2023 QCCQ 6375, 2023 QCCQ 6375

10057223 Canada inc. c. Lipscombe 2023 QCCQ 6375 JG2338 COUR OF QUEBEC CANADA PROVINCE OF QUÉBEC DISTRICT OF BEAUHARNOIS LOCALITY OF SALABERRY-DE-VALLEYFIELD « Civil Division » N° : 760-22-011942-201 DATE : September 18, 2023 ______________________________________________________________________ SOUS LA PRÉSIDENCE DE L’HONORABLE CÉLINE GERVAIS, J.C.Q. ______________________________________________________________________ 10057223 CANADA INC. Plaintiff v.

ANDREW LIPSCOMBE Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] 10057223 Canada Inc. (hereinafter named « Mad Dog Juice ») claims from Andrew Lipscombe an amount of $77,914.25, representing damages due to Mr. Lipscombe’s alleged unlawful selling of Mad Dog Juice’s products. This amount includes $20,000 for moral damages, trouble and inconvenience. [ 2 ] Mr.

Lipscombe claims in Cross-Demand an amount of $22,488.52, representing the value of personal belongings kept by Mad Dog Juice, general damages ($5,000) and unpaid royalties for the period of January 1, to February 6, 2020. BACKGROUND: [ 3 ] Mr. Lipscombe and Mad Dog Juice’s president, David Di Lallo, have known each other since high school. Both of them have been interested by the vaping industry; Mr. Lipscombe had a lab in Dorval, while Mr. Di Lallo opened a few compagnies involved in the e-liquid business.

Mad Dog Juice was incorporated in January 2017. [ 4 ] At that time, they came to a verbal agreement whereby Mr. Lipscombe would create flavors for Mad Dog Juice. He would be paid royalties as an independent contractor, which would vary upon the size of the bottles (from 30 ml to 140 ml / from 20¢ to $1) and $1.25 for speciality products. [ 5 ] According to a statement of royalties prepared by Mad Dog Juice, Mr.

Lipscombe received $43,176, $73,946 and $64,435.37 for the years 2017, 2018 and 2019 [1] . [ 6 ] According to Tenille Redding’s testimony (Mad Dog Juice general manager), she would calculate the royalties due to Mr. Lipscombe after receiving his invoices. [ 7 ] In the beginning of January 2020, an employee at Mad Dog Juice reported to Mr. Di Lallo that Mr. Lipscombe was stealing from the company, as he was seen taking product out of the company’s facilities. [ 8 ] Mr. Di Lallo inquired about the selling of products to clients without his knowledge and discovered that such was the case.

He found a bottle of Mad Dog Juice’s product at a client’s who had not ordered anything since July 2019. The production date was November 2019 [2] . [ 9 ] Mr. Di Lallo asked Mr. Lipscombe directly a few times if he was stealing from the company; the answer was always no. [ 10 ] On January 10, 2020, Mr. Di Lallo found in Mr. Lipscombe’s office a UPS waybill showing that products were sent to a client in France and that the sales’ price was wired directly to Mr. Lipscombe.

[ 11 ] He then sent a text message to Mr. Lipscombe with a picture of the documents asking him to call back [3] . In the telephone conversation that occurred on that same day, Mr. Lipscombe said: Sorry, I f** up , which led to the immediate termination of the contract. He said the same thing to Tenille Redding in another conversation that same day. [ 12 ] On January 15, 2020, Mr. Lipscombe sent a long email under the subject title Remorse [4] .

Parts of it read as follows: « It is with all my heart that I want to say how very sorry I am for causing such hurt and pain. (…) Truly from the bottom of my heart I’m remorseful and I wish the thought had never even crossed my mind, taking from you. (…) From very early on David was supportive and would lend or advance me monies anytime I needed. Sadly I needed to generate revenue and not debt. (…) There is no excuse or justifiable reason for what I did. There is no reason to forgive me.

The anger and hate towards me is understandable. (…) I royally f** up, royally and like I’ve said I understand how deeply hurtful my actions were. I’m truly sorry. I have lost a very good friend and a Family that I cared deeply about in acts of desperation. I’m obviously not a very good thief to have left all kinds of evidence hanging around your desk even after you had raised questions. (…) The truth is I’ve stolen from you and that will be something that will be in my heart for the rest of my life, how I hurt someone who loved me so much. (…).

Please when you can, let’s look at my personal belongings and getting some documents together to close everything properly. » [ 13 ] The next day, Mad Dog Juice’s attorneys sent a letter to Mr. Lipscombe. It informed Mr. Lipscombe that a forensic audit would be held in the next days to determine the extent of the damage caused to the company. It confirmed to him that they discovered he had sold products to a French company for an amount of $2,777 US. [ 14 ] They also reminded him that the amounts paid to Mr.

Lipscombe’s company Fusion des Saveurs had been revived by Revenue Quebec Auditors, as the company did not have proper GST and QST numbers. Revenue Quebec has requested back payments of QST for $7 076.39 and had a potential claim of $4,761.18; Canada Revenue Agency had potential claims of over $5,300. [ 15 ] In fact, Fusion des Saveurs had been administratively dissolved due to its default to file its annual mise à jour two years in a row. [ 16 ] Mr.

Lipscombe answered on January 20, 2020, with a long letter, in which he describes all the services he rendered to Mad Dog Juice [5] . [ 17 ] He admits having unlawfully sold products to an American distributor for the amount of $2,777 US, which he is remorseful for. He adds that the cost to the Company of those products is $775.44. [ 18 ] As for Revenue Quebec’s claim for back payment of QST in the amount of $7,076.39, he says that it was not intentionally directed at Mad Dog Juice, but was a major mistake.

He always had the intention to reimburse this amount. [ 19 ] He denies being bound by an exclusivity agreement, adding that the recipes were his intellectual property. He says that Mad Dog Juice has slandered his name by telling the industry he had stolen $20,000 which constituted defamation. [ 20 ] He proposes to resolve the situation by Mad Dog Juice paying him $65,000 as one year forecasted royalties, plus $822.25 for an outstanding invoice [6] . [ 21 ] From this amount, he deducts $7,076.39 for the QST claim, $2,777 for the unlawful sale and $10,000 for Mr.

Di Lallo’s duress, leaving a requested payment of $45,968.86. [ 22 ] To this letter was attached an unsigned contract dated September 15, 2016, between Mad Dog Juice and Mr. Lipscombe [7] . After Me Perlini answered Mr. Di Lallo’s proposal and stated that the contract he referred to was never signed and had no binding value, a signed copy by both parties was sent to him on January 28, 2020 [8] . [ 23 ] This signed contract drew the same reaction from Mr. Di Lallo and Mrs. Redding who denied that it was Mr. Di Lallo’s signature. [ 24 ] The Demand was served to Mr. Lipscombe on July 9, 2020.

In his oral grounds of defence, Mr. Lipscombe denied having sold the Plaintiff’s products to a company doing business in France for $2,777 US. He alleges that Mad Dog Juice has kept all the products and recipes created by him, that its revenues were never affected by his departure and that he never used the recipes for financial gain. [ 25 ] He filed a Cross-Demand in which he claims $22,488.52, representing the value of personal belongings kept by Mad Dog Juice ($9,790), general damages ($5,000) and a compensation for unpaid royalties for the period of January 1 to February 6, 2020. ANALYSIS AND DECISION:

TVQ paid to Revenue Quebec on Mr. Lipscombe behalf ($7 076.29) [ 26 ] Mr. Lipscombe recognizes that Mad Dog Juice should be reimbursed for that claim by Revenue Quebec, as it is due to his mistake in keeping his company up to date with the government. [ 27 ] He recognizes this in the letter P-14 sent to Mad Dog Juice’s attorneys, adding that he always had the intention to reimburse it. This claim of $7 076.29 is granted.

TVQ and GST to be paid not yet discovered ($9 103.87) [ 28 ] At the date of the hearing, Mad Dog Juice had not been sued and had not received any Letter of Demand by Revenue Quebec or Revenue Canada. The Court cannot condemn Mr. Lipscombe to reimburse to Mad Dog Juice money that was not paid, nor formally claimed. [ 29 ] Should Revenue Quebec or Revenue Canada claim any amount related to Mr. Lipscombe personally or one of his companies, Mad Dog Juice will have all the rights to sue Mr. Lipscombe to recover those amounts and their rights are hereby specifically reserved.

Concentrates sent to client in France ($2 777 US or $4 289 Can.) [ 30 ] Mr. Lipscombe has confessed that he sold products to a client in France and that he was not allowed to do so in his remorse email. Exhibit P-12 shows that the amount of this sale is $2,777 US, which, according to Mad Dog Juice, amounts to $4,289 Can. Mr. Lipscombe has not made any representations or proof to demonstrate that this converted amount is not accurate. This claim is granted for $4,289 . Goods that were taken by Mr.

Lipscombe ($315) [ 31 ] No sufficient proof as the value of those goods have been filed, so this claim cannot be granted. The exclusivity clause [ 32 ] Mr. Di Lallo relies on a verbal agreement intervened with Mr. Lipscombe stating that he would create recipes only for Mad Dog Juice and was not allowed to sell them to Mad Dog Juice’s clients. [ 33 ] The signed contract filed as exhibit D-2 says nothing about exclusivity. Mr. Di Lallo not only denied that it was not his signature that appeared on that contract, he proved it by the testimony of an expert, Mrs.

Brenda Petty [9] , who testified during trial. [ 34 ] Her professional opinion is that the questioned signature was written by a different hand than wrote the comparison signatures of David Di Lallo. [ 35 ] Her second conclusion is that the document was a created document. The signature line of Mr. Lipscombe being crooked is clear evidence that the document was not freshly keyed but parts of it was “put together” by copy/paste. [ 36 ] Mr.

Lipscombe did not file any counter-expertise and his testimony was far from enough to create a doubt about the expert’s conclusions. [ 37 ] Mad Dog Juice has proven that the agreement D-2 was never signed by Mr. Di Lallo. This puts a serious strain on Mr. Lipscombe’s credibility and the Court cannot believe him when he testified that there was no exclusivity with his flavors and recipes. [ 38 ] Another fact that is considered by the Court is that Mr.

Lipscombe has created a gmail address (maddogflavors@gmail.com), despite the fact he was already having one with the domain name @maddogjuice.com. [ 39 ] His explanation in his testimony is that it was done far before for internal use only. Exhibit P-22, which was included in a Notice to recognize the origin/Integrity of exhibits that was never denied by Mr. Lipscombe, shows it was used to send a confidentiality agreement to a third party on October 10, 2019. Reimbursement of expenses incurred for business trips ($8 132.54) [ 40 ] Mad Dog Juice claims for the costs of bringing Mr.

Lipscombe to different trade shows: Los Angeles ($822.83); Edmonton ($1,352.64); Birmingham ($3,226.98); Dallas ($1,371.15) and Edmonton ($1,358.94). [ 41 ] The basis of this claim should be an agreement that intervened between Mad Dog Juice and Mr. Lipscombe at the time of those business trips. If it was then agreed that Mr. Lipscombe had to reimburse the expenses should he quit the business, there would be a right of action. This is not what the proof have shown. [ 42 ] As the Court found that there was indeed an exclusivity clause between Mr.

Lipscombe and Mad Dog Juice, it was normal that business trips were to be paid by Mad Dog Juice. [ 43 ] It is understandable that Mad Dog Juice is frustrated by Mr. Lipscombe’s behavior. This is not a reason to claim from him the reimbursement of all expenses that were made previously on his behalf. This claim cannot be granted. [ 44 ] On the other hand, Mr. Lipscombe can hardly pretend that he was free to sell his recipes to other distributors and that he could meet them and discuss at the various trade shows while all his expenses were paid by Mad Dog Juice.

If such was the case, these expenses should then have been assumed by one of his other companies, or at least shared. Mad Dog Juice’s shares for contracts with Liquidwerk and Distrimarks

[ 45 ] Mad Dog Juice claims $9,600 for sales to Liquidwerk and $14,400 for the sale of nine recipes to Distrimarks. [ 46 ] Exhibit P-18 is an agreement between Liquidwerk and Point Consultants inc., one of Mr. Lipscombe’s company, dated July 26, 2019. The document is not signed. It speaks of a two-year term for an agreement by which Liquidwerk will buy formulations at the agreed price of $2,000 US per recipe, for a minimum of 12 formulations. [ 47 ] Mad Dog Juice says that this client never ordered from them after that date. [ 48 ] As Mr.

Lipscombe left the company six months later, Mad Dog Juice calculates the sale of six recipes and claims 80 % of $12,000, considering that 20% of that amount would have been paid as royalties to Mr. Lipscombe. [ 49 ] During his Pre-Trial Examination of September 16, 2021, Mr.

Lipscombe admits that he sold recipes to LiquidWerk on his own during the period when he was associated with Mad Dog Juice [10] . [ 50 ] The proof is clear that recipes were sold to LiquidWerk; the calculation submitted by Mad Dog Juice is accepted and their claim is granted for the amount of $9,600 . [ 51 ] As for Distrimarks, Mad Dog Juice has filed as Exhibit P-17 an agreement with Distrimarks dated January 29, 2018 regarding pricing and conditions for the E-Liquid partnership agreement between them.

No signed copy of this agreement could be found. [ 52 ] Exhibit P-12 (page 10) shows that flavor samples were sent to Distrimarks by Mr. Liscombe. Mr. Di Lallo said in his testimony that no one at Distrimarks would agree to talk to him to confirm these sales. [ 53 ] Mr. Di Lallo testified that he saw new recipes on Distrimarks’ website. With the same calculation, he asks for 80 % of $18,000 for nine recipes, stating that this is the price established by Mr. Lipscombe himself for the value of a recipe in the contract with LiquidWerk. [ 54 ] Mr.

Di Lallo said he kept his claim to the minimum and is not claiming for the loss of future business with Distrimark, which is no longer a client. As exhibit P-12 shows that flavors were sold to Distrimark, unauthorized by Mr. Di Lallo, Mad Dog Juice’s claim for a share of the sale of those recipes is granted for the amount of $14,400 . Goods sold to Vape 514 ($4 997.56) [ 55 ] Mad Dog Juice has proven that goods were sold to Vape 514 by Mr. Lipscombe.

The picture showing a sample of a bottle sold with a date of production later than the last order shows that such a sale happened [11] . [ 56 ] Mad Dog Juice has proven that the average order by Vape 514 were $999.51 monthly. They are asking for that sales amount for five months. [ 57 ] Mad Dog Juice has proven by preponderance of probabilities that Vape 514 was lost as a client because Mr. Lipscombe started to sell them products personally. This claim is granted for the amount of $4 997.56. General damages ($20 000) [ 58 ] Mr.

Di Lallo testified in a very sincere manner of all the trouble he went through after discovering all the facts previously mentioned. The fact that Mr. Lipscombe has off-set an amount of $10,000 for Mr. Di Lallo’s duress in his offer of settlement cannot be considered as an admission that such amount is due, but can be considered as a recognizance that, indeed, much stress was caused to Mr. Di Lallo. [ 59 ] However, it is not Mr. Di Lallo personally that is suing, but his company. Many judgments have said that a company cannot claim damages for trouble and inconveniences [12] .

This claim cannot be granted. [ 60 ] Mad Dog Juice’s claim is then granted for the total amount of $40 362.85 ($7,076.29 + $4,289 + $9,600 + $14,400 + $4 997.56) The Cross-Demand Goods kept by Mad Dog Juice [ 61 ] It was agreed at trial that Mad Dog Juice would give back to Mr. Lipscombe a water distillation unit and it was noted in the proces-verbal that Mr. Lipscombe would send a messenger to get it on March 27, 2023 between 9:00 and 17:00. [ 62 ] At the end of the trial, Mr. Lipscombe desisted of his claim for his other belongings. He had not filed any document to prove their value.

Unpaid royalties [ 63 ] In her testimony Mrs. Redding stated that there was a definite possibility that a balance of $850 may be due to Mr. Lipscombe. Further in the audience, this amount was raised to $2,281.05. [ 64 ] During the lunch break, Mrs. Redding made some further calculations for the royalties that were due between January 1 and February 6, 2020. She confirmed that an amount of $3 419.75 was due, as per Exhibit P-38. Mr. Lipscombe’s claim is granted for such amount.

General damages [ 65 ] Mr. Lipscombe pleads that Mad Dog Juice should not have sent his remorse email to all its clients and contacts, while Mad Dog Juice justified this action on information purposes, so that clients be aware that their association with Mr. Lipscombe was terminated. [ 66 ] The Court thinks that this purpose could have been reached by the text of the email D-1 and that it was not necessary to transfer Mr. Lipscombe’s correspondence. Should this be considered a fault, Mr.

Lipscombe had to prove that he suffered damages from this gesture. [ 67 ] He said he quit the industry and could not substantiate his claim, saying the amount was suggested by his lawyers. This claim is dismissed. [ 68 ] Mr. Lipscombe’s Cross-Demand is then granted for the amount of $3 419.75 .

FOR THESE REASONS, THE COURT: GRANTS in part the Demand; CONDEMNS Defendant Andrew LIPSCOMBE to pay to Plaintiff 10057223 CANADA INC. an amount of $40 362.85; GRANTS in part the Cross-Demand; CONDEMNS Plaintiff 10057223 CANADA INC. to pay Defendant Andrew LIPSCOMBE an amount of $3 419.75; AND, COMPENSATING THOSE AMOUNTS: CONDEMNS Defendant Andrew LIPSCOMBE to pay to Plaintiff 10057223 CANADA INC. an amount of $36,943.10 ; RESERVES 10057223 CANADA INC.’s rights to claim further from Mr.

LIPSCOMBE any amount paid to Revenue Quebec and Revenue Canada, should a claim arise in the future related to their business relationship; THE WHOLE with costs, including the expert Brenda Petty’s fees. __________________________________ CÉLINE GERVAIS, J.C.Q. Me Joseph Perlini Joseph Perlini Attorneys Attorneys for the Plaintiff Mr. Andrew Lipscombe Defendant Self represented