2013 QCCQ 709, 2013 QCCQ 709

Malevitis c. Shrier 2013 QCCQ 709 COUR DU QUÉBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division N°: 500-32-120730-090 DATE: January 22, 2013 ______________________________________________________________________ PRESIDED BY THE HONORABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ Maria-Christina Malevitis […] Outremont, QC, […] Plaintiff vs.

Andy Shrier […] , Notre Dame de l'île Perrot, QC, […] IMAJ DESIGNS INC. 1361 Jordi Bonet #102, Notre Dame de l'île Perrot, QC, J7V 7P2 Defendants ______________________________________________________________________ JUGEMENT ______________________________________________________________________ [ 1 ] The plaintiff, Maria Malevitis, sues Imaj Designs Inc., a business providing web design to its clients, and its shareholder Andy Shrier for arrears of payments allegedly owed for web design services rendered between July and November 2009.

She includes as well a claim in damages for lost business with her own clientele and other damages associated with her financial difficulty resulting from the non payment of the amounts claimed in connection with her services. [ 2 ] She asserts having worked for 16 weeks at $720 per week, for a total of $11,520. Taking into account payments totalling $6,550, she claims a balance of $4,970.

She adds to these damages totalling $4,813.50. [ 3 ] Her claim is in excess of the maximum permitted in the Small-claims Division, $7,000: she voluntarily reduces it to that maximum. [ 4 ] Andy Shrier contests the claim on the basis that he has no legal relationship to the plaintiff whose contract was with the corporation of which he is the principal, Imaj Designs Inc. ("Imaj") [ 5 ] Imaj contests on the basis that Ms Malevitis performed her services poorly and neglected her duties. Imaj asserts having paid all the amounts owed, with the exception of $1,500 which it claims to be entitled to withhold.

It adds a counter claim for $4,700 for loss of clientele, damages to client relations and lost revenue resulting from Ms Malevitis' breach of contract. The issues [ 6 ] The Court must answer the following questions: 1. What amounts are owed for services rendered and for damages, and by which defendant(s)? 2. If the corporation Imaj is the sole debtor under the contract, is there any basis for a claim against Mr Shrier personally? 3. Is Imaj entitled to claim damages against Ms Malevitis for unperformed or badly performed services?

The Facts [ 7 ] Ms Malevitis was already acquainted with Mr Shrier as a friend and her former employer in June 2009 when he approached her to accept the role of web designer for Imaj. [ 8 ] The offer was for full-time work, at an annual rate of $37,500, to be paid in weekly increments of $720. Billing, on the basis of a contract of services, would be made on a quarterly basis. [ 9 ] An initial exchange of emails (D-4) dated July 2nd shows that Ms Malevitis is asking for a salary of $720: "just one question regarding the salary-are you splitting it 80-20 or am I going to receive the full 720?

I would prefer 100% contract." [ 10 ] Ms Malevitis puts a lot of emphasis on the principle that she would received what amounted in reality to a weekly salary, though the billing was to be done as though she were an independent contractor.

In fact, she would devote all of her working time to the tasks assigned by Imaj, leaving the freelance work she had been doing. [ 11 ] She testified that she required a regular income as breadwinner of a young family. [ 12 ] An email from Mr Shrier dated Sept 16 shows that the contemplated payment is really a salary, expressed as a contractual amount: Just a reminder to start getting that 1st quarter invoice prepared.

Basically, just multiply your weekly amount…masks the fact that you work here EVERY WEEK and nowhere else!!! [ 13 ] Mr Shrier sees it differently: according to his testimony, she was a contractor providing services. Payment would depend upon Imaj receiving payment for completing its work to the clients.

Imaj, in turn, would then have the financial resources to pay Ms Malevitis her fee for the services rendered. [ 14 ] He attributes the non payment to her to the poor quality of the services, that made it impossible to collect amounts that would otherwise have given Imaj the cashflow required. [ 15 ] His version of the facts is also reflected in the written testimony of his colleague John Tzintzis, VP of Sales and Project Management from 2003-2009. [ 16 ] Mr Tzintzis' written testimony asserts that she accepted the position giving the impression that she could meet deadlines associated with several existing projects that were nearing completion and that she was aware that the payment of the money she would be owed depended on timely completion permitting receipt by Imaj of its closing account. [ 17 ] His written testimony goes on to state that initially, he had " a very positive and lenient demeanor towards" Ms Malevitis.

She was unable to meet clear schedules and she quickly became unreliable, within two weeks of the beginning of the job. This led to Imaj falling behind in its work, by two to three months, farming work out elsewhere. The time she stopped working for Imaj, Mr Tzintzis' departure from the company due to its lack of funds was imminent. [ 18 ] The exchanges of e-mails (P-10) between the parties shows a different situation that that described in the written testimony of Mr Tzintzis.

Mr Shrier writes to a customer on June 30, 2009 about a project called "Cashier PRO" that has been going very badly because of the poor work of the designer (Ms Malevitis predecessor). He asks for a second chance with the new designer whom Imaj has just hired (Ms Malevitis). [ 19 ] On July 2nd, Mr Shrier is thanking her for her initial work on the Cashier-Pro project which he refers to as a "wonderful job". [ 20 ] On July 25, she informs Mr Shrier about the badly-done work of her predecessor. She has to redo a lot of it.

She also expresses concern about the lack of payment: she has only received one cheque. [ 21 ] On July 27, 2009 he thanks her again for "the work and the update", mentions his dissatisfaction with her predecessor ("the last designer was a DOUCHE...". He expresses confidence in her use of her time, while encouraging her to "do whatever you deem necessary to do". [ 22 ] On July 31, she writes complaining about non-payment: she has $1,000 to show for five weeks work. [ 23 ] Other exchanges between July 27 and August 12 (D-4) show that Ms Malevitis is having difficulty keeping up with the

schedule and she expresses the realisation that she is "slipping". There are difficulties in her personal life, associated with a residential move. [ 24 ] Despite these concerns, Mr Shriar expresses his comprehension and is apologetic for the default in payment (Aug 18).

If they [the projects] are backed up, it's because of her predecessor, "but I feel like I should be the one apologizing for the lack of paychecks coming your way…" (Aug 23) [ 25 ] By September 4, 2009, she has worked 10 weeks ($7,200) and has received payments totalling $2,200. [ 26 ] Throughout, the attitude of Mr Shriar is to encourage her to continue working and to promise her payment out of some substantial sums that are coming in imminently. [ 27 ] The exchange of September 13 reveals that, despite her apology for certain shortcomings in her performance, Mr Shriar considers her not to be in default under her contract and urges her to continue, for the team to pull together.

Again, the emphasis is on continuing the work so that the clients will make their payments.

[ 28 ] In this exchange is found the admission that John Tzintzis is owed "a nice chunk of cash as well". [ 29 ] Ms Malevitis issues an invoice dated October 3, for $6,474.95. According to her statement P-5, the last week of regular work ended October 16. [ 30 ] She continues working on certain projects until November. [ 31 ] In October, the situation has deteriorated even further. On October 14, Andy Shrier is insisting on her accepting certain work, (P-8). She refuses, having not been paid.

She is trying to find jobs elsewhere, and doing work for her own clients. [ 32 ] November 17, he makes the gesture of offering a payment of $150 while informing her that certain clients have not paid. [ 33 ] On November 23, 2009, she sends a formal letter of demand, claiming the maximum of $ 7,000 representing overdue payments for her work and damages.

Analysis [ 34 ] Imaj takes the position that Ms Malevitis work was unacceptable from an early point in the relationship and that this justifies both the withholding of payments that would otherwise be due and an award of damages. [ 35 ] Whether the relationship is properly characterised as employment or a contract of services, the employee/contractor was entitled to a clear notification of the dissatisfaction of the employer/client, if there really was dissatisfaction. [ 36 ] By encouraging Ms Malevitis to continue and promising payment when cashflow permitted, Imaj did the opposite: it gave the message that, even if there were problems with her performance, these were accepted and the work would be remunerated and it should therefore be continued. [ 37 ] Imaj, having not put the opposite party in default, has no claim.

The payments are owed. [ 38 ] It follows that the cross-claim is without merit. [ 39 ] The Court finds Andy Shrier personally responsible. While it is the rule that a shareholder and director is not responsible for debts of a corporation, there are two reasons why, in this case, there is personal liability. [ 40 ] Firstly, it is the essence of all contracts that the parties be in good faith (art. 1375 of the Civil Code of Quebec): 1375.

The parties shall conduct themselves in good faith both at the time the obligation is created and at the time it is performed or extinguished. [ 41 ] At the point in time when Ms Malevitis was hired, thereby induced to let go of her usual clients, Mr Shrier was in a position to state openly that the business had major cash-flow problems, that its former sole fulltime designer had done very poor work and that the company's ability to pay its debts was in jeopardy.

If he had let her know that she would not be receiving the regular increments of salary that she had negotiated and that payment would be partial and tardy, she would not have accepted the job. [ 42 ] Secondly, the initial lack of transparency was exacerbated when Mr Shrier kept promising payment that he knew would not be made. The fact that the company was near collapse is indicated by the fact that it owed substantial amounts to its other key person, John Tzinzis. It was only by selling a property that Mr Shier owned personally that he could eventually promise payment to both of these individuals.

The company never recovered and ceased its business shortly afterward. [ 43 ]

Article 317 of the Civil Code of Quebec states the exception to the rule that generally protects shareholders and directors from legal liability: 317. In no case may a legal person set up juridical personality against a person in good faith if it is set up to dissemble fraud, abuse of right or contravention of a rule of public order. [ 44 ] In the present case, the lack of information at the time of the hiring and the continued promises that had no foundation constitute a lack of good faith, which is the essence of all contracts. It is tantamount to a fraud or an abuse of rights.

Mr Shier has personal liability, in solidarity with Imaj. [ 45 ] Ms Malevitis' claim in damages, is not substantiated in terms of lost income or additional expenses. The Court arbitrates her moral damages at $1,000. FOR THESE REASONS, THE COURT: CONDEMNS the Defendants to pay to the Plaintiff the sum of $5,970 with interest at the legal rate of 5% per annum and the additional indemnity provided at

article 1619 of the Civil Code of Quebec , calculated from November 23, 2009. CONDEMNS the Defendants, solidarily, to pay to the Plaintiff's judicial fees of $157.

__________________________________ DAVID L. CAMERON, J.C.Q. Date of hearing: December 11, 2012