2015 QCCQ 561, 2015 QCCQ 561

Space Realties Inc. c. 9069-9497 Québec inc. (A & C Développement & Construction) 2015 QCCQ 561 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF MONTRÉAL Civil Division No: 500-22-195571-123 DATE: January 28, 2015 ______________________________________________________________________ BY THE HONOURABLE SCOTT HUGHES, J.Q.C. ______________________________________________________________________ SPACE REALTIES INC. Plaintiff v. 9069-9497 QUÉBEC INC. doing business as A & C Développement & Construction and 4238222 CANADA INC.

Defendants ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Space Realties Inc. (Space) is claiming $49,439.25 in virtue of what it describes as a «finders fee agreement». I. THE FACTS 1. Some background [ 2 ] Space is a real estate agency and holds the relevant permits issued by the Organisme d’autoréglementation du courtage immobilier du Québec. Its executive officer is Ms Carly Surkes, who is a certified real estate broker.

Ms Surkes acted for Space all through the dealings involved here. [ 3 ] 9069-9497 Québec Inc. or A & C Developpement & Construction (A &

C) had received the mandate from 4238222 Canada Inc. to develop a construction project on its immovable property in Lachine. [ 4 ] 4238222 Canada Inc. was, at all relevant times, the owner of the land in question. Its project was to build and sell commercial condominiums. [ 5 ] As of the initial dealings between Space and A & C, Mr Joe Alter was the president of A & C. He was also a shareholder of 4238222 Canada Inc. [ 6 ] Mr Patrick Thomas was the chief financial officer of A & C.

He acted as representative of both A & C and 4238222 Canada Inc. through all the discussions and negotiations involved in this case. 2. The finders fee agreement [ 7 ] Ms Surkes, in the spring of 2010, contacted Mr Alex MacGibbon, president of Belfast Printers & Stationers Inc. («Belfast») in order to verify if he required the services of a real estate broker. [ 8 ] She learned that Belfast was not happy with the location it was renting at the time and wanted to explore the possibility of moving. Mr MacGibbon agreed that Ms Surkes search for a new location.

He wished to rent new space, but did not exclude purchasing a building. Together, they visited a number of properties, none of which were to Mr MacGibbon’s liking. [ 9 ] Ms Surkes then proposed exploring the possibility of acquiring a condominium that was being developed by A & C. She had seen a large sign on the property announcing the project. She called the telephone number appearing on the sign and spoke to Mr Thomas. She informed him that she had a potential purchaser. Wishing to secure her commission, she proposed the following agreement: […] A & C Construction Inc. April 26, 2010 4600 Cote Vertu #07

St Laurent, Quebec H4S 1C7 Dear Sir, We have introduced you to our client ————————, for the purpose of purchasing an industrial condo in your development. Should you be successful in selling such a condo to said above mentioned client and/or his nominee, you agree to pay Space Realties Inc. a commission of five percent (5%) of the total sale price at the signing of a Deed of Sale. […] [ 10 ] Mr Thomas refused to sign this agreement. However, to his surprise, the agreement was returned to him duly signed by Mr Alter a few days later.

The name of the client, Belfast, had also by then been added. [ 11 ] Mr Thomas states that the owner of the property, 4238222 Canada Inc., did not wish to begin development until 50% of the condominium space was sold. Therefore, offers for at least 15 000 sq. ft. of the development were necessary. [ 12 ] A meeting was held on May 10, 2010. Mr Thomas and Ms Surkes were present, as well as Mr MacGibbon, and a friend of his who also wished to relocate his business.

Since Mr MacGibbon did not require 15 000 sq. ft., some sort of collaboration with his friend would allow them to meet this requirement [1] . [ 13 ] Contrary to Mr MacGibbon’s testimony at trial, he was in fact happy with the outcome of this meeting, as he stated in his e-mail of May 12, 2010 [2] : No all is good! We are putting together something! I liked Patrick at lot – seemed like a very nice person!

Alex [ 14 ] Further to this meeting, Mr MacGibbon’s friend lost interest in the project. [ 15 ] Nonetheless, Mr MacGibbon wished to go ahead with a proposal [3] : Hi Carly, My friend you met is being wishy washy…so I need to forget him go ahead without him. I realize that they will only break ground when half is sold. Therefore, if he gets another sale we could move ahead… I hope the timing would be ok.

So I would like a proposal to build based on: • 8000 sq ft – 2000 office on 2 floors (1000 foot print) – 7000 warehouse • 1 bathroom for warehouse • 2 bathrooms – men’s – women (office) • 1 cafeteria • Lobby where reception desk will be located - 5 offices – standard size - 1 board room - Balance can be open space If there is anything else I am forgetting please let me know.

Thanks Alex (Reproduced as drafted) [ 16 ] On June 7 th , 2010 at 10 : 34 am, Mr MacGibbon wrote to Ms Surkes [4] : Hi Carly, I have another friend with a company looking for space – Spring next year and said he may be also interested in about 7500 sq ft. Therefore, between the 2 of us – can you work a proposal to us for 15,000 sq ft. Alex

[ 17 ] On June 15 th 2010, Ms Surkes submitted a draft offer to purchase to Mr MacGibbon for 8,000 sq. ft. to be constructed. In her email dated Jun 15th at 11: 05 am she wrote [5] : Hi Alex, Please see attached draft of an offer to purchase. The strategy would be to sign a document like this, and for your friend to sign one as well so we can submit them at the same time. […] (Emphasis added) [ 18 ] Mr MacGibbon never responded to this email or to the proposal made by Ms Surkes.

At trial he states that the space was to large, that the proposal was not satisfactory and that he did not have the $880,000.00 purchase price nor the $220,000.00 deposit identified in the draft. [ 19 ] Whatever his reasons, Mr MacGibbon did not contact Ms Surkes and preferred to renegotiate his lease with his landlord at that moment. 3. The new broker [ 20 ] Approximately one month later, Mr MacGibbon retained the services of another real estate agency. This new broker showed him a number of properties which were deemed unacceptable.

Then, in late 2010, he introduced Mr MacGibbon once again to the Lachine property. [ 21 ] Mr MacGibbon never told his new broker of his dealings with Space concerning this property, nor did he remind Mr Alter or Mr Thomas of these earlier discussions. [ 22 ] Louis Laflamme, a representative of the new broker, contacted Mr Thomas by telephone on December 20, 2010, to advise him that he had a potential purchaser for condominium space. [ 23 ] On December 22, 2010 [6] , 4238222 Canada Inc. made an offer to lease or sell two units in the project.

This offer was accepted by Alex MacGibbon on January 11, 2011. [ 24 ] On January 20, 2011 [7] , Mr Laflamme’s firm obtained the exclusive mandate for the sale of the Lachine property. [ 25 ] On April 29, 2011, Alex MacGibbon, acting for Belfast presented an offer to purchase 7394 sq. ft. of industrial space within the Lachine project [8] . This offer was accepted by the vendor described as «Joe Alter, for a company to be formed».

Among other conditions, the Deed of sale was to be signed on or before September 16, 2011. [ 26 ] In fact, the Deed of sale was signed only on April 27, 2012 [9] , after three amendments to the offer to purchase, as well as many postponements of the date of closing. The vendor was not «a company to be formed» but rather 4238222 Canada Inc. represented by Joseph Altshuller. This is the full legal name of Joe Alter. 4. Control of 4238222 Canada Inc. [ 27 ] At the time of the discussions with Space, 4238222 Canada Inc. was represented by Mr Thomas.

He signed the correspondence filed in the Court record for Gordon Lazar, Director of 4238222 Canada Inc. [ 28 ] As stated, the management of 4238222 Canada Inc. did not wish to begin construction before selling at least 15 000 sq. ft. of the entire project. This is one of the reasons the negotiations with Belfast never progressed in 2010. [ 29 ] However, when the proposition from the new broker, still for less than 15 000 sq. ft., was presented, the situation had changed. [ 30 ] In fact, by then, (according to Mr Thomas) Mr Alter was on the verge of taking control of 4238222 Canada Inc.

At the date of Mr MacGibbon’s offer (April 29, 2011), Mr Alter had struck a deal in principal to acquire the control of 4238222 Canada Inc. The Registre des enterprises [10] , shows that on September 22, 2011, Mr Joe Alter became director and president of the company, effectively replacing Mr Lazar and the previous directors. 5.

Recollection of Belfast [ 31 ] Initially, Mr Thomas did not recall that the offer presented through the new broker was from the purchaser introduced by Space, namely Belfast. [ 32 ] It was only in February 2012 [11] that on reviewing his file, he came upon the finders fee agreement (Exhibit P-2), and made the link between Belfast and Space. [ 33 ] Mr Thomas advised the new broker of the existence of the prior agreement with Space. They responded that it was no longer binding because it was «en dehors des limites prescrites». Specifically, they told Mr Thomas that the «six months limit» had expired.

Mr Thomas was comforted by this, and did not ask the advice of his lawyer. [ 34 ] Mr Laflamme confirms that he was shown the Space agreement. After speaking to a colleague, they agreed that it was «too old». He adds that he told Mr Alter that «this should not be a problem». II. THE ISSUES

a) What are the parties’ obligations under the finders fee agreement?

b) Who is bound by the finders fee agreement?

c) Was the finders fee agreement still binding at the time of the sale of the property? III. THE ANALYSIS

a) What are the parties’ obligations under the finders fee agreement? [ 35 ] Exhibit P-2 is a finders fee agreement. Its drafting is clear. The law concerning this type of agreement is settled. It was sufficient for Space to introduce a potential purchaser to A & C [12] . Space had no obligation to be the efficient cause of the sale [13] . The time elapsed between the introduction and the Deed of sale has no bearing on the matter [14] . [ 36 ] The jurisprudence invoked by the defense does not apply here.

In the case of 141221 Canada Ltée [15] , the Court dismissed the claim by reason of the expiry of the contractual obligations (see paragraph 76). In Forac Consultants Inc . [16] , the agreement was not a simple finders fee agreement. The Plaintiff also had the obligation to «maintain channels of communications between the parties». The Court of Appeal came to the conclusion that the Plaintiff had not done so, thus dismissing the claim. Lastly, in the case of Les Pierres Primcar Inc . [17] , the issue was whether or not the Court could raise the corporate veil between two moral persons.

Space has conceded here that there is no evidence to allow application of this theory. [ 37 ] In view the above, the Court will analyze the facts of this case in accordance with the rules settled by the Court of Appeal in Corporation Adelaide Capital [18] .

b) Who is bound by the finders fee agreement? [ 38 ] The defense pleads that the finders fee agreement binds neither of the Defendants (paragraph 17 of the

Summary grounds of defense dated December 7 th , 2012). This argument is unfounded. [ 39 ] The evidence is undisputed that A & C was acting in virtue of a verbal mandate to develop 4238222 Canada Inc.’s project [19] . [ 40 ] The rules of mandate are clear: 2160. A mandator is liable to third persons for the acts performed by the mandatary in the performance and within the limits of his mandate unless, under the agreement or by virtue of usage, the mandatary alone is liable.

The mandator is also liable for any acts which exceeded the limits of the mandate, if he has ratified them. [ 41 ] In view of Mr Thomas’ testimony that A & C was acting as mandatary, the mandator 4238222 Canada Inc. is liable under the finders fee agreement. The change of shareholders act in directorship of 4238222 Canada Inc. do not change this. [ 42 ] As for A & C, it is liable in virtue of the second paragraph of

article 2157 of Civil Code of Québec : 2157. A mandatary who binds himself, within the limits of his mandate, in the name and on behalf of the mandator, is not personally liable to the third person with whom he contracts.

The mandatary is liable to the third person if he acts in his own name, subject to any rights the third person may have against the mandator. [ 43 ] On April 23 rd , 2010 [20] , Mr Thomas, acting as representative of 4238222 Canada Inc., made an offer to Space. [ 44 ] The finders fee agreement [21] was signed by Mr Alter for A & C on April 26 th , 2010. [ 45 ] Clearly A & C, although it states today that it was only a mandatary, never divulged this at the appropriate time. It decided to act in its own name rather than correcting the contract that was presented to it. A & C publicly advertised the sale.

The telephone number on the «For sale» sign on the property was that of Mr Alter. He signed Exhibit P-2 in the name of A & C contrary to Mr Thomas’ advice. Mr Alter chose to do so rather than specifying that A & C was acting as mandatary for 4238222 Canada Inc. [ 46 ] Ms Surkes was under no obligation to correct Exhibit P-2. The fact that she did not verify the ownership of the immoveable property has no bearing on the matter. A & C assumed obligations under the finders fee agreement and it was its obligation to sign the correct contractual document.

Mr Alter, according to the evidence, is an experienced businessman. Since he did not testify, the Court has no choice but to give full binding effect to the signature he added to Exhibit P-2. [ 47 ]

Article 2157 of Civil Code of Québec imposes obligations only on the mandatary. It was A & C’s obligation to specify clearly that it was acting as a mandatary in order for the first paragraph of this

article to apply [22] . It was not Space’s obligation to tell A & C how to act. A & C chose to act in its own name; it is liable under paragraph 2. [ 48 ] Since A & C and 4238222 Canada Inc. were, at all relevant times, acting «for the service or carrying on of an enterprise», solidarity between them is presumed according to the Civil Code of Québec [23] .

c) Was the finders fee agreement still binding at the time of the sale of the property? [ 49 ] Defendants plead that Exhibit P-2 was no longer in force (périmé

e) at the time of the sale.

[ 50 ] They base this argument on a number of facts, that they summarize as « This is not the same deal »: ➢ the 2 year that elapsed between P-2 and the sale; ➢ the land ultimately developed was smaller than that envisaged in 2010; ➢ the change of control of 4238222 Canada Inc.; ➢ the fact that Mr Thomas did not remember Belfast; ➢ the condominium ultimately purchased was not identical to that discussed into 2010 (7493 sq. ft. rather then 8000); ➢ Belfast purchased the condominium without the involvement of Mr MacGibbon’s friend; ➢ Belfast’s financing differed between 2010 and 2012; [ 51 ] The two year (2) delay is of no effect according to the Court of appeal. [ 52 ] The changes within 4238222 Canada Inc., as well as the modifications to the size of the land are solely 4238222 Canada Inc.’s responsibility.

These matters are indoor management and do not affect the rights Space has under the finders fee agreement. [ 53 ] As for the other changes that took place during the negotiations between the parties, none of them constitute a defense to Space’s claim. According to Exhibit P-2, the negotiations are the sole responsibility of the vendor (« should you be successful in selling such a condo to said above mentioned client and/or his nominee »). As well, by definition, negotiations typically involve changes to the parameters of the initial offer. The numerous modifications made to Belfast’s offer show exactly this.

The difference in size of the condominium is slight and of no legal consequence. Also, Belfast’s financing was never an obligation for Space. Most of the other changes to the deal were caused by the vendor itself. [ 54 ] Lastly, the defense pleads that it would be unjust to condemn them to pay a commission for a second time. It is true that the new broker received its commission for the sale to Belfast. However, this is Defendants’ own fault. Mr Thomas did not ask for legal advice when he remembered the agreement with Space.

As he said at trial:«J’aurais dû» . [ 55 ] Since there is no debate that Belfast was introduced to Mr Thomas by Space, the finders fee agreement must be given full effect. FOR THESE REASONS, THE COURT : GRANTS the Motion to introduce proceedings; CONDEMNS 9069-9497 Québec Inc. and 4238222 Canada Inc. solidarily to pay Space Realties Inc. the sum of $49,439.25 together, with interest at the legal rate and the additional indemnity provided for in

article 1619 of Civil Code of Québec since the date of service of the Motion; THE WHOLE with costs. __________________________________ SCOTT HUGHES, J.Q.C. Me Howard Schnitzer For the Plaintiff Me Jean-Guy Campeau For the Defendants Dates of hearing: May 8 th , 2014 and July 3 rd , 2014 [23] 1525. Solidarity between debtors is not presumed; it exists only where it is expressly stipulated by the parties or provided for by law. Solidarity between debtors is presumed, however, where an obligation is contracted for the service or carrying on of an enterprise .

The carrying on by one or more persons of an organized economic activity, whether or not it is commercial in nature, consisting of producing, administering or alienating property, or providing a service, constitutes the carrying on of an enterprise.