2020 QCCQ 5223, 2020 QCCQ 5223

Becker c. Raymond 2020 QCCQ 5223 COURT OF QUÉBEC «Small Claims Division» CANADA PROVINCE OF QUEBEC DISTRICT OF BEDFORD TOWN OF COWANSVILLE «Civil Division» No: 455-32-700928-194 DATE: September 18, 2020 ______________________________________________________________________ BY THE HONOURABLE PIERRE BACHAND, J.C.Q. ______________________________________________________________________ BURKHARD BECKER Plaintiff v.

ALAIN RAYMOND Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Plaintiff is claiming 15,000$ from defendant. The latter is the sole shareholder and administrator of A & G Puisatiers Experts Inc. (A & G). [ 2 ] Plaintiff was granted a judgment for 14,939$ against this company on June 27, 2018 ( 2018 QCCQ 4385 ).

He did not succeed to execute this judgment and he is now suing defendant personally. [ 3 ] According to him, since defendant is the sole shareholder of A & G, this makes him liable for the company’s debts. Unfortunately for plaintiff, this does not have any legal basis, considering the evidence adduced. [ 4 ] The evidence provided by both parties shows that A & G still exists but has no assets and has not operated for the last 2 or 3 years.

Previously, it had filed a proposal through a bankruptcy trustee but everything was abandoned after a few years. [ 5 ] There is certainly more to know but that is what the evidence reveals. Plaintiff received a letter from lawyer Richard Arcand on behalf of defendant in 2019. It stated that the corporation had filed a bankruptcy proposal in 2012, was insolvent, had no assets and had stopped any operation. [ 6 ] Plaintiff testifies that he made some attempts through a bailiff to execute the judgment with no valuable results.

He set a post- judgment examination where defendant failed to appear with no apparent follow-up. [ 7 ] Defendant states that his company is not bankrupt but has stopped all operations at least two years ago. He now operates another company called Puisatiers Experts Inc. This corporation did not benefit from any transfer of money or of any goods or equipment from A & G. [ 8 ] Here are the legal principles applying in this case. First, A & G is a legal person distinct from its shareholders and is not their mandatary as stated by the Court of Appeal in Singh c. Kohli, 2015 QCCA 1135 , par. 57 . Mr.

Justice Martin F Sheehan writes in 7914377 Canada Inc. v. Gauvreau, 2019 QCCS 4344 , about the applicable law in such a matter: [83] It is trite law that corporations have a legal personality that is separate from its shareholders. This entails that shareholders and directors of corporations are not responsible for liabilities incurred by the corporation when the corporation has insufficient funds to pay them: 24-247 […] Les tiers ne peuvent exercer leurs recours qu’à l’encontre de la société, sans recours contre ses administrateurs si elle s’avère incapable d’exécuter ses obligations.

C’est l’effet principal de la personnalité morale de la société : ses actes envers les tiers n’engagent qu’elle-même et non ses membres, c’est-à-dire ses actionnaires ou ses administrateurs. [84] When parties deal with a corporation without obtaining a personal guarantee from its main shareholders, they assume the risk of the

corporation’s insolvency. [85] The Civil Code of Quebec (‘‘CCQ’’) provides an exception to this rule. It stipulates that: 317. The juridical personality of a legal person may not be invoked against a person in good faith so as to dissemble fraud, abuse of right or contravention of a rule of public order. … [88] The Court of Appeal in Lanoue, highlights that lifting the corporate veil of a corporation to find its shareholders personally liable is an exceptional measure which should only be used when the criteria of

article 317 CCQ. are strictly met. It notes: Le contrat du mois de juin 1993 est intervenu entre Labatt et Citi Club. Labatt savait alors pertinemment qu'elle transigeait, dans le cours normal des affaires, avec une société et non avec des individus. On ne peut certes prétendre que les frères Lanoue ont alors invoqué « la personnalité juridique d'une personne morale » pour « masquer la fraude, l’abus de droit ou une contravention à une règle intéressant l’ordre public », au sens de l’

article 317 C.c.Q. L’insolvabilité future de la personne morale n’a pas pour effet de rendre les actionnaires débiteurs personnels d’une dette qu’ils n'avaient garantie en aucune façon; c’est l’essence même de la personnalité juridique de la personne morale qui est ici en cause. Il ne saurait donc être question de « soulever le voile corporatif » pour condamner les frères Lanoue à

titre d'actionnaires. 4.1.2 Gauvreau did not use the corporate veil of SMO to dissemble fraud, abuse of right or contravention of a rule of public order. [89] Plaintiff had the burden to prove fraud or abuse of rights. In order to meet this burden, it had the obligation to overcome the presumption of good faith.” [ 9 ] To summarize the case, the evidence shows that plaintiff entered into a contract with A & G, a corporation. He obtained a judgment against A & G but was unable to execute it, A & G being insolvent and having ceased its operations. Defendant is now operating another company with a very similar name.

There was no transfer of assets between these two corporations. [ 10 ] Does the Court know all the truth? Probably not. But it is bound by the evidence which does not show any fraud or anything which would warrant lifting the corporate veil. [ 11 ] The application must therefore be dismissed. WHEREFORE, THE COURT: [ 12 ] DISMISSES the application. [ 13 ] WITHOUT legal costs. __________________________________ Pierre Bachand, J.C.Q. Date of hearing: September 14, 2020