2019 QCCA 1029, 2019 QCCA 1029

Samprêt Plus inc. c. Benarroch 2019 QCCA 1029 COUR D'APPEL CANADA PROVINCE DE QUÉBEC GREFFE DE MONTRÉAL N o : 500-09-027110-170 (500-17-082364-145) PROCÈS-VERBAL D'AUDIENCE DATE : Le 5 juin 2019 CORAM : LES HONORABLES FRANÇOIS DOYON, J.C.A. NICHOLAS KASIRER, J.C.A. MARIE-JOSÉE HOGUE, J.C.A. APPELANTE AVOCAT SAMPRÊT PLUS INC. m e KARIM RENNO (Renno Vathilakis inc.) INTIMÉS AVOCAT AUDREY BENARROCH AUDREY BENARROCH, ès qualité de fiduciaire de la fiducie BEN-JENG FAMILY TRUST RAPHAEL BENARROCH , ès qualité de fiduciaire de la fiducie BEN-JENG FAMILY TRUST Me JEAN-PIERRE SHEPPARD (Robinson Sheppard Shapiro sencrl)

En appel d'un jugement rendu le 15 septembre 2017 par l'honorable Mark G. Peacock de la Cour supérieure, district de Montréal . NATURE DE L'APPEL : Sûretés – Hypothèque – Exercice des droits et recours – Mesures préalables – Prise en paiement Greffier d’audience : Philippe Charette Salle : Louis-H. Lafontaine AUDITION 9 h 30 Début de l’audience. Commentaires introductifs par la Cour. 9 h 31 Argumentation de Me Renno. 10 h 07 Suspension de l’audience. 10 h 12 Reprise de l’audience. 10 h 13 PAR LA COUR : arrêt – voir page 3. Fin de l’audience. Philippe Charette Greffier d’audience PAR LA COUR ARRÊT [ 1 ] Pour les motifs qui seront déposés ultérieurement,

LA COUR : [ 2 ] REJETTE l’appel, avec les frais de justice en appel. FRANÇOIS DOYON, J.C.A. NICHOLAS KASIRER, J.C.A. MARIE-JOSÉE HOGUE, J.C.A. Samprêt Plus inc. c. Benarroch 2019 QCCA 1029 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-027110-170 (500-17-082364-145) DATE: June 11, 2019 CORAM: THE HONOURABLE FRANÇOIS DOYON, J.A. NICHOLAS KASIRER, J.A. MARIE-JOSÉE HOGUE, J.A. SAMPRÊT PLUS INC. APPELLANT - Plaintiff v.

AUDREY BENARROCH AUDREY BENARROCH in her capacity as a Trustee of Ben-Jeng Family Trust RAPHAEL BENARROCH in his capacity as a Trustee of Ben-Jeng Family Trust RESPONDENTS - Defendants REASONS FOR THE JUDGMENT RENDERED AT THE HEARING OF JUNE 5, 2019 [1] At the hearing on appeal on June 5, 2019, the Court rendered the following judgment: POUR LES MOTIFS QUI SERONT DÉPOSÉS ULTÉRIEUREMENT , la Cour: [1] REJETTE l’appel, avec les frais de justice en appel. [2] What follows are the reasons for judgment.

*** [ 3 ] Samprêt Plus inc. (“Samprêt”) has appealed a judgment of the Superior Court, District of Montreal (the Honourable Mr. Justice Mark G.

Peacock), rendered September 15, 2017, which, inter alia , dismissed its motion to institute proceedings for the voluntary surrender and taking in payment of two residential immovables belonging to the respondents. [1] The latter, acting as sureties or borrowers, had hypothecated the immovables as security for two loans (the “HSBC loan” and the “Samprêt loan”) for which Samprêt is creditor. [ 4 ] The judge held that the prior notice of exercise of hypothecary rights and taking in payment given by Samprêt was null because it incorrectly identified the amount of the debt (para. [161]).

Furthermore, even if the prior notice had been validly given, he would have exercised his discretionary authority to dismiss Samprêt’s demand for taking in payment because, in his estimation, it would have given rise to an unconscionable profit in the form of an unjust enrichment for Samprêt, in violation of principles of good faith (paras [171] and [172]). [ 5 ] While the parties state the matter differently, there is agreement between them that there is only one substantive issue in dispute on appeal: whether the judge erred in deciding that an amount of $408,000 should be deducted from the balance due pursuant to one of the loans for which Samprêt is creditor. *** [ 6 ] The judge presided a three-day trial in which a series of documents were filed and contradictory testimonial evidence was given as to the financial commitments made by Samprêt, by the respondents, and by other persons associated with one or another of the parties.

In carefully-prepared reasons, the judge remarked upon the effort required of him “to determine what were the true legal relationships and intentions among the parties” (para. [6]), “to make sense of incomplete documents” (para. [8]) and “to decipher this web of documents that do not say what they mean” (para. [117]). He recorded his view of the “lax accounting of Samprêt” (paras [65] to [68] and [111]) and was especially critical of the testimony given by the representative of Samprêt, Mr.

Samy Bitton, whose explanations of the various transactions were described on multiple occasions as lacking in credibility (see, e.g ., paras [30] to [36]). [ 7 ] In respect of the disputed $408,000, the judge found that the amount should be deducted from the HSBC loan made to a company called Luxor, controlled by Mr. Daniel Shamir, spouse of respondent Audrey Benarroch. Ms. Benarroch had agreed to act as surety for the loan. The claim relating to that loan was assigned by the HSBC Bank to Samprêt and, when Luxor failed to meet its obligations, Samprêt sought to execute its security on an immovable owned by Ms.

Benarroch. [ 8 ] Mr. Shamir had a claim against a former business associate, Ronen Basal, in respect of the sale of an unrelated business called UNIDEV. According to the judge’s view of the evidence, Mr. Basal agreed to pay an amount to Samprêt, as a portion of Luxor’s debt to Samprêt, instead of paying directly the money he owed to Mr. Shamir arising out of the sale of UNIDEV. Mr. Basal, who knew Mr. Bitton, understood that Mr. Shamir owed money to Samprêt and that by paying the amount, he would both reduce his own indebtedness to Mr. Shamir and Mr.

Shamir’s indebtedness to Samprêt. [ 9 ] The judge found that Mr. Basal made this payment for Mr. Shamir by granting a credit on the purchase price of a house bought for Mr. Bitton’s son, which credit he characterized as “partial compensation” for the HSBC loan that reduced the debt by $408,000. The judge explained in detail the manner in which the amount of $408,000 was paid to Samprêt, by Mr. Basal, for Mr. Shamir, in paras [105] to [127] of his reasons. The judge wrote in part (footnotes omitted, with emphasis added): Amount Assigned by Mr. Shamir to Samprêt [105] The evidence discloses that Mr.

Shamir directed that amounts that were owed to him, as a result of (

a) the sale of his shareholdings in UNIDEV and (

b) the reimbursement of UNIDEV’s indebtedness to him, be paid as compensation to Samprêt. [106] Mr. Ronen Basal was the other main shareholder in UNIDEV. In his examination out of Court as a third party, Mr. Basal testifies that Samprêt was given credit for $408,000 (composed of two amounts owing to Mr. Shamir re: UNIDEV : $280,000 and $128,000). This credit was to be applied to the purchase of a house (on behalf of Mr. Bitton’s son, Dvir Bitton) that the Basal group was constructing at 5736 Park Place near the Cavendish Mall . [107] Mr.

Bitton testifies that he did not accept any amounts from the Basals to pay down the HSBC loan. He says that he refused to cash cheques he was given (see Exhibit P-14). […] [118] On cross-examination, Mr. Bitton confirmed that he did not cash any of these cheques. Based on the evidence from Mr. Ronen Basal, who is not contractually involved with either the HSBC or Samprêt loans, the Court does not accept this explanation from Mr. Bitton. Rather, instead of this transaction which involved cashing actual paper cheques, Mr. Bitton (Samprê

t) received payment from Mr. Shamir as

part compensation for the HSBC loan through the credit on the house for Mr. Bitton's son. [119 ] Mr. Ronen Basal’s testimony is given additional credibility by Mr. Bitton himself who testifies he had known the Basal family for many years, beginning when they all lived in Israel. […] [122] Mr. Ronen Basal confirms that Mr. Shamir cashed two cheques for a total of $32,000 (Mr. Shamir agrees) leaving a balance of $128,000 owing to be paid by the Basal group to Mr. Shamir. Mr. Basal testifies that in lieu of his paying this balance to Mr.

Shamir, a credit for the amount of $128,000 was provided against the purchase price of the house for Mr. Bitton's son located at 5736 Park Place. [123] Furthermore, Mr. Ronen Basal testifies that on the strength of a simple handshake, Mr. Bitton agreed that the $280,000 discussed

above would be applied against the purchase price for this home at 5736 Park Place. Therefore, this $280,000 which was owed to Mr. Shamir for his shares got credited to Mr. Bitton by way of a credit on a house purchase for Mr. Bitton's son. The Court determines Mr. Shamir’s testimony to be most probable: that these sums were owed to him, were in fact “paid” by way of credit to Mr. Bitton and Samprêt in the form of credits of $128,000 and then $280,000 on the price of a home being built at 5736 Park Place in Côte-St-Luc by Mr. Basal, and which would ultimately be occupied by Mr. Bitton's son. In effect, Mr.

Shamir subrogates Samprêt in Mr. Shamir’s rights to receive $408,000.00. Since Samprêt (and Mr. Bitton) accept the equivalent of this amount as a credit on a house, this acts as partial compensation on the HSBC loan and reduces the debt by $408,000.00 . […] [127] The evidence discloses that the following payments were received by Samprêt and should be applied in compensation in reduction of the HSBC loan : 127.1. $105,282.04 ($70,224.24 plus $17,500 plus $14,257.80 plus $3300) in receivables (P-8C).

Dates of collection are respectively: March 13, 2012,May 16, 2012, September 19,2012 and March 17, 2013; 127.2. $408,000 effectively received by Samprêt as a credit and used by Mr. Bitton to purchase the house for his son, from the Basal group. The effective date of collection is determined by the Court to be June 13, 2012 which is the date of the Convention de cession de créance signed by Mr. Bitton.; 127.3. $21,426.37 as a Luxor account receivable was received by Samprêt on November 7, 2016. This amount had been recovered by attorney Chamoun who had the mandate to recover Luxor receivables on behalf of Samprêt.

Mr. Bitton had refused to accept this amount on March 18, 2016 since he did not agree with the fee account of attorney Chamoun. He later accepted the amount. 127.4. $4,886.44 advanced by Mr.

Shamir to attorney Chamoun for the benefit of Samprêt (Exhibit D-14 with date of collection determined to be March 18, 2016); […]. *** [ 10 ] In support of its appeal, Samprêt observes that the HSBC Bank Facility Letter, detailing certain terms of the initial HSBC loan made to Luxor, contains a clause that precludes the Borrower from making payments by way of “set-off, compensation, counterclaim, recoupment, defence or other right which the Borrower may have against the Bank or anyone else for any reason whatsoever”. [ 11 ] Samprêt argues that this contractual term is clear and that the judge erred in fact and in law in setting it aside, specifically by finding that compensation did operate and that Samprêt had renounced to the respondents’ waiver of the compensation undertaking (see paras [99] to [101] of the judgment in appeal).

Samprêt states its view of the sole question in appeal as follows: Did the first Judge err in law and in facts by coming to the conclusion that compensation in the amount of $408,000 was to be applied to the HSBC Facility Letter, notwithstanding the Respondents’ clear waiver to any right to compensation? [ 12 ] At the hearing, Samprêt argued further that the broad language of the clause did not permit partial payment by a third party either. [ 13 ] Some preliminary observations are required before reviewing Samprêt’s argument in appeal. [ 14 ] Firstly, Samprêt is correct to state that, in order to operate as a mode of extinction of obligations, “compensation / compensation ”, within the meaning of

article 1672 C.C.Q ., requires that two persons be “reciprocally debtor and creditor of each other / réciproquement débitrices et créancières l’une de l’autre ”. The respondents do not dispute this point. [ 15 ] In the instant case, Samprêt was the creditor of Luxor pursuant to the terms of the assigned HSBC loan. By reason of the surety to which she had agreed and by which one of her immovables was hypothecated, Ms. Benarroch may also be considered Samprêt’s debtor under this loan.

Moreover, Samprêt is creditor and the respondents are debtors under the second loan made directly to them. [ 16 ] On the other hand, Samprêt is not, reciprocally, the debtor of any of the respondents in respect of the disputed amount of $408,000. [ 17 ] As Samprêt notes in its written argument on appeal, the Basal family owed that amount, following the UNIDEV sale, to a trust administered by Mr. Shamir and Ms. Benarroch. Moreover, Samprêt acknowledges that Mr. Bitton’s son received credit on the purchase of a home in that same amount from Mr.

Ronen Basal. [ 18 ] For this reason, the appellant is quite right to say that “compensation” (sometimes called “set-off” in English, as in former

article 411 C.C.L.C. ) cannot operate to extinguish the debt owed to Samprêt. [ 19 ] It is true that the judge used the words “compensation” and “set-off” in his reasons in a manner that might give a reader pause, unless the whole of the judgment is taken into account. [ 20 ] Specifically, the judge did not reduce the amount due to Samprêt by $408,000 by reason of “compensation” within the meaning of

article 1672 C.C.Q. The better reading of the judgment as a whole is that, in most instances, he used the word “compensation” in another, legally-accepted sense to indicate his view that Samprêt received partial payment ( i.e . it was “partially compensated”) for an amount of $408,000 when Mr. Samy Bitton’s son received a credit in that amount from Mr. Ronen Basal. [2] [ 21 ] Indeed the judge used the word “compensation” in paragraphs [123] and [127] of his reasons, quoted above, in this latter sense, in reference to the $408,000 disputed amount. It is patent from the context of the judge’s remarks that, in that instance, he was not using the term as it is understood in

article 1672 C.C.Q. , but rather merely to indicate a partial payment made by a third party that satisfied, in

part, the claim that Samprêt had against Mr. Shamir, Luxor and Ms. Benarroch. The fact that the judge referred to this partial payment as “partial compensation” of the money owed, or that he referred to “compensation” elsewhere in his reasons, is not a reversible error. [ 22 ] The real question to be determined is whether the credit of $408,000 made to Mr. Bitton’s son was properly viewed by the judge as partial payment, by Luxor, to its creditor Samprêt, with a view to paying off part of the HSBC loan.

Indeed, this is the manner in which the judge himself cast the matter when he stated the issues in dispute in paragraph [9] of his reasons (see, especially, para. [9.3] where he asked “what are the amounts that must be credited to the borrowers by way of repayment for each of the two debts?”). [ 23 ] There is no substantive issue in law as to whether the credit could constitute partial payment of the debt, subject to the requirement that Samprêt accept the payment by a third party in the form that the payment was made.

The judge was plainly satisfied with the evidence that the credit was made by a third party to a person authorized by the creditor to receive payment and that Samprêt accepted the credit as partial payment of the debt (see, in particular, para. [123] of his reasons). The judge found that this credit to Mr. Bitton’s son constituted partial payment of the HSBC debt, by Mr. Basal, a third party to the debtor-creditor relationship between Luxor and Samprêt, and that Mr.

Samy Bitton accepted this as partial payment on behalf of Samprêt (paras. [123] and [127.2]). [3] [ 24 ] As a matter of fact, the judge found that this was the intention of Mr. Basal, Mr. Shamir and Ms. Benarroch, and of Mr. Samy Bitton, Samprêt’s principal when the credit to Mr. Bitton’s son was made. It was consonant with the close relationship between the parties and with the fact that Mr. Shamir, Ms. Benarroch’s spouse, was creditor of Mr. Basal and debtor of Samprêt (see para. [119] of the judgment in appeal).

The $408,000 credit was, according to the judge’s view of the evidence and his measure of the intention of the parties, at once a payment by Mr. Basal in satisfaction of his debt to Mr. Shamir and, indirectly, a partial payment of the debt Mr. Shamir and Ms. Benarroch owed to Samprêt. [ 25 ] Whether or not the judge erred in finding that the $408,000 credit was, in the circumstances, a partial payment of the debt owed to Samprêt is a question of fact or, at most, a mixed question of fact and law. It turns on the highly factual matter as to whether a credit extended to Mr.

Bitton’s son amounted to an advantage to Samprêt that, given the close relationship between the parties, could be understood as also amounting to a reduction in both Mr. Basal’s indebtedness to Mr. Shamir and Mr. Shamir’s indebtedness to Samprêt. The judge found that it was a partial payment and that it was validly accepted on behalf of Samprêt.

Only a palpable and overriding error would allow this Court to disturb this finding and reverse the judge’s consequential conclusion that the amount of the HSBC loan should be reduced. [4] [ 26 ] The evidence adduced at trial that is relevant to this characterization of the credit of $408,000 as a partial payment of the debt owed to Samprêt is not completely reproduced in the record on appeal. [ 27 ] What is in the record comforts the judge’s

interpretation: the evidence that Mr. Basal gave on discovery, upon which the judge relies, suggests that the credit was intended to reduce Luxor’s debt to Samprêt. Mr. Shamir’s testimony at trial and that of Ms. Benarroch, are incompletely reproduced in the record, but the excerpts that are included are suggestive of this same

interpretation. [ 28 ] The appellant Samprêt had the duty to reproduce the depositions and other evidence necessary to substantiate its argument on appeal that the credit did not in fact serve to pay down, in part, the HSBC debt. This is especially true in light of the importance, for the judge, of considerations relating to credibility to this finding, especially the relative lack of credibility afforded to Mr. Samy Bitton on this point and the preference given, by the judge, to Mr. Shamir’s explanation (para. [123]).

In light of the appellant’s failure to do so and the highly factual character of the matter in dispute, the appeal must fail given the absence of a proper demonstration of a reversible error. [5] [ 29 ] Lastly, it bears mentioning that, according to the judge, the position advanced by Samprêt would have resulted in the latter’s unjust enrichment at the respondents’ expense. This is the case on appeal as well: Samprêt seeks to benefit from a $408,000 credit accorded to Mr. Bitton’s son without any reduction of the amount it claims against Luxor, Mr. Shamir, and Ms. Benarroch.

Here again, the appellant has failed to show how the judge’s view of the matter reflects an error that would justify an intervention by the Court. [ 30 ] The foregoing are the reasons for the judgment, rendered at the hearing, by which the Court dismissed the appeal, with legal costs on appeal. FRANÇOIS DOYON, J.A. NICHOLAS KASIRER, J.A. MARIE-JOSÉE HOGUE, J.A. Mtre Karim Renno Renno Vathilakis inc. For Appellant Mtre Jean-Pierre Sheppard Robinson Sheppard Shapiro For Respondents Date of hearing: June 5, 2019