd'exécuter son obligation ou ne l'a pas exécutée dans le délai fixé par la mise en demeure lui intimant d'exécuter ses obligationsconformément au contrat (art. 1605 C.c.Q.; Domtar inc. c.

Grantech inc., J.E. 2002-1296 (C.A.)). [47] Termination for cause is only lawful if prior to the termination, the client has put the contractor in default in writing and thelatter has not remedied the default in the delay afforded, or is in default by operation of law, and further establishes that the default isimportant. [48] In the present case, as outlined above, Garage Shaltas never put Construction Martoccia in default in writing prior to sending theNovember 25, 2013 Notice of Termination. [49] Moreover, none of the conditions required to give rise to default by sole operation of law exist.[17] [50] Therefore, even if Garage Shaltas was able to prove that it had serious reasons to terminate the Construction Contract, which aswill be briefly outlined below, it did not have, its termination of the agreement was unlawful under the common law rules governingtermination for cause because it failed to put Construction Martoccia in default. (ii) Did Garage Shaltas have serious reasons justifying the termination of the Construction Contract? [51] Considering that the lack of a written notice as required by

section 10 of the Construction Contract (and as required by thecommon law rules) is sufficient reason to conclude that Garage Shaltas’ termination was unlawful, it need not address this issue in detail. [52] However, because a significant portion of the trial was devoted to this issue, the Court will briefly comment below whetherGarage Shaltas had serious reasons justifying the termination of the Construction Contract. [53] For the reasons outline below, the Court believes that it did not. [54] Garage Shaltas has the burden of proving that Construction Martoccia breached its obligations flowing from the ConstructionContract in such an important way that termination was warranted.[18] [55] The evidence reveals that in September 2013, roughly 1 month prior to awarding the Construction Contract to ConstructionMartoccia, Garage Shaltas had entered into a contract of enterprise with 3038203 Canada Inc (d.b.a.

Renovation Zora) whereby the latteragreed to frame the exterior wall of the Building with wood so as to install metal siding on the building.[19] [56] After approximately three weeks, Garage Shaltas terminated Renovation Zora’s contract, alleging that the quality of the workwas poor. [57] Renovation Zora sued Garage Shaltas before the Court of Québec, Small Claims Division, to claim payment for the value of thework performed prior to the cancellation of its contract (Renovation Zora Lawsuit).

Garage Shaltas cross-claimed for $15,000 indamages for the poor quality of Renovation Zora’s work.[20] [58] When Construction Martoccia was awarded the Construction Contract, its scope of work included correcting the structuralproblem in strapping. Some of the wood framing that Renovation Zora had installed was already in place when Construction Martocciabegan its work on the Building.[21] [59] Garage Shaltas retained Mr. Nabih to inspect the Building and prepare a report identifying the deficiencies in the workperformed on the Building. On November 7, 2013 Mr.

Nabih inspected the Building and issued a report dated November 14, 2013.[22] [60] He writes in his report that the framing work carried out on the Building was poorly done. His Report does not once mentionConstruction Martoccia or Renovation Zora by name. He employs the generic term “le constructeur” throughout his Report. [61] Mr. Nabih admits in cross-examination that he does not identify in his Report who between Renovation Zora and ConstructionMartoccia authored the deficient work he refers to in his Report because his mandate did not include identifying the person who wasresponsible for the deficient work.

He adds “mon rapport pouvait servir pour n’importe quel contracteur’’. [62] While Garage Shaltas had the burden of proving that Construction Martoccia poorly executed the Construction Contract andthis warranted its termination, its own expert is not able to identify who as between Construction Martoccia or Renovation Zora authoredthe allegedly deficient work.

In this regard, the Court agrees with Justice Marengo when she writes in the Renovation Zora Judgement: [24] In the end, by hiring and firing (and sometimes suing) a series of contractors in succession, defendant [Garage Shaltas] hasbecome unable to prove the deficiencies which he is alleging, according to a preponderance of evidence.[23] [63] Finally, the Court will comment on the expert opinion offered by Mr. Gagné, who testified for Construction Martoccia.[24]

[ 64 ] In the fall 2013, Mr. Gagné was a technical adviser employed by the APCHQ and was called upon by Martoccia Construction to review the construction methods employed by Construction Martoccia on the Building considering the complaints raised by Garage Shaltas. At the time, he had reviewed photos of the work in progress and confirmed to Construction Martoccia that its method was appropriate. [ 65 ] Mr. Gagné was then retained by Construction Martoccia as an expert witness once the dispute with Garage Shaltas came before the Court.

He visited the Building after he was retained as an expert witness in June 2015. [ 66 ] Mr. Gagné’s testimony was clear, articulate and convincing. His credibility as an expert in this matter was superior than Mr. Nabih’s. The Court is convinced, based on his testimony and his Report, that the work performed by Construction Martoccia was done in accordance with the Construction Contract and good practices. Garage Shalta’s decision to terminate the contract was not justified and was unlawful.

c) If Garage Shaltas’ termination of the Construction Contract was lawful, what damages is it entitled to? [ 67 ] Considering that the Court has decided that the termination of the contract was not lawful, Garage Shaltas is not entitled to an award of damages and its Motion to Introduce Proceedings will be dismissed.

d) If the Court concludes that Garage Shaltas’ termination of the agreement was unlawful, is Construction Martoccia entitled to the payment of $9,766.53 representing the value of the work performed up to the date of the termination? [ 68 ] As decided above, Garage Shaltas’ termination of the Construction Contract was unlawful.

Where a client unlawfully terminates a construction contract, the contractor is entitled to compensation that on a quantum meruit baisis, that is, an amount equivalent to the value of the work carried out up to the date of the termination. [25] [ 69 ] The Construction Contract provided that Construction Martoccia was to carry out 4 types of work on the Building. [26] When the contract was abruptly terminated on November 25, 2013, Construction Martoccia had carried out 1 of those 4 items, namely the correction of the structural problem in strapping and supplying and installing an 8” high knee wall on the roof. [ 70 ] Construction Martoccia argues that the value of this work amounts to $9,766.53, which takes into account the $5,000 deposit paid by Garage Shaltas. [27] It claims this amount from Garage Shaltas. [ 71 ] Construction Martoccia supports its claim with an invoice, the back-up invoices for the purchases of supplies and materials, and a detailed listing of the hours worked on the site by its principal and employees. [28] [ 72 ] This evidence is credible and was not successfully challenged by Garage Shaltas.

Accordingly, Construction Martoccia’s will be entitled to compensation of $9,766.53, which represents the damages it suffered as a result of Garage Shaltas’ unlawful termination of the Construction Contract, plus interest at a rate of 15% per annum calculated as of December 15, 2013. [29]

e) Is Garage Shaltas’ lawsuit abusive within the meaning of

article 51 Code of Civil Procedure (C.C.P.)? If so, what damages are to be awarded to Construction Martoccia? [ 73 ] Construction Martoccia argues that Garage Shaltas’ lawsuit is abusive within the meaning of

article 51 C.C.P in that (

i) it is clearly unfounded and frivolous, and (ii) it used this lawsuit as an attempt to defeat the ends of justice. [ 74 ] Articles 51, 53 and 54 of the Code of Civil Procedure set out the powers of a Court to sanction the abuse of procedure. The Court has the discretion to declare a judicial demand abusive. [ 75 ] Abuse of procedure is evident when a case is clearly unfounded, frivolous or intended to delay.

Abuse can also arise when a procedure is excessive or unreasonable or causes a prejudice to a person or attempts to defeat the ends of justice. [ 76 ] A finding of abuse and the implementation of the remedies provided for in articles 53 and 54 C.P.C. requires a finding of frivolity and the improper or reckless nature of the pleadings. The frailness of the right of action is not enough. [ 77 ] According to the Court of Appeal, a lawsuit is clearly unfounded and therefore abusive for the purposes of

article 51 C.C.P. if a reasonable and prudent person, placed in the circumstances known to the party at the time of filing the claim, would conclude that there was no basis for that proceeding. Is unfounded a procedure offering no real chance of success and brought with recklessness. [30] [ 78 ] In 4379047 Canada inc. v.

Papagiannis, Justice Paul Mayer aptly summarized as follow what constitutes an abusive judicial application: [126] The case law sets out that an abusive action is one that is rash and foolhardy, that is, one that a reasonable and prudent person in similar circumstance would conclude is without merit. This is an objective test that is to be examined regardless of intent. One needs to assess all of the circumstances of a case to be able to determine whether an action had a sound legal foundation when the procedure was taken.

One must determine whether the Plaintiffs had a veritable chance of success. [31] [ 79 ] In Cosoltec , the Court of Appeal states that cases of abuse and the appearance of abuse remain associated with the most egregious cases. [32] [ 80 ] The mere fact of taking an action is not in itself abusive. Likewise, simply because a case is dismissed does not necessarily mean that it was abusive. Construction Martoccia has the burden of proving, on the balance of probabilities, that Garage Shaltas was foolhardy in proceeding with this case.

[ 81 ] For the reasons that follow, the Court considers that a reasonable and prudent person in similar circumstances would not have undertaken the present action. [ 82 ] It is crystal clear that Garage Shaltas has consistently invoked termination for cause. [33] What is equally clear is that

section 10 of the Construction Contract between Garage Shaltas and Construction Martoccia required Garage Shaltas to send its contractor a written notice of termination affording it 7 days to remedy the default(s), before it could terminate the contract for cause. [ 83 ] No such notice was ever sent by Garage Shaltas. Without such a notice, this case did not have a leg to stand on. It was foolhardy to go ahead with the case without the written notice.

But that is not all. [ 84 ] The litigation between Garage Shaltas and Construction Martoccia initially commenced in February 2014 when the latter filed an application before the Court of Québec, Small Claims Division. [34] [ 85 ] Garage Shaltas responded by filing a Contestation and Cross-claim in which it denies owing anything to Construction Martoccia, alleges that the latter did not properly execute the Construction Contract and claims damages of $7,000 in its Cross-claim. [ 86 ] In January 2015, despite the proceedings pending in the Small Claims Lawsuit, Garage Shaltas filed its Motion to Institute Proceedings against Construction Martoccia before the Civil Division, claiming damages of $46,290.20. [ 87 ] During closing arguments, and after 5 days of trial, Garage reduces its quantum by more than half, to $18,866.85, an amount not substantially above the ceiling of the jurisdiction of the Small Claims Division. [ 88 ] The Court also questions the use by Garage Shaltas of the same Nabi-Tek Expert Report before this Court and before Justice Marengo in the Renovation Zora Lawsuit. [ 89 ] Finally, the Court also notes that Garage Shaltas refuses to voluntarily execute the Renovation Zora Judgement in which on April 10, 2017, the Court ordered it to pay $7,473.88, to the plaintiff.

Mr. Velji (Renovation Zora’s president) explained that Garage Shaltas had closed it bank account and shut down its business. [35] [ 90 ] The evidence also reveals that Garage Shaltas has transferred ownership of the Building. On December 14, 2015 it transferred title to the Building to Mr. Mohamed, its president, director and majority shareholder. On December 29, 2015, Mr. Mohamed transferred title to 9309-1833 Québec Inc., a company controlled by Mr. Mohamed. [36] [ 91 ] Motion to Introduce Proceedings is abusive for the purposes of

article 51 C.C.P. Not only is it abusive because, a reasonably prudent person would have concluded that it had no realistic chance of success given the lack of the written notice required by

section 10 of the Construction Contract. But in addition, the cumulative effect of the facts described above in paragraphs 82 to 88 lead the Court to conclude that Garage Shaltas is using the Court system in an attempt to defeat the ends of justice. [ 92 ] To paraphrase Justice Mayer in 4379047 Canada inc. v. Papagiannis , the legal system is a public good; it is not a tool to be used in a commercial battle to refuse to pay what is rightly owed. [37] To use the legal system in such a manner is what is described in

Article 51 C.P.C. as an attempt to defeat the ends of justice [ 93 ]

Article 54 C.C.P. empowers the Court to award a party who has been a victim of abusive proceedings damages equivalent to the legal fees it has incurred in defending itself against these proceedings. Construction Martoccia seeks a damage award of $41,034.37, which represents the legal fees it spent to defend itself against Garage Shaltas’ lawsuit. [38] There is no proof that this invoice has been paid. Mr. Martoccia states that he has agreed with his lawyer to pay for the legal fees after the trial. [ 94 ] In 4379047 Canada inc. v. Papagiannis [39] , Justice Mayer summarized as follows the law on a claim for reimbursement of legal fees: 6.2 The law [199]

Article 54 C.P.C. provides that upon determining that there has been an abuse of procedure, the Court may order that damages be paid to the injured party, including the professional fees and disbursements incurred. [200] In the case of Groupe Van Houtte inc. v.

Développements industriels et commerciaux de Montréal inc. , Madam Justice Marie- France Bich, explains the criteria applicable to determine the reasonableness of legal fees and the requirement that Courts analyse them in a rigorous manner: [124] […] Les facteurs suivants peuvent notamment être considérés pour évaluer le caractère raisonnable de la réclamation : importance et difficulté du litige, temps qu'il était nécessaire d'y consacrer, mais aussi façon dont l'instance a été menée par la

partie qui réclame le remboursement de ses honoraires extrajudiciaires (y compris en rapport avec l'utilité ou la pertinence des procédures), ainsi que raisonnabilité intrinsèque du taux horaire de l'avocat de cette

partie ou du montant facturé, selon la formule convenue avec le client, pour assurer sa représentation dans l'instance. Il faut aussi, bien sûr, examiner la proportionnalité des honoraires réclamés au regard de la condamnation prononcée et l'ensemble du contexte. [125] Ce contrôle judiciaire doit être exercé de façon rigoureuse, il va sans dire, pour éviter la surenchère de services juridiques ou de procédures ou l'exagération dans la fixation du taux ou du montant de la facturation, surenchère ou exagération qui pourraient résulter de la perspective que les honoraires d'avocat d'une

partie soit payée par l'autre. Il va sans dire également que la

partie qui réclame le remboursement de ses honoraires extrajudiciaires doit s'attendre et consent implicitement à lever une

partie du secret professionnel qui

l'unit à son avocat, dans la mesure nécessaire à la vérification du caractère raisonnable des honoraires en question. [201] To delimit the reasonableness of fees, articles 101 and 102 of the Code de déontologie des avocats , provide as follows: 101. A lawyer must charge and accept fair and reasonable fees and disbursements. The same applies to advances he asks the client to provide. 102. The fees are fair and reasonable if they are warranted by the circumstances and proportionate to the professional services rendered.

In determining his fees, the lawyer must in particular take the following factors into account: (1) experience; (2) the time and effort required and devoted to the matter; (3) the difficulty of the matter; (4) the importance of the matter to the client; (5) the responsibility assumed; (6) the performance of unusual professional services or professional services requiring special skills or exceptional speed; (7) the result obtained; (8) the fees prescribed by statute or regulation; and (9) the disbursements, fees, commissions, rebates, costs or other benefits that are or will be paid by a third party with respect to the mandate the client gave him. [202] As stated in the Quebec Court case of Ogilvy Renault v.

Beauce, société mutuelle d’assurances générales, legal fees are just and reasonable when they are justified by the circumstances and they are proportionate for the services rendered. [203] The reasonable character of the fees incurred remains intrinsically related to the facts and circumstances of each case. The Defendants have the burden of proving that the legal fees they are claiming are reasonable. [ 95 ] The Court reviewed the defence counsel’s draft invoice. [40] It covers the time period March 5, 2015 to June 3, 2017.

Defence counsel’s involvement in this lawsuit actually began prior to March 2015, as they filed an Appearance on January 19, 2015. [ 96 ] Me Manella did not testify at trial to explain the nature and complexity of the case. Nor did he provide an explanation of the billing process at the law firm to ensure that the client is not overcharged. [ 97 ] While this case was not a particularly complex matter, it was an important one for Construction Martoccia. [ 98 ] The draft invoice indicates that 137.6 hours were spent working on the file from March 2015 to June 3, 2017.

The bulk of those hours, 103 hours, were worked by lead defence counsel, Me Manella. His hourly rate is reasonable considering his years of experience. [ 99 ] The time and effort devoted to the matter is reasonable: the number of hours spent on the file is reasonable, considering the work involved (preparing for and attendance at discovery of Mr.

Mohamed, preparing for trial, 5 day trial). [ 100 ] However, the Court notes that a portion of the draft invoice covers work done in relation to the Renovation Zora Lawsuit and the Small Claims Lawsuit, which fees are not fees incurred by Construction Martoccia to defend itself against Garage Shaltas’ abusive judicial application. [41] [ 101 ] Having considered all of the above-mentioned factors, the Court deems that a reduction of 25% of the sum claimed is fair and reasonable in the circumstances. Hence, the Court will award $30,775 in compensation for extra-judicial legal fees pursuant to

article 54 C.C.P.

f) If the Court concludes that Garage Shaltas’ lawsuit abusive, is its director, Mr. Mohamed, personally liable for the damages awarded to Construction Martoccia? [ 102 ] Construction Martoccia relies on

article 56 C.C.P. and asks the Court to condemn Mr. Mohamed, Garage Shaltas’ president, director and majority shareholder, to personally pay the damages awarded for abusive proceedings. [ 103 ]

Article 56 C.C.P. provides as follows: 56. If a legal person is responsible for an abuse of procedure, those of its directors and officers who participated in the decision may be ordered personally to pay damages. The same holds for an administrator of the property of others who is responsible for such an abuse. [ 104 ] Mr. Mohamed was not and has never been a party to these proceedings. Can the Court under

article 56 C.C.P. order a director or officer of a legal person to pay damages when that director or office is not a party to the proceedings? [ 105 ] The Court does not believe so. To order a director or officer of a legal person to pay damages under

article 56 C.C.P. while that person is not a party to the legal proceedings would run afoul of the rule stated at paragraph one of

article 17 C.C.P.:

17. The court cannot rule on an application, or take a measure on its own initiative, which affects the rights of a party unless the party has been heard or duly called. [ 106 ] Mr. Mohamed is a distinct person and party from Garage Shaltas. The Court agrees with the reasons of Justice Gouin in Northspec Chemicals Corp . v. Chemor inc ., where she writes in regards to

article 54.6 of the old Code of Civil Procedure , which is substantially similar to

article 56 C.C.P.: [22] Lorsqu'une

partie recherche la condamnation d'un administrateur, soit d'engager sa responsabilité personnelle en vertu de l'

article 54.6 C.p.c ., ce dernier doit être

partie au litige et les procédures doivent lui avoir été préalablement signifiées selon les règles établies par le Code de procédure civile . [23] En introduisant les nouvelles dispositions du Code de procédure civile relative aux avis de procédure, le législateur n'a certainement pas voulu faire disparaître ou faire perdre les droits énoncés aux autres dispositions du Code , tel que l'importance de la signification des actes de procédures.

La règle audi alteram partem est certes l'une des plus importantes dans notre système juridique et passer outre ce principe peut constituer en soi un abus. [24] Notre système de droit est basé sur un régime contradictoire et avant de pouvoir condamner un justiciable, à quelque

titre que ce soit, il a le droit de connaître les motifs de la poursuite, de se faire entendre et de se défendre. [25] Ce principe est à la base même de notre système juridique. [26] L'

article 5 du Code de procédure civile édicte: 5. Il ne peut être prononcé sur une demande en justice sans que la

partie contre laquelle elle est formée n'ait été entendue ou dûment appelée. [27] L'

article 23 de la Charte des droits et libertés de la personne traitant des droits judiciaires énonce: 23 . Toute personne a droit, en pleine égalité, à une audition publique et impartiale de sa cause par un tribunal indépendant et qui ne soit pas préjugé, qu'il s'agisse de la détermination de ses droits et obligations ou du bien-fondé de toute accusation portée contre elle. Le tribunal peut toutefois ordonner le huis clos dans l'intérêt de la morale ou de l'ordre public [28] La doctrine est unanime.

La règle de l' audi alteram partem est un principe fondamental basé sur l'équité naturelle et dont l'inobservance détruit la juridiction du tribunal et entraîne, de ce fait, la nullité de toutes les procédures subséquentes, y compris le jugement lui-même ] . [29] Puisque ce principe constitue l'élément le plus fondamental dans notre système judiciaire, une déclaration expresse du législateur aurait été nécessaire pour mettre de côté cette exigence primordiale. [30] Une telle déclaration n'est pas contenue à l'

article 54.6 C.p.c . [42] [ 107 ] The Court concludes that Mr. Mohamed cannot be held personally liable for the damages awarded to Construction Martoccia under

article 56 C.C.P. given that he was not personally a party to the proceedings. Legal Costs and Expert Fees [ 108 ]

Article 339 C.C.P. provides that legal costs may include expert fees. Mr. André Gagné testified as an expert for Construction Martoccia. His testimony was useful in adjudicating one of the questions in dispute. His fees for the drafting of his report, for the time spent testifying and his attendance over 3 days of the trial total $5,204.94. [43] This amount is fair and reasonable and the Court will order Garage Shaltas to pay it. FOR THESE REASONS, THE COURT: [ 109 ] DISMISSES Garage Auto Shaltas Inc.’s Motion to Introduce Proceedings; [ 110 ] WITH LEGAL COSTS; [ 111 ] GRANTS in

part Construction Martoccia Inc.’s Cross-Claim; [ 112 ] CONDEMNS Garage Auto Shaltas Inc. to pay to Construction Martoccia Inc. $9,766.53 plus interest at a rate of 15% per annum calculated as of December 15, 2013; [ 113 ] CONDEMNS Garage Auto Shaltas Inc. to pay to Construction Martoccia Inc. $30,775 pursuant to articles 51 and 54 of the Code of Civil Procedure , plus interest at the legal rate and the additional indemnity provided for by

article 1619 of the Civil Code of Québec , as of the date of this judgement; [ 114 ] WITH LEGAL COSTS , including $5,204.94 in expert fees. __________________________________ ENRICO FORLINI, J.C.Q.

Me Tomy Markakis De Louya Markakis Plaintiff’s lawyer Me Luc Mannella Mannella Gauthier Tamara Avocats inc. Defendant’s lawyer Date of hearing: February 22, 23 & 24, 2017 and June 2 & 5, 2017