2021 QCCA 1748, 2021 QCCA 1748

Genexy Company Limited c. Gagné 2021 QCCA 1748 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-028827-202 (700-17-009148-122) DATE: November 22, 2021 CORAM: THE HONOURABLE MARK SCHRAGER, J.A. STEPHEN W. HAMILTON, J.A. GUY COURNOYER, J.A. GENEXY COMPANY LIMITED APPELLANT – Plaintiff/Cross-Defendant v. MANON GAGNÉ 9213-4519 QUÉBEC INC. FRANK DE PETRILLO RESPONDENTS – Defendants/Cross-Plaintiffs JUDGMENT [ 1 ] This is an appeal from the judgment rendered on January 16, 2020 by the Superior Court, District of Terrebonne (the Honourable Mr.

Justice Claude Auclair), dismissing Appellant’s action with legal costs and granting the cross-demand so as to condemn Appellant to pay Respondent Gagné $10,000, with legal costs. [ 2 ] For the reasons of Schrager, J.A., with which Hamilton and Cournoyer, JJ.A., concur, THE COURT : [ 3 ] DISMISSES the appeal without legal costs given the absence of contestation. MARK SCHRAGER, J.A. STEPHEN W. HAMILTON, J.A. GUY COURNOYER, J.A. Mtre Neil Gary Oberman Mtre Mathieu Papineau SPIEGEL SOHMER INC. For Appellant Manon Gagné Unrepresented Date of hearing: October 27, 2021 REASONS OF SCHRAGER, J.A.

I. INTRODUCTION AND FACTS [ 4 ] This is an appeal from the judgment rendered on January 16, 2020 by the Superior Court, District of Terrebonne (the Honourable Mr. Justice Claude Auclair), [1] dismissing Appellant’s action with legal costs and granting the cross-demand so as to condemn Appellant to pay Respondent Gagné $10,000, with legal costs. [ 5 ] The judge detailed Appellant’s claim of USD$137,436.20 as being comprised of: (

i) USD$44,832.06, representing the balance for finished goods (winter jackets) after the application of a deposit of USD$67,500 and; (ii) USD$92,604.20 for fabric purchased by Appellant to manufacture the garments for 9213-4519 Québec Inc. (hereinafter "Corporate Respondent”). [ 6 ] Gagné was a principal of Corporate Respondent and acted as guarantor of its debts to Appellant. Corporate Respondent, as well as the other personal Respondent (Frank De Petrillo), became bankrupt prior to the trial.

Accordingly, the issue before the judge was the liability of Gagné as guarantor for payment of the sums claimed by Appellant from Corporate Respondent. Gagné did not file a representation statement nor a brief in appeal. [ 7 ] Corporate Respondent contracted with Appellant for the manufacture of winter jackets to be supplied ultimately to local ski teams. The jackets were to be fabricated in China and shipped to Canada during the month of October 2011. However, a guarantee agreement was subsequently signed on November 2, 2011, specifying November 15, 2011 as the shipping date.

The judge found that, at that time, Appellant’s representatives knew of the production delays being experienced, so that the November 15 shipping date would not be respected.

Nevertheless, Appellant’s representatives not only concealed these problems, but represented that the finished goods were ready to be shipped and that the shipping was about to commence, while insisting on receipt of the original signed guarantee from Gagné. [ 8 ] Delivery of the full order of jackets was only received on December 15, 2011, and by January of 2012, Corporate Respondent received returns of goods from its customers because of late deliveries and a manufacturing defect consisting in leakage of the down filling from the jackets. II.

THE JUDGMENT [ 9 ] The judge found that Appellant knew that production was delayed and that the obligation to deliver by November 15 would not be respected. Equally, it knew of the importance of that delivery date for Corporate Respondent’s business. [ 10 ] The judge found that Appellant acted in bad faith by deceiving the guarantor with misinformation or a lack of information about the production delays. The guarantor had a right to this information pursuant to Arts. 2345 and 2355 C.C.Q.

The judge characterized Appellant’s behaviour in this regard as bad faith and, as such, found that it constituted a fin de non-recevoir with respect to the claim against Gagné under her personal guarantee.

The judge further held that Corporate Respondent’s acceptance of delivery of the goods after the agreed upon date was not a renunciation of the term of the contract, at least not for the guarantor. [ 11 ] Based on the fin de non-recevoir , the judge also refused Appellant’s claim for the cost of fabric which it had purchased for Corporate Respondent, but which had not been used in the production of the garments and represented an amount of USD$92,604.20.

He also found that Appellant had not mitigated its damages by following up on reselling the fabric as instructed by Gagné, who had identified a potential purchaser. Appellant had insisted on full payment from Respondents prior to any such resale. Moreover, Appellant adduced no proof at the trial as to what had ultimately happened to this fabric. [ 12 ] The judge added that even if he had not concluded that a fin de non-recevoir blocked the claim against Gagné as guarantor, he would nevertheless have dismissed the action because of the manufacturing defects in the garments.

The judge accepted the testimony of Gagné as well as the report and testimony of Respondents’ expert in that regard. The expert’s evidence was uncontradicted, because, even though Appellant obtained the postponement of the trial in order to retain its own expert, Appellant never adduced any such report or evidence. [ 13 ] The judge added an analysis of the credibility of Appellant’s representative (Mr.

Wong), which he found to be sorely lacking. [ 14 ] As well, given his findings on Appellant’s claim, he obviously dismissed its claim for reimbursement of its legal fees. [ 15 ] Lastly, the judge granted Gagné’s cross-demand of $10,000 for stress and inconvenience arising from Appellant’s behaviour in the commercial relationship, as described above. III. ISSUES IN APPEAL [ 16 ] Appellant raises seven issues in appeal, namely, in its own words:

i) Did the trial judge err in law in his analysis of the factual matrix put forward by Appellant and accordingly misapprehend the evidence such that the rendering would have been different and, thus, the judgment should not be given deference?

ii) Did the trial judge err in law in his appreciation of the legal standard for an essential condition to a contract? In the alternative, did the trial judge commit a palpable and overriding error of fact and law in concluding that the delivery date was an essential condition? iii) Did the trial judge commit a palpable and overriding error of fact in concluding that there were manufacturing defects and allowing into evidence the expert’s testimony on same? iv) Did the trial judge err in law in concluding that a fin de non-recevoir was legally justified and did he render an ultra petita judgment by applying same?

In the alternative, did the trial judge commit a palpable and overriding error of fact and law in concluding that a fin de non-recevoir could be opposed to Appellant?

v) Did the trial judge err in fact and in law in dismissing Appellant’s claim for the cost of the fabric? vi) Did the trial judge err in fact and in law in dismissing Appellant’s claim for legal fees? vii) Did the trial judge err in law by awarding moral damages to Respondent? IV. DISCUSSION [ 17 ] Despite Appellant’s attempt to characterize them otherwise, all of the issues raised by Appellant are either purely factual or mixed questions of law and fact, so that the standard applicable for appellate intervention is that of palpable and overriding error. I will examine each of the issues raised in their order.

i) Did the trial judge err in law in his analysis of the factual matrix put forward by Appellant and accordingly misapprehend the evidence such that the rendering would have been different and, thus, the judgment should not be given deference? [ 18 ] Appellant argues the theory of the distorting lens to set aside the judge’s finding on the facts and on credibility: 57.

As such, the Appellant submits that the theory of the distorting lens applies and submits that the Trial judges finding on the conduct of Appellant tainted his analysis of the evidence to the point of causing overriding errors affecting the outcome of his rendering. (sic) [ 19 ] As the Supreme Court stated in Salomon , [2] the standards developed in Housen [3] still apply where an appellant argues that the judge reviewed the evidence through a distorting lens.

Thus, a factual inference made by a trial judge based on a witness’s credibility commands deference and the application of the standard of “overriding and palpable error”. [4] An appeal is not a second trial. [5] [ 20 ] The judge said that Mr. Wong’s explanations surrounding the timing of the signing of the guarantee agreement were not credible. [6] He did not believe Mr. Wong when he said that he had mistakenly thought the delivery date was February 11 instead of November 2 because of the way the date had been written in French. It was Mr.

Wong himself who had sent the guarantee agreement signed by him on November 1 requiring Gagné’s signature. [7] The trial judge was also not impressed by Mr. Wong’s email in which he said he had shipped “the balance goods on November 24, 2011”, because he found that other emails contradicted such assertion. [8] Furthermore, the judge did not believe Mr.

Wong’s affirmation that the jacket examined by Respondents’ expert had not been produced by Appellant. [9] Finally, the judge also was not impressed by the Appellant’s inability to produce the bill of lading that could have indicated the precise shipping date. [10] [ 21 ] Such detailed treatment of the evidence in the judgment indicates that the judge did not misunderstand the factual matrix as Appellant contends.

Accordingly, Appellant has not established any palpable error in the judge’s finding that Appellant acted in bad faith. ii) Did the trial judge err in law in his appreciation of the legal standard for an essential condition to a contract? In the alternative, did the trial judge commit a palpable and overriding error of fact and law in concluding that the delivery date was an essential condition? [ 22 ] Appellant contends that the November 15 delivery date was not stipulated to be a strict delay, so that in treating it as such the judge erred in law.

Appellant adds that even if the date was a strict delay, Corporate Respondent renounced by accepting delivery of the goods after that date. [ 23 ] The trial judge concluded that the delivery date stipulated in the guarantee agreement was an essential condition for the giving of the guarantee. He based such conclusion on Gagné’s testimony, the letter of Corporate Respondent’s attorney confirming the initial order, and the

preamble of the guarantee agreement itself. [11] [ 24 ] In her testimony, Gagné said that she had signed the guarantee agreement because of Appellant’s representation that the goods were finished and therefore there would be no issue with respecting the stipulated delivery date. [ 25 ] In his letter dated October 4, 2011, [12] counsel for Corporate Respondent wrote: Mister Wong, (…) Our client understand the discussion that you had between both of you, that you will make sure that her orders will be sent in a delay of a few days exceeding the original receiving date .

You understand, finally that in order for our client to continue surviving that her orders need to be shipped in the month of October 2011 . Note that our client needs a confirmation from your part that her orders will be delivered on time .

Note that I do not have any funds in trusteeship and that the present should not be considered as a security deposit. (Emphasis added by the trial judge) [ 26 ] In reference to the delay, the guarantee agreement states: [13] WHEREAS, GENEXY is currently in possession of certain finished goods previously ordered by SNOW CRIMINAL (hereinafter ″finished goods)″; WHEREAS, certain claims, disputes, and/or other disagreements arose and now exist between GENEXY and SNOW CRIMINAL with respect to the delivery and payment of the finished goods ; and WHEREAS, it is the intention and desire of the Parties to this Agreement, and each of them, to resolve in good faith all differences, disagreements, disputes and/or concerns with respect to the Contract and payment of the Contract Amount subject to certain exceptions, and as such, the Parties hereto enter into this GUARANTEE AGREEMENT. (…) 3.

Shipment: GENEXY agrees to ship the finished goods previously ordered by SNOW CRIMINAL to SNOW CRIMINAL’s freight forwarder warehouse on or before November 15, 2011. (Emphasis added by the trial judge) [ 27 ] In

summary, the judge reviewed the evidence before him, including the wording in the guarantee agreement and the parties’ conduct. He analyzed the general context of the agreement and the fact that Appellant was already in breach of the contractual delivery date when it insisted on receipt of the original of the guarantee agreement.

Consequently, the judge’s conclusion as to the importance of the delivery date is based on the evidence and is not erroneous. [ 28 ] That Corporate Respondent took in the goods and shipped them to its customers, albeit late, can only be viewed in context as an attempt to salvage the situation so as to mitigate any loss caused by the late delivery.

In any event, even if Corporate Respondent, as purchaser, renounced the delivery date, this does not change the fact that the guarantor (Gagné) was induced to sign the guarantee by Appellant’s bad faith. [ 29 ] Moreover, even if the judge committed a palpable and overriding error here, which I do not think is the case, Appellant would still need to overcome the judge’s finding of fact that the goods were defective. iii) Did the trial judge commit a palpable and overriding error of fact in concluding that there were manufacturing defects and allowing into evidence the expert’s testimony on same? [ 30 ] Appellant has not established any error committed by the judge in allowing the evidence of the defects in the jackets. [ 31 ] As well, deference is owed to the judge’s assessment of the evidence, generally and particularly regarding expert testimony. [14] Determining the qualifications of the expert, evaluating his knowledge and appraising the probative force of his testimony are all questions of fact. [15] [ 32 ] The trial judge accepted the report of Respondents’ expert and found that his testimony was credible and consistent with Gagné’s testimony. [16] Appellant emphasizes a clerical error regarding the identification number of the garment which was subject to the expert’s examination.

However, the trial judge accepted Gagné’s explanation that it was a simple mistake. [17] No valid reason has been given for this Court to review that conclusion. [ 33 ] Finally, it is noteworthy that Appellant asked to adjourn the trial on March 8, 2017 to give it the opportunity to produce a rebuttal expertise, only to come back to court on October 17, 2019 to announce that such expertise had not been prepared. [18] In the absence of an expertise or any other evidence contradicting Appellant’s proof, it was open to the judge in the exercise of his discretion to infer from one garment that other garments in the lot had the same defects. iv) Did the trial judge err in law in concluding that a fin de non-recevoir was legally justified and did he render an ultra petita judgment by applying same?

In the alternative, did the trial judge commit a palpable and overriding error of fact and law in concluding that a fin de non-recevoir could be opposed to Appellant? [ 34 ] Gagné argued in first instance that she signed the guarantee based on fraud and error provoked by Appellant’s misrepresentations, which consisted mainly of requiring her personal guarantee while representing that the goods were ready or about to be ready for shipment, when Mr. Wong knew that there were delays in the manufacturing process. [ 35 ] Gagné sought the nullity of the guarantee.

She proved Appellant’s bad faith in fact and pleaded in law that her guarantee should, as a consequence, be set aside as a nullity induced by fraud or error which vitiated her consent. In his reasoning, the judge relied on a different legal institution ( fin de non-recevoir ) which arose from the same facts as the plea of nullity.

[ 36 ] A fin de non-recevoir sanctions the unfair or uncooperative behaviour of one party by the dismissal of an action otherwise well- founded in law. [19] The reprehensible behaviour need not necessarily be a fault in the ordinary sense of the term. [20] The offending party does not necessarily need to have acted maliciously. [21] The evaluation of the reprehensible behaviour is determined based on the principles of equity and good faith. [22] [ 37 ] Respondent pleaded Appellant’s bad faith, [23] with which the judge agreed, as indicated above.

Appellant was heard and sought to rebut this view of the facts which the judge had accepted and which led him to the decision not to enforce the guarantee against Respondent based on the doctrine of fin de non-recevoir rather than nullity. This does not constitute reviewable error in the context of this case. [ 38 ] In relying on the doctrine of fin de non-recevoir , the judge did not commit an error of law which is overriding in the circumstances of the case.

He may have infringed on Arts. 17 and 323 C.C.P. or the right to be heard generally. [24] However, Appellant had every opportunity to convince the judge (and this Court) that it did not act in bad faith. The institution of fin de non-recevoir was merely the legal characterization of the facts.

Indeed, the fin de non-recevoir as a legal argument to prevent the enforcement of the guarantee could conceivably have been raised for the first time in appeal since it arises from the same facts as the plea of nullity. [25] Artfully, counsel for Appellant submits that, faced with a plea of fin de non-recevoir , other proof would have been adduced.

However, he could not identify what that proof would have been nor how it would have changed the trial judge’s findings that Appellant’s misrepresentations induced the signing of the guarantee. [ 39 ] Even though the judge’s failure to advise the parties of his intention to apply the doctrine of fin de non-recevoir may have been an error, I am not convinced that the final result would be any different, so the error, if any, is not overriding.

Moreover, any such error would not be overriding given the judge’s finding that the jackets were defective, such that payment under the guarantee would not be due, irrespective of the argument concerning the nullity or lack of enforceability of the guarantee.

v) Did the trial judge err in fact and in law in dismissing the Appellant’s claim for the cost of the fabric? [ 40 ] The trial judge’s dismissal of this part of the claim is inextricably tied to his factual finding of Appellant’s bad faith, which Appellant has not successfully assailed. Moreover, the judge also found on the facts that Appellant did not mitigate its damages by selling the fabric. Appellant has not established any reviewable error in this regard. vi) Did the trial judge err in fact and in law in dismissing Appellant’s claim for legal fees? [ 41 ] Given my position on grounds

i) to v), I agree that the judge was correct not to treat Appellant’s claim for legal fees. vii) Did the trial judge err in law by awarding moral damages to Respondent? [ 42 ] The judge’s decision to award moral damages is based on the facts. The standard of intervention for such awards was explained as follows by Morissette, J.A., in Fillion v.

Chiasson : [26] […] Je rappelle que la norme d’intervention en cette matière est très sévère et favorise la détermination faite en première instance : la Cour n’intervient que si le juge qui a entendu le procès a appliqué un principe erroné ou si la somme accordée constitue une indemnisation manifestement incorrecte du préjudice subi. (…) [Emphasis added] [ 43 ] I see no reason to intervene in the judge’s decision, given all of the factual findings regarding Appellant’s behaviour, which findings led to the conclusion that it acted in bad faith.

The purpose of the award was not per se to punish Appellant, but rather to compensate Gagné for the effect of that behaviour on her, [27] as the judge pointed out. [28] The quantum of the award is in line with the jurisprudence of the Court. [29] Thus, the principles applied are correct and the amount of the condemnation is not erroneous. There is, accordingly, no cause for appellate intervention. * * * [ 44 ] For all the foregoing reasons, I propose to dismiss the appeal without legal costs given the absence of contestation. MARK SCHRAGER, J.A.