r v. 4417186 CANADA INC., 2013 QCCA 191

Francoeur c. 4417186 Canada inc. 2013 QCCA 191 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-021024-104 500-09-021064-100 (500-14-030937-080) DATE: FEBRUARY 4, 2013 CORAM: THE HONOURABLE YVES-MARIE MORISSETTE, J.A. JACQUES DUFRESNE, J.A. NICHOLAS KASIRER, J.A. N o : 500-09-021024-104 MARCEL FRANCOEUR APPELLANT – petitioner v. 4417186 CANADA INC. and SNF LP RESPONDENTS – respondents/plaintiffs in warranty and JEAN-GUY HAMELIN and HAMÉTAL CANADA INC.

IMPLEADED PARTIES – defendants in warranty N o : 500-09-021064-100 SNF LP APPELLANT IN ACTION IN WARRANTY – respondent/plaintiff in warranty v. JEAN-GUY HAMELIN and HAMÉTAL CANADA INC. RESPONDENTS – defendants in warranty and MARCEL FRANCOEUR IMPLEADED PARTY – petitioner JUDGMENT

[ 1 ] On appeal from a judgment of the Superior Court, District of Montreal, rendered on August 19, 2010 (the Honourable Mr. Justice Roger E. Baker), which dismissed the appellant’s motion to homologate and his claim for damages; [ 2 ] For the reasons of Kasirer, J.A., with which Morissette and Dufresne, JJ.A. agree, THE COURT: [ 3 ] ALLOWS the principal appeal (500-09-021024-104), with costs in both courts; [ 4 ] SETS ASIDE the judgment of the Superior Court; [ 5 ] HOMOLOGATES the "Quittance et transaction" agreement as a transaction within the meaning of

article 2631 C.C.Q.; [ 6 ] ORDERS the parties to abide by the terms of the "Quittance et transaction" agreement; [ 7 ] CONDEMNS the respondent companies 4417186 Canada Inc. and SNF LP, solidarily, to pay the sum of $380,844.00, with interest from the date of service of the motion to amend the motion to homologate dated November 24, 2008, and the additional indemnity provided by law; and [ 8 ] DISMISSES the appeal in respect of the action in warranty (500-09-021064-100), with costs in both courts. YVES-MARIE MORISSETTE, J.A. JACQUES DUFRESNE, J.A. NICHOLAS KASIRER, J.A.

Mtre Bernard Moreau Mtre Josée Pilon Kaufman Laramée For Marcel Francoeur Mtre Éric Vallières Mtre Sidney Elbaz (absent) McMillan For 4417186 Canada Inc. and SNF LP Mtre Vincent Thibeault Lavery, de Billy For Jean-Guy Hamelin and Hamétal Canada Inc. Date of hearing: December 5, 2012 REASONS OF KASIRER, J.A. [ 9 ] A senior executive in the scrap metal business obtained generous terms from his employer when he agreed to leave his job. Following the sale of the business by the company president, the new owners refused to honour the settlement.

They argued the arrangement was a sham, designed to conceal the executive’s entitlement to an undeserved bonus payable when the company changed hands. [ 10 ] The Superior Court agreed. Based largely on his reading of the evidence and his measure of the credibility of the principal witnesses at trial, the judge held that the agreement between the outgoing president and the senior executive was invalid and that the latter had no right to the bonus.

The judge characterized the settlement as a fraudulent transaction by which the president made a lavish and unwarranted gift to his former employee at the expense of the new owners of the company. [ 11 ] Mindful of the deference owed on appeal in matters of fact and credibility decided at trial, I most respectfully disagree with the judge’s conclusion that the transaction was invalid and that the senior executive had no right to the bonus.

When they undertook to buy the company, the new owners agreed to assume certain risks and accepted that aspects of the business would not be revealed to them until closing of the sale. In my view, the judge neglected to account for this apportionment of risk when he held that the company was not obliged to the senior executive following the change in ownership. This was a palpable error, which, by reason of its distorting effect on the judge’s view of the evidence, overrides his conclusions.

Accordingly, I respectfully propose that the trial judgment be set aside and that the company be condemned to pay the senior executive the money that is his due.

I The Facts [ 12 ] Marcel Francoeur was a retired executive with experience in the steel industry when he was first hired by Québec Métal Recyclé (FNF) inc., a subsidiary of SNF inc., in May of 2005. Mr. Francoeur was recruited by Jean-Guy Hamelin, the president and controlling shareholder of the parent company. On August 1, 2006, he signed a new two-year, renewable contract of employment as First Vice- President of QMR. Clause 11 provided that SNF inc. could terminate the employment contract unilaterally, for any reason, upon payment to Mr.

Francoeur of an amount of one month salary for every year of employment, based on a minimum of nine months and a maximum of twelve months salary. Mr. Francoeur’s annual base salary was $250,000, not including benefits and bonuses, later increased to $253,896. [ 13 ] In late 2006, Mr.

Hamelin, representing Hamétal Canada inc., a company he controlled, and the other majority shareholders of SNF inc., began to examine different possibilities for selling the SNF-QMR group of companies. [ 14 ] As part of that strategy, the SNF-QMR group followed the advice of an external adviser and offered a limited group of its key employees the right to a bonus of 1.5 times their salary as a retention incentive.

The bonus, that the parties came to refer to as the "golden parachute", would be payable to the employees who remained with the SNF-QMR group at the time of the sale or change in control of the business. Mr. Hamelin signed an agreement promising Mr. Francoeur this retention bonus on April 13, 2007, and promised it as well to two other executives. The agreement with Mr. Francoeur was subject to a confidentiality clause. Some senior employees of the SNF- QMR group, including Diane Fournier, the director of human resources who would later play a role in the departure of Mr.

Francoeur from the company, would neither be offered the golden parachute nor apprised of it. [ 15 ] On June 11, 2007, Mr. Francoeur signed an addendum to his employment agreement which provided him with a raise. Clause 2 of this addendum stated that QMR could terminate the employment contract unilaterally, for any reason, on condition that it pay Mr. Francoeur one month salary for each year of service up to "un maximum de 9 mois" and stipulated that if the contract ended by reason of the sale of the business he would receive, "à

titre de préavis/indemnité et/ou dommage liquidé, une somme équivalant à 12 mois de salaire brut". [ 16 ] On October 3, 2007, Mr. Francoeur signed a further addendum to his contract of employment that provided him with a minimum bonus of $75,000 for the financial year ending January 31, 2008. Like the addendum of June, 2007, this agreement was not subject to a confidentiality undertaking. [ 17 ] On November 17, 2007, Denis Fraser approached Mr. Hamelin on behalf of Herbert Black and Ronald Black, the principals in American Iron and Metal LLP, who were interested in purchasing the SNF-QMR group.

The Black group and the SNF-QMR group were fierce competitors in the scrap metal business. Evidence at trial suggested that the personal relations between Mr. Hamelin and Mr. Herbert Black were strained. [ 18 ] On behalf of one of the Black companies, Mr. Fraser offered to buy the SNF-QMR group for $10 million more than the next best offer. As an inducement for Mr. Hamelin to sell to the Black group notwithstanding their rivalry, and as a means of providing him comfort against the possibility that the Blacks might have a change of heart, Mr. Fraser offered to complete the transaction with dispatch, allowing Mr.

Hamelin to keep certain business information confidential until the date of closing. Moreover, the buyers said that they were prepared to forego the usual "due diligence" verifications often required for acquisitions of this kind. [ 19 ] In the meantime, Mr. Hamelin observed that relations between certain of his employees and First Vice-President Francoeur had become increasingly difficult. On November 26, 2007, he wrote the following email to Mr.

Francoeur, who was out of the office on holiday at the time: Comme nous l’avons tous les deux constaté au cours des derniers mois, il m’apparaît évident que notre association ne peut plus continuer. Je crois que nous devrons nous rencontrer à l’extérieur du bureau pour discuter de tes conditions de départ tout en explorant les possibilités de te confier des mandats spéciaux.

J’apprécierais, dans les circonstances, que tu évites de te présenter au bureau et je communiquerai avec toi demain pour fixer notre rencontre. [ 20 ] In the early hours of November 28, 2007, a share purchase agreement was concluded whereby the Black group undertook to buy the shares of SNF inc., the parent company of the SNF-QMR group, held by Mr. Hamelin's holding company and other shareholders. The closing of the sale would take place at a later date, at which time title to the shares, and with them control of the SNF- QMR group, would be transferred to the Blacks.

The purchaser would then pay the sale price of $64,200,000 and other considerations. (The closing did in fact take place on February 4, 2008). [ 21 ] Mr. Fraser testified that, just prior to the conclusion of the share purchase agreement, Mr. Hamelin drew him aside and informed him, in a brief exchange, that he had dismissed Marcel Francoeur from the company. Mr. Hamelin disputed the details of this encounter at trial. [ 22 ] The share purchase agreement was just that: a sale of shares. It left the companies in the SNF-QMR group intact – including QMR, the corporate employer of Mr.

Francoeur – notwithstanding the change in ownership. (After closing, the companies would be reorganized within the Black group, but this has no direct bearing on the outcome of the appeal). [ 23 ] The terms of this share purchase agreement require close examination. Clause 1.2 of the agreement set forth the timing for disclosure to the buyers of certain key documents, specifying in particular that a list of bonuses would be held under seal with Mr. Hamelin’s lawyers until closing.

Clause 2.2 included an acknowledgement by the purchaser that it did not have access to the material held under seal, that it had not undertaken a due diligence exercise in respect of the SNF-QMR group and that it fully accepted the risks in the circumstances. In clause 4.1.9)c), the company undertook that it had no undisclosed obligation to pay bonuses to employees with

the exception of those set forth in

schedule 4.1.9)

c) held under seal. In clause 6.1, the vendors agreed to pursue the ordinary course of business of the SNF-QMR group until closing date and not to conclude (with some named exceptions) contracts having a total value of more than $100,000. The vendors also undertook not to raise employee salaries or to pay bonuses, except for designated exceptions, before closing. Clause 8 provided that the sale was conditional on obtaining approval from governmental competition authorities, and that this condition was to the benefit of the Black group. Clause 11.3 stipulated that Mr.

Hamelin had to remit his resignation as president of the company at the date of closing and that the Black group would designate his replacement. The purchaser acknowledged in clause 4.1.13) that there were no further undertakings or warranties by the vendors other than those set out in the agreement and clause 7.4 limited the remedies in case of any misrepresentations made by either party. [ 24 ] Mr.

Hamelin remained president of the SNF-QMR group following the signature of the agreement of November 28, 2007. (He left his position on or about the time of the closing of the sale of shares in SNF inc. to the Black group on February 4, 2008, in keeping with the terms of the share purchase agreement). [ 25 ] On November 28, 2007, Mr. Hamelin circulated a memorandum to SNF-QMR personnel announcing the departure of First Vice-President Francoeur. [ 26 ] On December 5, 2007, Mr. Francoeur learned from Mr.

Hamelin that the share purchase agreement had been concluded with the Black group. [ 27 ] On December 6, 2007, Mr. Francoeur and QMR, represented by Mr. Hamelin, signed a document entitled "Quittance et transaction". Ms. Fournier, who was QMR's director of human resources at the time, signed as witness. This agreement, on which much of the appeal turns, also merits close examination. (The trial judge reproduced it at length in paragraph [9] of his reasons). [ 28 ] The

preamble recorded that on November 26, 2007, QMR informed Mr. Francoeur that his employment with the company would end on November 25, 2008. [ 29 ] Clause 2 stipulated that he would receive his regular salary, less deductions, through November 26, 2007. Clause 3 provided that the company would pay Mr. Francoeur for an additional period of 12 months, commencing November 26, 2007 and ending November 25, 2008, as a working notice period (described as a "préavis travaillé" in the agreement), during which time Mr. Francoeur would continue to be employed exclusively by the company.

His salary would be $200,000 for the year, paid in instalments every other week. The clause continued: Durant cette période de préavis, « MARCEL FRANCOEUR » travaillera principalement à partir de son domicile. Ses tâches consisteront notamment à conseiller le président sur les dossiers stratégiques et toutes autres tâches à être déterminée [ sic ] par le président. Il est expressément entendu entre les parties que pour avoir droit au paiement de cette période de douze (12) mois, « MARCEL FRANCOEUR » doit absolument travailler au bénéfice de « QMR »; […]. [ 30 ] By clauses 5, 6 and 7, Mr.

Francoeur acknowledged that he gave full and final release and waiver of any right of action he may have against his employer, including rights arising out of the termination of his employment, in consideration for the payments to him in the "Quittance et transaction". In clause 8, both parties acknowledged that these funds were paid without any admission of liability and "à

titre de gratification seulement". Clause 9 required Mr. Francoeur, as of the date of signature, to remit his office keys, computer and company car to QMR. Clause 11 provided that the agreement was confidential. Clause 13 stated that the parties recognized that the agreement constituted a transaction within the meaning of articles 2631 C.C.Q. [ 31 ] The "Quittance et transaction" included a handwritten reference to the $75,000 bonus for 2007, added at the behest of Mr. Francoeur, noting that it would be payable as part of the settlement.

The agreement made no mention of the "golden parachute" bonus to which the parties had previously agreed on April 13, 2007. Mr. Francoeur had also asked Mr. Hamelin that it be explicitly included. At trial, he testified that Mr. Hamelin did not want it to be mentioned in the document because the golden parachute was a confidential bonus. Mr. Francoeur said that Mr. Hamelin undertook to him that it would nevertheless be paid. [ 32 ] In the period following the signing of the "Quittance et transaction", Mr. Hamelin did not ask Mr. Francoeur to perform any work whatsoever. Mr.

Francoeur did undertake certain initiatives on his own and remained available to work for the company from home. Mr. Francoeur received the payments due under the agreement, including the payments pursuant to the working notice period clause, down to the date of closing of the sale of the SNF-QMR group, at which time the payments stopped. [ 33 ] At closing on February 4, 2008, the Black group opened the documents held under seal, including the

schedule 4.1.9)c). The new owners of QMR learned that three employees, including Mr. Francoeur, were designated beneficiaries of the golden parachute bonus payable upon the change in control of the SNF-QMR group. At about that time, the Black group also learned that according to the "Quittance et transaction", he was employed by the company until November 25, 2008. [ 34 ] Mr. Francoeur was summoned to a meeting with Mr. Black on February 7, 2008 at which time he was informed that the Black group had no work for him and no intention of honouring the "Quittance et transaction".

He was told that he would not receive the golden parachute bonus because, for the Black group, he had not been a legitimate employee of QMR at the time of change of control of the company. [ 35 ] Mr. Francoeur took action to have the "Quittance et transaction" homologated as a transaction and, by reason of his status as employee of the company, to claim $380,844 under the golden parachute agreement. The Black group denied liability, calling Mr. Hamelin and Hamétal Canada inc. as defendants in warranty. One of the Black companies intervened in the Superior Court to claim $30,769.24 from Mr.

Francoeur, alleging that the SNF-QMR group had wrongly paid him this amount under the "Quittance et transaction", and asked for an additional amount of $75,000 representing the bonus for the year 2007 that was not properly due. II Judgment of the Superior Court [ 36 ] The trial judge dismissed both Mr. Francoeur’s motion to homologate the "Quittance et transaction" and his claim for the

retention bonus based on the golden parachute. As a result, he found it unnecessary to decide the action in warranty. [ 37 ] The judge held that the "Quittance et transaction" was not a valid transaction as it did not have, as its object, the prevention of a dispute between the parties or a concession made by Mr. Francoeur. Instead, he construed it as a new contract of employment for a fixed term, expiring on November 25, 2008: Mr. Francoeur was freshly hired to work from home, with largely unspecified tasks, at a salary of $200,000. [ 38 ] According to the judge, Mr.

Francoeur had in fact previously been dismissed from the company on November 26, 2007. He cited the email Mr. Hamelin sent to Mr. Francoeur that day and the announcement made to company employees shortly thereafter as evidence of the dismissal. [ 39 ] The judge recalled that, pending the closing of the sale of shares in the SNF-QMR group to the Black group, Mr. Hamelin did not have authority to bind QMR for contracts valued over $100,000 according to clause 6.1)

b) of the share purchase agreement. For that reason alone, the "Quittance et transaction" was invalid. [ 40 ] In any event, the judge was of the view that the "Quittance et transaction" was "pure fantasy, [...] intended to provide a temporary sinecure for Francoeur while doing no work." He noted a total absence of evidence that anyone in the Black group consented to giving Mr. Francoeur $200,000 to "sit at home" (para [58]). The arrangement was "pure fiction" and could not legitimately give Mr. Francoeur the status of an employee required for him to claim the golden parachute payment (para [59]). [ 41 ] Mr.

Francoeur's claim for $380,844 based on the agreement of April 13, 2007 was dismissed. The judge noted that the golden parachute had been "successfully hidden" from the Black group and only disclosed to them after the share purchase agreement in 2008 (para [60.4]). As a result, it could not be set up against the new owners. In addition, Mr. Francoeur and Mr. Hamelin had unfairly conspired to make it appear that Mr.

Francoeur was still employed by the SNF-QMR group at the time of change in control when in fact he had been fired on November 26, 2007. [ 42 ] Referring to the golden parachute and the "Quittance et transaction", the judge concluded at paragraph [60.6] that "Francoeur was a willing participant in these confidential agreements, and accordingly has no right to claim from the Respondents who were kept ignorant of their existence". [ 43 ] In support of his conclusions, the judge observed that Mr.

Francoeur’s answers to questions in respect of the "Quittance et transaction" lacked sincerity, concluding that "there was no credibility whatsoever in his testimony" (para [25]). Mr. Hamelin testified that he did not fire Mr. Francoeur on November 26, 2007. Referring to the email sent to Mr. Francoeur that day and the memo sent to employees shortly thereafter, the judge wrote that Mr. Hamelin’s affirmation was contrary to his own written documents and "entirely lacking in credibility" (para [40]). [ 44 ] On the other hand, the judge noted that Diane Fournier had testified that Mr.

Francoeur had left his job on November 26, 2007, and not in 2008 as the appellant claimed. According to the credible testimony of Denis Fraser, the golden parachute was only disclosed to the respondents in 2008 and that Mr. Hamelin had lied when he told Mr. Fraser that no such bonus existed (paras [60.3] and [60.4]). [ 45 ] On this basis, he dismissed Mr. Francoeur’s claims under the two agreements. [ 46 ] Finally, the judge concluded that the $75,000 bonus payable to Mr. Francoeur should be honoured. He also decided that the amount of $30,769.24 paid to Mr.

Francoeur by the SNF-QMR group between the date of his dismissal and January 19, 2008 need not be reimbursed. He accordingly dismissed the aggressive intervention by SNF LP. The Black group chose not to appeal these conclusions. [ 47 ] Mr. Francoeur did appeal. Having called Mr. Hamelin and Hamétal Canada inc. in warranty at trial, the Black group asks the Court to declare them solidarily liable in the event that any of the Black companies, including QMR, be held liable to Mr. Francoeur in the principal appeal. III Arguments of the parties [ 48 ] Mr. Francoeur, as appellant, and Mr.

Hamelin and Hamétal Canada inc., as respondents in warranty, argue that the judge erred in deciding that the "Quittance et transaction" was a sham and say instead it was a valid transaction that settled the termination of Mr. Francoeur’s employment with QMR. [ 49 ] They contend that Mr. Francoeur had not been dismissed from the company on November 26, 2007. While company president Hamelin had decided to remove him from the position of First Vice President at that time, the later "Quittance et transaction" provided Mr. Francoeur with a working notice period (the "préavis travaillé") as a notice of termination.

During this working notice, he would be paid a lesser amount than his previous salary, with an attending change to his duties, and agreed that November 25, 2008 would be the definitive date upon which his contract of employment with the company would end. In other words, his status in the company changed, but he had not been dismissed and there was no new contract of employment. They say Mr.

Francoeur was still an employee at the time of the closing of the sale on February 4, 2008. [ 50 ] Lastly, they argue, the share purchase agreement provided the proper explanation for the timing of the disclosure of the disputed documents to the Black group. In that agreement, the parties agreed that certain documents, including the golden parachute agreement, would not be revealed to the buyer until closing and, further, that the Black group would not undertake a due diligence examination of the vendors’ business.

The golden parachute was therefore not concealed from the Black group, but was private to the SNF-QMR group until closing to protect it from its rival in the event the deal failed. As fitting, the "Quittance et transaction" was only revealed to the new owners of QMR at closing. [ 51 ] The Blacks answer that there are no grounds for setting the trial judgment aside. [ 52 ] In what the respondents describe as a "plot" hatched to reward Mr. Francoeur unjustly at the expense of the Black group, they

say Mr. Hamelin and Mr. Francoeur signed a "pseudo-transaction" on December 6, 2007 designed to create the appearance that Mr. Francoeur was still employed by QMR when in point of fact he had been fired ten days before. The purpose of this arrangement was clear: the parties sought to provide Mr. Francoeur with a $200,000 gratuity in consideration for no real work and, importantly, to give him the status of employee at the time QMR would change hands, thereby qualifying him for the golden parachute at the expense of the new owners. [ 53 ] The respondents submit that the judge was right to decide that Mr.

Francoeur’s employment ended on November 26, 2007 and that he was not legitimately employed by QMR at the time of the transfer of shares to the Black group. The judge was right to decide that the "Quittance et transaction" was not a transaction in the legal sense because it lacked any concession whatsoever by Mr. Francoeur. Even if it were to be construed as a transaction, its very terms make plain that Mr. Francoeur waived rights not spelled out in the agreement.

On this alternative analysis as well, he has no right to the golden parachute. [ 54 ] If the judge was incorrect in dismissing the executive’s claim, say the respondents, Mr. Hamelin’s conduct meant that he and Hamétal Canada inc. should answer for any amount that the Black group might owe to Mr. Francoeur. IV Analysis [ 55 ] It is often said, and quite rightly so, that a court of appeal should tread cautiously before disturbing the findings of fact by a trial judge, especially when those findings are comforted by determinations bearing on the credibility of witnesses.

Only a palpable error committed by the judge that overrides his or her conclusions will do. [1] The onus is on the party who alleges the error of fact: an appellant bears what is generally seen as a heavy burden of identifying the mistake and showing how it had a conclusive effect on the outcome of the case. [ 56 ] In answer to the alleged mistakes raised by Mr. Francoeur and Mr. Hamelin, the respondents say the judge made no error susceptible of review on appeal. The judge denied Mr.

Francoeur’s claims based on his first-hand appreciation of the evidence and, in particular, the credit he gave to the testimony of Mr. Fraser and Ms. Fournier as against that of Francoeur and Hamelin. The respondents see no overriding error. [ 57 ] I disagree. In my respectful view, the trial judge erred when he decided – indeed this conclusion is at the core of his reasons – that Marcel Francoeur and Jean-Guy Hamelin fraudulently concealed the golden parachute agreement from the Black group and secretly concluded a sham “Quittance et transaction” designed to protect an entitlement to which Mr.

Francoeur had no right. [ 58 ] At the root of this mistake was a misreading of the share purchase agreement signed on November 28, 2007 by which Mr. Hamelin and others agreed to sell their shares in the SNF-QMR group to the Blacks. [ 59 ] This misreading had an overriding effect on the judge’s conclusions in two respects, summarized here and explained in detail below. [ 60 ] First, according to the share purchase agreement, the Blacks accepted that the golden parachute would not be revealed to them until closing of the sale.

As purchaser of the SNF-QMR group, the Blacks assumed all risks associated with this non-disclosure and agreed that they would undertake no due-diligence review prior to closing. The judge was wrong to hold that the golden parachute had been fraudulently hidden from the Black group. When they bought the company, the Blacks had freely agreed, at their risk and peril, to forgo access to this information. QMR must honour the golden parachute as a consequence of this choice by the new owners. [ 61 ] Second, the share purchase agreement explicitly left Mr.

Hamelin in place as president of QMR until closing, and charged him with running the business, subject to some limitations. Mr. Hamelin was thus the named president for whom Mr. Francoeur was answerable for the period of working notice, and would be until the then undetermined date of closing. The judge was wrong to decide that Mr. Hamelin could not negotiate, as president, the terms of Mr. Francoeur’s "Quittance et transaction" as he did, including the establishment of a working notice period of 12 months for Mr.

Francoeur, ending on November 25, 2008, in time to qualify for the golden parachute. [ 62 ] The share purchase agreement did nothing, therefore, to change the fact that QMR was bound by the golden parachute and the "Quittance et transaction" towards Mr. Francoeur at the time of change of control of the company. The share purchase agreement left QMR intact when it was finalized, with its responsibilities to Mr. Francoeur and others as employer, notwithstanding the change in ownership. Mr. Francoeur was also a third party to the share purchase agreement and, in principle, it cannot be set up against him.

In sum, the share purchase agreement provides no basis for relieving QMR and its new owners from liability to Mr. Francoeur. [ 63 ] Moreover in connection with the appeal in warranty, there is no basis for holding Mr. Hamelin responsible for the money owed by the Black group. Even if he did misrepresent the facts relating to Mr. Francoeur's dismissal to Mr.

Fraser prior to the share purchase agreement, the Black group waived any right they might have had to take legal action based on such misrepresentation in clauses 4.1.13) and 7.4 of the share purchase agreement. [ 64 ] I would respectfully add that the judge's misreading of the share purchase agreement meant that he viewed some of the evidence from a wrong perspective. This resulted in a distortion of certain facts as he recorded them, including some matters of credibility, as the judge sought to find explanation for what he saw as irrational conduct by Mr. Hamelin and Mr. Francoeur.

Like in the case of Ford du Canada ltée v. Automobiles Duclos inc. [2] , the judge’s evaluation of the evidence was undertaken here "à travers un prisme qui doit être écarté et qui a clairement eu un effet déformant". It meant that much of what appeared to the judge to have been concealed by Francoeur and Hamelin was in fact legitimately confidential.

Conduct undertaken by the same parties that the judge characterized to be in bad faith was in fact the reflection of good faith business practices that should not have had a negative impact on their credibility. [ 65 ] In fairness to the judge, at least one of these mistakes has its origin in a clerical error in the parties' pleadings, [3] but the overall impact nevertheless has an overriding effect on the conclusions of the Superior Court.

As in Ford , [4] the consequence of this error in perspective meant that some of the facts as ascertained by the judge, including certain findings relating to the credibility of Mr. Francoeur and Mr. Hamelin, must be set aside notwithstanding the rule that requires appellate courts to show deference to such

determinations made at trial. The judge’s findings on credibility cannot therefore be read as insulating the judgment of the Superior Court from review. [ 66 ] I turn now to the specific arguments raised in support of the principal appeal and the appeal in warranty.

A) Principal appeal by Mr. Francoeur against the Black group [ 67 ] The principal appeal turns on whether Mr. Francoeur can homologate the "Quittance et transaction" in order to benefit from his period of working notice. If Mr. Francoeur can establish that he qualified pursuant to the golden parachute at the time of change of control of the SNF-QMR group, and that he did not waive his rights in the "Quittance et transaction", the retention bonus should also be paid. [ 68 ] The judge decided that the non-disclosure of the golden parachute agreement to the Blacks was fatal to Mr.

Francoeur's claim to the retention bonus. He also held that Mr. Hamelin did not have the power to grant his former employee what amounted to a new contract as part of a sham transaction. I will examine these two points in turn. (

i) Non-disclosure of the golden parachute under the share purchase agreement [ 69 ] The share purchase agreement was referred to in the judgment but, with respect, the Superior Court did not consider the proper impact of clauses 2.2 and 4.1.9)

c) on the enforceability and confidential character of the golden parachute. [ 70 ] Clause 4.1.9)

c) was an undertaking by the vendors relating to employee bonuses. It provided that SNF inc. and its affiliates had no undisclosed system of bonuses, including any bonus that would be payable to a QMR employee such as Mr. Francoeur, "à l’exception de ce qui est décrit à l’annexe 4.1.9)c)". This schedule, it will be recalled, was held confidentially under seal by the law firm representing Mr. Hamelin pursuant to clause 1.2 of the agreement. [ 71 ] Paragraph 5 of

Schedule 4.1.9)

c) made explicit reference to the golden parachute that had been signed by Mr. Francoeur on April 13, 2007 as an incentive for him, along with a select group of senior employees, to remain with QMR when the parent company began discussions with potential buyers. It provided as follows: 5. Bénéfices payés lors d’un changement de contrôle MM. Marcel Francoeur , Michel Poulin et Paul-Émile Tremblay ont une entente intervenue avec SNF leur donnant droit à une prime de 150% de leur salaire annuel advenant la vente ou le changement de contrôle de SNF .

Cette prime est payable par SNF peu importe que le bénéficiaire demeure ou non à l’emploi de SNF suite à la vente ou au changement de contrôle de celle-ci. Ce montant est payable en sus de, et ne remplace aucunement, tout montant payable en vertu de la

Section 3 ou 4 du présent

annexe (en ce qui concerne M. Paul-Émile Tremblay et M. Marcel Francoeur). (Emphasis added.) [ 72 ] By clauses 1.2 and 2.2, the Black group acknowledged that it had no access to this

schedule at the time of the agreement to purchase the shares on November 28, 2007. It was only to be disclosed to the buyers at closing when the seal would be broken. This is in fact exactly what occurred on February 4, 2008. [ 73 ] The Black group accepted the consequential risks in clause 2.2, entitled "Reconnaissance de l’acheteur": Pour plus de précision, l’acheteur (

i) reconnaît ne pas avoir eu accès aux annexes (sauf pour les annexes 6.2.3), 11.3.8) et 11.4.6) remises à la signature des présentes) et ne pas avoir fait de vérification diligente à l’égard de la Société ou de ses filiales et (ii) accepte pleinement les risques découlant de ces circonstances . (Emphasis added.) [ 74 ] Why would the Black group have accepted this unusual risk at the time of the share purchase agreement? [ 75 ] The answer is very clear from the evidence, including from the testimony of the Blacks' very own representatives. [ 76 ] All parties agree that Mr.

Hamelin and Herbert Black were fierce rivals. Mr. Hamelin had first sought to sell his business to another player in the market. In late November of 2007, when the Black’s representative approached Mr. Hamelin to strike a deal, the Black group offered a generous price, a non-disclosure undertaking and the no due-diligence clause as an inducement to shareholders, including Mr. Hamelin who controlled the company, to sell their stake in SNF inc. [ 77 ] The parties understood as well that the deal, once agreed to, might not close.

Clause 8.1.1) stipulated that approval by the government authorities under the Competition Act was a condition to finalizing the sale. Clause 8.1.2) stipulated that this condition was to the benefit of the Blacks and could be waived by them. [ 78 ] Mr. Hamelin, as vendor, thus ran the risk that the share purchase agreement would not close. If the Black group had access to confidential information prior to closing and the deal fell through, Mr. Hamelin would have revealed that information unnecessarily to his rival to the detriment of the company.

As a consequence, the share purchase agreement provided that certain aspects of the operations of SNF inc. and its affiliates, including information relating to employee bonuses set forth in

schedule 4.1.9)c), would be kept from the Black group until closing. This was plainly stated, as well, in clause 2.2 which recorded the absence of a due diligence requirement and stipulated that the buyer assumed all the risks flowing from that undertaking. [ 79 ] At trial, Mr. Fraser acknowledged this to be the case, describing the absence of due diligence, in his words, as "très inusuel" but

justified in the circumstances: R. : … il avait été entendu qu’on ne pourrait pas avoir de due diligence , ce qui est très inusuel dans une transaction de cette… de cette taille-là. Et qu’on devrait procéder beaucoup plus sur une base de confiance et de représentations entre les… les individus. Et c’est très inusuel, c’était justifié par le fait que c’est deux (2) compétiteurs. [ 80 ] Mr. Fraser further explained that the Black group understood that information in the

schedule pertaining to certain bonuses, which included the reference to Mr. Francoeur’s golden parachute payment, would be held under seal until closing. [ 81 ] The judge did not discuss this non-disclosure undertaking by the Black group. Instead, he decided that Francoeur and Hamelin had actively colluded to conceal the golden parachute agreement in a manner that impugned their good faith, notably in paragraphs [16], [17], [33], [53] and [60] of his reasons. In his description of the facts in paragraph [17] of his reasons, for example, the judge reproached Mr.

Francoeur for not having explained why and for whose benefit the golden parachute agreement was to remain confidential. Among the reasons that Mr. Francoeur did not have a right to the $380,844 golden parachute, the judge cited the fact that the agreement was not disclosed to the buyers (para [60.3]). [ 82 ] It was wrong to consider the golden parachute had been concealed – it had not – and the fact that Mr. Hamelin treated it as confidential was not an appropriate basis to infer bad faith on his part. As for Mr.

Francoeur, who was of course not directly involved in the sale of QMR shares to the Blacks, he was bound to keep the golden parachute confidential by the terms of the agreement itself entered into long before the Blacks came into the picture. Indeed, as a bonus extended to only a select group of QMR employees, it had to remain confidential within the firm otherwise it might bring about discord and even prompt breach of loyalty for those who did not enjoy the same advantage.

The judge wrote that "Francoeur did not take the trouble to explain why and for whose benefit the agreement was to remain confidential" (para [17]). With respect, that is incorrect. The golden parachute was made confidential on the advice of experts, as an internal memo produced at trial makes plain. Moreover, Hamelin, Francoeur and QMR executive Tremblay all gave evidence explaining that confidentiality was necessary to prevent jealousies within the firm. [ 83 ] It is true that Mr.

Fraser testified that he did not learn of the golden parachute until closing but it was wrong for the Superior Court to see in this the basis for imputing a wrongful design on the part of Mr. Hamelin, much less Mr. Francoeur, to hide the bonus from the Black group (para [60]). Fraser himself, as representative of the Blacks, agreed to clauses 2.2 and 4.1.9)c), as well as the attending

schedule relating to undisclosed bonuses, and acknowledged at trial that the Blacks had no right to access the information until closing. [ 84 ] Not only did the judge neglect to consider that the Black group accepted that this information would be kept from them until closing, but he also did not take into account the assumption of risk by the Black group associated with its no due-diligence acquisition.

Hardly neophytes in the market, the Blacks made a business decision to proceed with the acquisition on a no due-diligence basis, waiving the right in particular to see some of the employee information, and are the artisans of whatever good or ill fortune that may have resulted. Following completion of the sale, the Blacks could not avoid liability associated with a risk to which they had, as new owners, freely agreed. If Mr.

Francoeur was a legitimate employee of the company at the time of the change in control or otherwise qualified under the terms of the agreement, he should have received the golden parachute bonus. [ 85 ] The judge decided, however, that Mr. Francoeur was no longer an employee at closing in 2008. He had been dismissed and, according to the judge, he and Mr. Hamelin had fraudulently made it appear otherwise in the "Quittance et transaction". With respect, this conclusion was also mistaken when considered from the point of view of the share purchase agreement and the obligations of QMR arising out of Mr.

Francoeur’s contract of employment. I turn now to a consideration of this matter. (ii) Powers of Mr. Hamelin to bind QMR under the share purchase agreement [ 86 ] The judge held the "Quittance et transaction" to be invalid for a series of reasons, among them being that Mr. Hamelin had exceeded his authority as president of QMR in signing it. The judge was of the view that the settlement amounted to a new contract of employment with Mr. Francoeur for an amount over $100,000. [ 87 ] Clause 6 of the share purchase agreement indeed precluded Mr.

Hamelin from signing contracts in excess of $100,000 as a means of protecting the future interest of the Black group in the company. The judge wrote that this overreaching of authority "alone would have the effect of invalidating the financial aspect of the Transaction, which, as will be seen below, is nothing more than a new employment agreement for Francoeur to meet the new reality; that is, the new ownership with the change of control" (para [32]). The judge went on to blame Mr. Francoeur for accepting the arrangement to advise Mr. Hamelin as president when it was plain that Mr.

Black had no intention of leaving him in that role. This aspect of the arrangement, wrote the judge, "puts the good faith of Francoeur and Hamelin in serious doubt" (para [53.2]). [ 88 ] With respect, the judge made two errors here. [ 89 ] First, the share purchase agreement only had effect between the shareholders of SNF inc., on the one hand, and the Black group, on the other, and did not bind third parties. The judge erred when he set up clause 6 of the share purchase agreement against Mr. Francoeur who was not a party to that contract. [ 90 ] Moreover, it bears keeping in mind that QMR was obliged to Mr.

Francoeur as employer and the terms of Mr. Francoeur’s departure were agreed to by QMR’s president. QMR’s obligations to its employees did not change by the mere fact that ownership of the controlling shares in the company had changed hands. The Blacks were new owners, but the company that agreed to the terms and conditions of Mr. Francoeur’s "Quittance et transaction" was QMR which was still in business, albeit under a new name. [ 91 ] The second error is, in my view, more far-reaching. The judge misunderstood the role that Mr.

Hamelin, as company president, would play in the SNF-QMR group following the conclusion of the share purchase through to the date of the closing of the sale of the shares. While he correctly noted that Mr. Hamelin’s authority was curtailed by clause 6, the judge did not take into account that the share purchase agreement was designed to leave Mr. Hamelin in place, as company president, for what was then an undetermined period

down to the date of closing. This was one of the errors that led the judge to infer unfairly that the "Quittance et transaction" was the fruit of collusion between Francoeur and Hamelin. [ 92 ] In fact, Mr. Hamelin had the authority to negotiate the terms of Mr. Francoeur’s departure from the company notwithstanding the agreement to sell shares in the company.

And QMR had a duty to provide a proper notice of termination, or a financial equivalent, to its senior executive in connection with his dismissal from the company. [ 93 ] It was only at closing of the share purchase agreement – assuming the conditions for closing were met – that Mr. Hamelin would relinquish his controlling share of SNF inc. to the Black group and, according to clause 11.3, resign as president and director of the companies in the SNF-QMR group. Until then, the share purchase agreement left him in place, in a manner fully acknowledged by the Black group.

As president, he was formally charged with powers to make decisions in the ordinary course of business (clause 6.1.1)a)), including reasonable measures to ensure that employees would remain with the companies (clause 6.1.1)

d) and e)). This made sense in the context of a conditional sale of shares between rivals whereby the condition was stipulated to the advantage of the Black group. [ 94 ] In the circumstances, it was natural that Mr. Francoeur assume that Mr. Hamelin, as president of QMR notwithstanding the sale of shares to the Blacks, be invested with the appropriate powers to negotiate the termination of his contract of employment. While it was true, as the judge observed, that Mr. Francoeur had been apprised that the sale purchase agreement was in place, he knew too that Hamelin remained on as president. Mr.

Hamelin certainly had every interest to preserve the value of the company during the period running up to closing, given that the deal might not close and that the SNF-QMR group could well remain under his ownership. [ 95 ] The judge decided, however, that Mr. Francoeur and Mr.

Hamelin could not, in good faith, have thought that Hamelin would remain on as president during the working notice period and that there was no evidence to that effect in the record (para [53.2]. [ 96 ] In my view, it made perfect sense, given the risk that the conditional share purchase agreement would not close and the necessary interval between the agreement and the then undetermined closing date, that Mr. Hamelin continue to run the company in order to protect his stake in the business.

Not only did clause 6 gave him the power to operate the business in a normal fashion until closing, including a duty to acquit obligations of the company towards its employees, clause 11 provided that he would resign only if the sale was finalized. It even gave him a say, at clause 6.2.6), as to who from the Black group could visit the company premises. [ 97 ] Contrary to what the judge wrote, there was ample evidence in the record to confirm that Mr.

Hamelin was president following the conclusion of the share purchase agreement and that there were no plans to remove him – assuming that was possible – before closing. Respondents’ witness Diane Fournier, QMR’s human resources officer whose testimony the judge declared to be credible, gave evidence to this effect. So did former executive in the SNF-QMR group Paul-Émile Tremblay whose testimony the judge did not analyze. Moreover, Mr. Hamelin gave evidence that Herbert Black announced at a meeting on December 4, 2007, that Hamelin would stay on as president for at least a year and said that Mr.

Black confirmed this to him in person. Mr. Francoeur testified that Mr. Hamelin had said to him, at the time the "Quittance and transaction" was concluded, that he planned to stay on as president for a year. As for Mr. Fraser, his evidence on this point was inconclusive.

In any event, the judge was wrong to say that there was "no evidence" on this point and mistaken to infer bad faith on the parts of Hamelin and Francoeur in this regard. [ 98 ] Not only did this misinterpretation of the share purchase agreement prompt the judge to presume Francoeur and Hamelin to be in bad faith, it led him to conclude that the transaction had been fraudulently concealed from the Black group. Yet clause 11 provided that the "Quittance et transaction" be confidential to the parties and as the Black’s own representative, Mr.

Fraser, acknowledged at trial, the buyers had no right to obtain such information on employee working conditions prior to closing. [ 99 ] It meant, as well, that the judge thought that Mr. Hamelin and Mr. Francoeur conspired to make an unwarranted gift to Mr. Francoeur (paras [58] and [59]). There was, however, no unwarranted gift but merely a promise to give Mr. Francoeur a notice of termination owed to him by law. Indeed the judge neglected to consider the offer to Mr.

Francoeur of a working notice period of twelve months as a legitimate counterprestation for terminating his two-year, renewable contract as First Vice President. [ 100 ] As it happened, it fell to Mr. Hamelin to negotiate the terms of Mr. Francoeur's departure after informing him not to return to QMR as First Vice President on November 26, 2007. This is precisely what the president did when he and Mr. Francoeur agreed on the conditions for ending the contract on December 6, 2007. [ 101 ] According to Mr.

Francoeur’s contract of employment as First Vice President of August 1, 2006, the company could terminate it unilaterally provided that it gave him one month salary for each year of service, with a minimum of nine months and a maximum of twelve months. The parties signed an addendum on June 11, 2007 that made several changes, one of which stated that Mr. Francoeur’s right to one month of salary for each year of service would be to a "maximum", rather than a minimum, of nine months. Mr.

Hamelin testified that this was a clerical error that should have stated a "minimum" of nine months in that the changes only sought to improve Mr. Francoeur's working conditions. Mr. Francoeur confirmed that the changes were made at his request, and the testimony of human resources director Diane Fournier on this point also suggests the reference to a "maximum" of nine months notice was an error. The judge did not address this matter, in fact he does not appear to have considered the impact of this addendum on the terms of Mr.

Francoeur's departure. [ 102 ] The better view of the evidence is that the reference to a maximum of nine months notice was a clerical error but, at the end of the day, the issue is not decisive. Given that QMR had the right to terminate the contract unilaterally, Mr. Francoeur’s two-year renewable contract of employment was considered in law to be for an indeterminate term for the purposes of calculating his "notice of termination / délai de congé" under articles 2091 and 2092 C.C.Q. [5] Mr.

Francoeur therefore had a right, upon dismissal, to a reasonable notice of termination or the financial equivalent to which he could not renounce in advance. [6] [ 103 ] When viewed from the perspective of the presumption of good faith to which Francoeur and Hamelin are legitimately entitled, the terms of the "Quittance et transaction" are unexceptional and indeed reflect a reasonable notice of termination upon which a senior executive of Mr. Francoeur’s experience could be expected to settle a dismissal without cause with his employer. Mr.

Francoeur was a 60 year-old senior executive with long experience in the industry who had been working for QMR for nearly three years. His contract

was renewable and, without a reasonable notice period or indemnity in lieu of notice, Mr. Francoeur would likely have sued QMR. In the circumstances, a 12-month working notice period at reduced salary with reduced responsibilities is not an unreasonable basis for ending his contract. [7] [ 104 ] The judge was not wrong to observe that QMR informed Mr. Francoeur that his contract as First Vice President would end when Mr. Hamelin wrote the email to him on November 26, 2007. Nor was he wrong to observe that Mr. Hamelin sought to inform company personnel of Mr.

Francoeur’s departure as First Vice President by his memorandum of November 28, 2007. But as the tenor of the email clearly indicated, the parties still needed to discuss Mr. Francoeur’s "conditions de départ" and this would be done, as Mr. Hamelin noted, "tout en explorant les possibilités de te confier des mandats spéciaux." Mr. Hamelin thereby recognized that, by reason of the unilateral dismissal of his senior executive from his contract, the company had to give Mr.

Francoeur a reasonable notice of termination or a compensation in lieu thereof. [8] [ 105 ] The judge – convinced the parties were in bad faith – neglected to consider the proper application of Mr. Francoeur's rights, and the company's obligations, pursuant to the law relating to contracts of employment. The parties chose to settle the notice of termination in the negotiated "Quittance et transaction" by which Mr. Francoeur agreed to a 12-month working notice period (a period of "préavis travaillé").

Following a dismissal, the process of negotiating the rights and obligations of the parties under articles 2091 and 2092 C.C.Q. in a transaction is standard practice in labour law matters, and it is not unusual for the notice of termination to take the form of a working notice period, with changed responsibilities, as it did here. [9] Not only is it standard practice for employers and employees to negotiate a working notice period in a transaction, but there was also evidence from legal counsel Éric Boucher of QMR, not cited by the judge, to the effect that this was standard practice for the company.

The 12-month working notice period was simply one of the terms of dismissal and not, as the judge decided, a "new contract of employment". The judge misread the "Quittance et transaction" under the sway of his suspicions that Francoeur and Hamelin had orchestrated a sham at the expense of the Blacks. [ 106 ] The judge wrote, in paragraphs [53.2] and [55], that the agreement was merely a sui generis contract and not a transaction within the meaning of

article 2631 C.C.Q. in that it did not refer to anything of a contentious nature. Yet the transaction did put an end to any possible dispute arising out of the dismissal, and it did involve both sides making concessions. Mr. Francoeur waived his right to take legal action against QMR arising out of the termination of his contract as First Vice President. QMR did obtain final settlement of that dispute from Mr. Francoeur by conceding a period of working notice, but it obtained more. The judge wrongly saw the contract as a gratuity made by the company to Mr.

Francoeur for $200,000 for doing nothing, but there was no new debt of $200,000 for QMR. In fact, QMR obtained an effective reduction in salary – from about $253,000 to $200,000 calculated on an annual basis during the working notice period – and it obtained a further undertaking from Mr. Francoeur that he would remain exclusively at the disposal of QMR and its president during the twelve months. This amounted to a concession, made by Mr. Francoeur to the advantage of the company, as he agreed not to compete by working for others in the scrap metal business, including potentially the Black group.

It reflected a legitimate concern for QMR and for Mr. Hamelin who knew that the sale was conditional and might fall through. Indeed Mr. Hamelin feared that the Black group might steal his employees and, along with them, information of value on QMR operations. As he explained at trial, Mr. Hamelin was particularly concerned about the raiding of his personnel: "je pensais que Herbert Black, il me volerait mes employés".

If this had occurred, especially in the sensitive period between the signature of the share purchase agreement and closing, it would have been damaging to QMR. [ 107 ] QMR thus had an interest in retaining the exclusive right to Mr. Francoeur’s services but, because of dissension between him and the other employees, it was important that he leave his position as vice president and not work on site. An obvious solution was to provide him with a working notice period with changed responsibilities, rather than a fixed indemnity or a notice of termination with his same duties.

Far from a "fiction" or "pure fantasy" as the judge described the arrangement, the working notice period for twelve months off-site at reduced salary was a rational and effective way to meet QMR’s obligation to Mr. Francoeur arising out of the dismissal while preventing the Black group or another player in the market from recruiting him away. The fact that Mr. Hamelin secured, as well, a commitment from Mr. Francoeur to work as needed on special mandates was an added advantage for the company and a further concession by Mr. Francoeur. It is true that Mr.

Hamelin did not avail himself of these services between December 6, 2007 and the closing on February 4, 2008, but things might well have transpired otherwise had, say, the Blacks decided not to finalize the conditional share purchase agreement, leaving Mr. Hamelin with controlling ownership of the SNF-QMR group. [ 108 ] The result was that the judge held the December 6, 2007 agreement to be invalid as a transaction setting out the conditions for the termination of Mr.

Francoeur’s position with the company when it fit that bill completely. [ 109 ] As a transaction, the December 6 agreement had the further virtue of rendering its content res judicata between the parties – an advantage for both – pursuant to

article 2633 C.C.Q. As has often been observed in the field of labour law, this is one of the principal reasons why employers and employees have recourse to the transaction as a means of settling possible disputes associated with an employment contracts. Moreover, the parties stipulated here that the agreement would be confidential, a feature common of many transactions, but something that the judge wrongly took to be a sign of the deceitful character of the arrangement in paragraphs [53] and [58].

He also denounced the clause by which both parties stated that the agreement was signed without any acknowledgment of liability or wrongdoing (clause 8). The judge wrote: "The Court can divine no rational purpose to this clause" (para [53.4]).

Yet not only were the parties free to include the provision, this kind of clause is commonly encountered in transactions, as author Renée Goyette explains: "De manière générale, les parties optent, plus souvent qu’autrement si ce n’est que pour conclure une cessation d’emploi avec dignité, pour l’inclusion d’une déclaration selon laquelle la transaction est conclue sans admission de part et d’autre." [10] [ 110 ] The judge observed that Mr. Hamelin caused Ms. Fournier, the human resources director, to change the date of the termination of employment for Mr.

Francoeur in the "Quittance et transaction" from November 26, 2007 to November 25, 2008, the date reflecting the end of the twelve month working notice period. He concluded that Mr. Hamelin had "deliberately falsified" the date for the purpose of allowing Mr. Francoeur to qualify for the golden parachute: there could be "no rational explanation for imposing Francoeur on an as yet unknown president, for a fixed period of time, with no real specific duties, but with the caveat however that whatever they might be, they were to be performed by Francoeur at his home" (para [53.4]). [ 111 ] The inference that Mr.

Hamelin "deliberately falsified" the date of Mr. Francoeur’s dismissal was again a reflection of the mistaken perspective adopted by the judge. It is true that November 26, 2007 was the date at which Mr. Francoeur was first informed

that his contract as First Vice President would end, but there was a "rational explanation" for fixing the date of the ultimate end of employment at November 25, 2008. This late date reflected the end-point of the working notice period, settled upon in keeping with QMR’s obligation to Mr. Francoeur under his contract of employment. The judge makes no mention of the working notice period. However, Mr. Francoeur’s company employment file, prepared by Ms. Fournier, was filed in evidence.

This document properly records that, after his departure as First Vice President, he continued on the company payroll, pursuant to a "préavis travaillé", scheduled to end on November 25, 2008. Ms. Fournier explained at trial that she prepared this employment file to reflect the working notice period set out in the "Quittance et transaction." She explained further that, as she understood matters, Mr. Francoeur’s certificate of "cessation d’emploi" could not be prepared until November 25, 2008 because "le préavis devait être travaillé." Vice President Paul-Émile Tremblay gave similar evidence.

It was a mistake to consider the change of date to be a falsification; it merely represented an adjustment to reflect the end date of the working notice period. [ 112 ] The judge misunderstood the settlement – it was not a sham, fraudulently concealed from the Black group, but a rather ordinary transaction to settle an employee dismissal with a working notice period. Because he overlooked the basis by which the parties chose to settle a potential dispute, the judge wrongly inferred a lack of credibility in Mr. Francoeur’s explanation of the arrangement (para [25]).

He misunderstood that the twelve-month working notice period was also to the advantage of QMR in that it assured the company a non- competition undertaking from a senior employee and it settled company obligations under

article 2091 and 2092 C.C.Q. This misunderstanding prompted him to infer incorrectly that Mr. Hamelin, who sought to explain the fact that the employment relationship continued through the working notice period, was also lacking in credibility (para [40]). [ 113 ] While the respondents argued, as their principal position in appeal, that the judge was right to characterize the transaction as a sham, they adopted an alternative argument resting on a radically different characterization of the parties’ intention in signing the contract. The respondents say that if the transaction is valid, then Mr.

Francoeur should be held to have waived his right to the golden parachute bonus by the effect of the general waiver clauses in the "Quittance et transaction", citing in particular Mr. Francoeur’s decision to renounce, in signing the transaction, "à toute action, droit d’action, réclamation de quelque nature que ce soit [...] pour toutes les questions reliées directement ou indirectement à son emploi" (clause 7). The respondents note that Mr. Hamelin had agreed to a handwritten addition recording the $75,000 bonus due to Mr.

Francoeur but declined to include an explicit mention of the golden parachute, notwithstanding Mr. Francoeur’s request. They say this omission is a clear expression of the intent of the parties to exclude the retention bonus. The waiver clause suffers no ambiguity, say the respondents, and therefore needs no

interpretation. [ 114 ] The argument is attractive at first blush and presents Mr. Francoeur with the task of contradicting a written contract, the meaning of which appears plain, on the basis of testimonial evidence. It would certainly be wrong to ignore the intention of the parties as declared in the waiver clause.

But as my colleague Bich, J.A. wrote in Sobeys Québec inc. , [11] "[…] l'on ne peut ignorer que la volonté déclarée des contractants, ou celle qu'ils déclarent en apparence, ne traduit pas toujours fidèlement leur volonté réelle: le contenu explicite du contrat, pour diverses raisons, peut ne pas être conforme à cette dernière". In interpreting the "Quittance et transaction", as in any other contract, one must seek out the common intention of the parties rather than adhere unthinkingly to the literal words on the contractual page (article 1425 C.C.Q.).

This is no less true when those terms are "clear", although the regime for proving common intention, where a party seeks to contradict the terms of the writing by testimony, must be respected. As a general rule, the rules of evidence require a commencement of proof in these circumstances (article 2863 C.C.Q.). This rule, however, is not one of public order and, as Bich, J.A. pointed out in Sobeys, the court may not raise it of its own motion. "En l'absence d'une objection", she wrote, "la preuve contraire à l'

article 2863 C.c.Q. est recevable, le plaideur défaillant étant tenu pour avoir renoncé à en invoquer l'illégalité." [12] [ 115 ] Mr. Francoeur seeks to prove, by his testimony, a common intention that he not be deprived of the golden parachute bonus, contrary to the plain terms of the waiver clause. It is true that beyond the text of the agreement, none of the evidence supports this new depiction of the parties’ common intention in signing the "Quittance et transaction." Mr. Francoeur was categorical in his testimony: not only did Mr.

Hamelin reassure him that the waiver did not apply to the golden parachute and that he would be paid the retention bonus despite the omission, but he testified that the president of the company asserted that the omission was intentional and necessary. As noted above, the bonus only benefited three of QMR’s key employees and Diane Fournier was not part of that group. She prepared the draft transaction and witnessed it in its final form. Mr. Hamelin knew that, had the golden parachute been explicitly mentioned, Ms.

Fournier would have learned that she had not been granted the incentive bonus payable when the company changed hands. The risk was plain that she would have left the company to work for a competitor. There was thus a credible and rational explanation for leaving all references to the golden parachute out of the "Quittance et transaction." [ 116 ] No objection was raised by counsel to Mr. Francoeur's testimony at trial and that testimony is, therefore, admissible to prove the common intention of the parties. But objection or not, the testimony is admissible under

article 2863 C.C.Q. While Mr. Hamelin gave no evidence on this point, there is a commencement of proof in writing that emanates from QMR that substantiates, in my view, Mr. Francoeur's testimony as to the common intention of the parties in the "Quittance et transaction." [ 117 ] On December 18, 2007 – some twelve days after the settlement signed by Mr. Hamelin for QMR and Mr. Francoeur – QMR's lawyers forwarded the materials relating to employees and bonuses of the SNF-QMR group to the law firm Lavery, de Billy as required by the share purchase agreement.

In the list of employees figured Marcel Francoeur's name, with an explicit reference to the "Date de fin de contrat" as November 25, 2008. These documents also included the

schedule 4.1.9c) in its final form, which expressly included Marcel Francoeur as one of the three employees who was to be paid the golden parachute bonus in the event of change of control. The

schedule emanates from QMR through Mr. Hamelin – indeed it can be attributed to all the signatories of the share purchase agreement who agreed that the information on bonuses be forwarded under seal to Lavery, de Billy on December 18, 2007. The

schedule is a commencement of proof that renders probable the existence of a verbal agreement to exclude the bonus from the "Quittance et transaction." [13] Testimony is thus admissible to prove the parties' intention to complete the writing. This commencement of proof is consonant with Mr. Francoeur's testimony, otherwise uncontradicted, that he and Mr. Hamelin had not intended for the waiver in the transaction to exclude the golden parachute bonus. [ 118 ] The better view, supported by the evidence of the circumstances, is that the golden parachute was not waived in the settlement. [ 119 ] This

interpretation of the transaction is consonant not only with the circumstances in which it was concluded (article 1426 C.C.Q.), but also with the parties' conduct after its signature. After signing the transaction, QMR recognized, by forwarding the

schedule

to Lavery, de Billy, that Mr. Francoeur still qualified for the bonus. As the authors of Baudouin et Jobin: Les obligations have written, "L'examen de la façon dont les parties se sont conduites par rapport au contrat après sa conclusion, donc l'interprétation qu'elles lui ont donnée elles-mêmes, est également une aide précieuse." [14] QMR's conduct following the transaction confirms the evidence given that Mr. Francoeur did not waive the bonus on December 6, 2007. [ 120 ] In sum, I propose that the principal appeal be allowed in order to grant Mr.

Francoeur’s claims based on the homologation of the "Quittance et transaction" and for the full amount of the bonus pursuant to the golden parachute agreement.

B) The Appeal in Warranty [ 121 ] Should Mr. Hamelin and his holding company Hamétal inc. be held responsible for the sums that the Black group owe Mr. Francoeur based on the principal appeal? [ 122 ] Findings made in the principal appeal dispose of the Blacks' main arguments in support of the appeal in warranty against Mr. Hamelin. He was not involved in any fraudulent dealings upon which his liability could rest. Mr. Hamelin did have the authority as president pursuant to the share purchase agreement to conclude the December 6, 2007 settlement with Mr. Francoeur and thereby bind QMR.

There were, as I have noted, legitimate business reasons for providing Mr. Francoeur with a reasonable working notice period of twelve months. [ 123 ] One argument does remain. The Blacks contend, based on testimony given by Mr. Fraser that the judge held to be credible, that Mr. Hamelin had told Fraser, on the eve of the signing of the share purchase agreement, that he had fired Marcel Francoeur and that he was not owed any bonus resembling the golden parachute. Mr. Fraser did indeed testify that, in a short encounter with Mr. Hamelin at the office elevators, he had been told that Mr.

Francoeur had been dismissed and did not benefit from the golden parachute. Mr. Hamelin vigorously denied these assertions. The judge wrote that Mr. Hamelin lied in this regard (para [60.3]. [ 124 ] Did Mr. Hamelin lie to the Black group’s representative such that he should be called upon to answer for the compensation owed to Mr. Francoeur under the "Quittance et transaction" and the golden parachute agreement? [ 125 ] Whatever credibility one might be inclined to afford Mr. Fraser, a misrepresentation made by Mr.

Hamelin, even if it occurred, cannot be the source of liability by reason of risks freely assumed by the Blacks in the share purchase agreement. [ 126 ] I have already noted that the Blacks waived due diligence verifications at the time of the share purchase agreement as a means of inducing Mr. Hamelin and the other shareholders to sell their stake in the SMF-QMR ground. The purchasers also waived any recourse against the vendors for misrepresentation, including Mr. Hamelin via his holding company, in clause 4.1.13:

ARTICLE 4 – REPRÉSENTATIONS ET GARANTIES DES VENDEURS 4.1. Représentations et garanties des vendeurs […] 13) Aucune autre représentation et garantie les représentations et garanties des vendeurs contenues à l’Article 4 et à l’Article 6 des présentes sont les seules représentations et garanties faites par les vendeurs en rapport avec la transaction prévue. [ 127 ] Not only did the Black group accept to forego any recourse based on prior representations made by the vendors that were not carried forward in the share purchase agreement, a further clause limited remedies in the event of misrepresentations. According to clause 7.4, "Les droits à l’indemnisation énoncés au présent

Article 7 constituent les seuls recours de chacune des parties à l’égard des déclarations fausses ou trompeuses ou d’un manquement à des garanties de l’autre parties aux présentes." (Clause 7 provided a limited remedy for the buyers in case of misrepresentation which they did not pursue on this count.) [ 128 ] The effect of these two clauses, neither of which was considered by the judge, was to exclude actions against Mr. Hamelin and Hamétal inc. based on the alleged misrepresentation to Mr. Fraser on the eve of the share purchase agreement.

They are fatal to the claim made in the appeal in warranty based on the testimony of Mr. Fraser. [ 129 ] The Blacks have no basis for claiming from Mr. Hamelin the monies due to Mr. Francoeur from QMR, the company they now own. *** [ 130 ] By way of conclusion, I propose that the trial judgment be set aside and the principal appeal be allowed, with costs in both courts. [ 131 ] The "Quittance et transaction" agreement should be homologated as a transaction within the meaning of

article 2631 C.C.Q. This means, as a consequence, that the respondent companies 4417186 Canada Inc. and SNF LP will be indebted to Marcel Francoeur for the unpaid portion of the $200,000 salary for the working notice period from the time he was summarily dismissed by Herbert Black, being $169,230.76. [ 132 ] The respondents should also be condemned to pay Mr.

Francoeur the sum of $380,844.00, being the unpaid retention bonus pursuant to the golden parachute agreement due to him upon change of control of the company, with interest from November 26, 2008 and the additional indemnity provided by law. [ 133 ] The appeal in warranty against Jean-Guy Hamelin and Hamétal inc. should be dismissed, with costs in both courts.

NICHOLAS KASIRER, J.A.