2023 QCCQ 348, 2023 QCCQ 348

Raikles c. Gilmour 2023 QCCQ 348 COURT OF QUÉBEC CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTRÉAL “Civil Division” No: 500-22-266505-216 DATE: February 8, 2023 ______________________________________________________________________ PRESIDED BY THE HONORABLE MÉLANIE DUGRÉ, J.C.Q. ______________________________________________________________________ MARSHALL RAIKLES Plaintiff/Cross-Defendant v.

RODNEY GILMOUR Defendant/Cross-Plaintiff __________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Marshall Raikles and Rodney Gilmour entered into a business partnership whereby they were to sell, exclusively through the company Skigouroumonde Inc. ( Gourou )’s website, ski race equipment and accessories. The targeted clientele was young ski racers. Mr. Raikles provided the initial funding to start the business and Mr. Gilmour handled the day-to-day operations. [ 2 ] Mr. Raikles alleges that Mr.

Gilmour omitted to return unsold product to suppliers and either kept those products for himself or sold them outside the company’s channel. Mr. Raikles is now claiming $25,795.13 from Mr. Gilmour. Although the parties were bound by a contractual agreement, Mr. Raikles alleges that the basis of his recourse is “extracontractual”. He argues that Mr. Gilmour committed a fault outside the contract that caused him financial and moral damages because Mr. Gilmour was aware that he, alone, supported the financial responsibility of the company. [ 3 ] Mr.

Gilmour admits that he retained some products, either for himself or to sell outside the company’s website. He assesses their value at $2,500 to $3,000. [ 4 ] Mr. Gilmour, however, alleges that most products were returned to suppliers and that credit notes were issued in favor of the company. He has also filed a cross-application against Mr. Raikles claiming a total of $51,541.16 for various expenses related to website development, Internet fees, storage fees, and advertising campaigns that he personally incurred, and that were supposed to be assumed by Mr. Raikles. In addition, Mr.

Gilmour claims $17,500 for damages to his reputation and $12,000 for moral damages. QUESTIONS AT ISSUE [ 5 ] The Court must answer the following questions to solve this dispute:

a) Did Mr. Gilmour commit an extracontractual fault towards Mr. Raikles?

b) If so, were damages suffered and what is the value of such damages?

c) Is Mr. Gilmour’s cross-application well founded in law and has he proven the damages claimed? [ 6 ] For reasons explained below, the Court concludes that both application and cross-application are unfounded, having not been directed at the proper party, which is Gourou. ANALYSIS AND DECISION

a) Did Mr. Gilmour commit an extracontractual fault towards Mr. Raikles? Business partnership between the parties – December 2019 to February 2021 [ 7 ] On March 19, 2020, Gourou was incorporated. [1] The first shareholder and sole administrator was Mr. Raikles and the second shareholder was Kermode Media Inc., Mr. Gilmour’s holding company. Both parties acknowledge that 51% of Gourou’s shares were held by Mr. Raikles and 49% by Kermode Media Inc. [ 8 ] The essence of the agreement, which was exclusively verbal, was that Mr. Raikles would provide the initial funds, while Mr.

Gilmour would oversee Gourou’s daily operations. In addition, Mr. Raikles was to pay for initial expenses, and it was agreed that those would be reimbursed to him once the company became profitable. Furthermore, the products were to be sold at a retail price equivalent

to twice the wholesale price. [ 9 ] The Court notes that there was no written contract between the parties nor any shareholders agreement describing profit distribution, payment of dividends or reimbursement of expenses. However, Mr. Gilmour was behaving like a Gourou’s employee and even sent his resignation letter [2] to Mr.

Raikles on February 15, 2021, when things turned sour. [ 10 ] In the summer of 2020, orders were placed with suppliers, and products were received late October/early November 2020 and stored in a warehouse. [ 11 ] The products were not paid for upon delivery, since most suppliers’ payment term ranged between 30 and 90 days. Approximately $50,000 worth of ski products were purchased, and by mid-November 2020, all the ordered inventory was received and Gourou was ready to operate. [ 12 ] From a financial investment standpoint, Mr.

Raikles transferred $4,200 from his personal bank account to Gourou’s between June and December 2020. These deposits were rapidly followed by Interac transfers from Gourou’s account to Mr. Gilmour personally. [3] [ 13 ] Mr. Raikles testified that these amounts were related to expenses incurred by Mr. Gilmour in the business operations, such as the costs of warehouse’s lease and purchase of office and shipping equipment. [ 14 ] Unfortunately, the parties’ business endeavour was not as successful as expected.

Between November 2020 and January 2021, only three sales were made through Gourou’s website for a total of $530. [4] [ 15 ] Around mid-January 2021, Mr. Raikles asked Mr. Gilmour to communicate with the suppliers to inform them that Gourou was closing, and to request that they take their products back and issue credit notes. [ 16 ] Mr. Gilmour sent an email to suppliers on January 11, 2021 [5] , and they all accepted to take the products back.

The plan was to ship them by the end of January to give suppliers sufficient time to sell the products to other customers before the end of the season. [ 17 ] In February 2021, Mr. Raikles was surprised to receive calls and communications from suppliers asking where their products were, because they had not been shipped back and their invoices had not been paid either. [ 18 ] Mr. Raikles confronted Mr. Gilmour, but his answer was rather confused. On February 12, 2021, Mr. Gilmour sent Mr. Raikles an email entitled “Wrap[-]up

summary for skiguruworld as of [February] 12” [6] with several attachments. [ 19 ] The Court concludes from the evidence that Mr. Gilmour admits having retained some products for himself and having sold products outside Gourou’s website. Proceeds of these offline sales, approximately $2,500 to $3,000, were deposited in Kermode Media Inc.’s bank account. [ 20 ] At trial, Mr. Gilmour’s explanations as to what actually happened to the missing products lack credibility, are confused and unclear.

As a result, the Court is unable to assess what products were sent back to suppliers with credit notes, what products were retained for personal use, and what products were sold outside Gourou’s website with the proceeds going to Mr. Gilmour. [ 21 ] Although Mr. Gilmour admitted having retained and sold some products, any proceeds of such offline sales would not be payable to Mr. Raikles, but to Gourou, which is not a party to the proceedings.

Collection notices from suppliers [ 22 ] In the spring of 2021 and in the following months, several suppliers sent collection notices and updated invoices to Gourou for products that were not returned. [7] [ 23 ] Mr. Raikles’ claim against Mr. Gilmour is based on these collection notices as well as on invoices issued to Gourou for products that are still missing. [8] As of today, none of the invoices addressed to Gourou have been paid. [ 24 ] The Court is satisfied with the evidence offered by Mr. Raikles that the amounts claimed by the suppliers result from a fault committed by Mr.

Gilmour, whereby he retained products that were supposed to be either sold through Gourou’s website or returned to the suppliers. [ 25 ] However, Mr. Raikles failed to show that he would be personally liable for the amounts claimed by the suppliers because these collection notices are addressed to Gourou, a distinct legal entity and still a duly incorporated company. [ 26 ] Having concluded that Mr. Gilmour committed a fault, is this fault contractual or extracontractual? [ 27 ] At trial, the Court challenged Mr. Raikles’ position on the extracontractual basis of this recourse. Mr.

Raikles’ position was that the fault was committed outside the contract because Mr. Gilmour knew that any financial loss caused to Gourou would lay on Mr. Raikles’ shoulders as the sole investor in the project. [ 28 ] No caselaw or doctrinal

article was submitted to the Court to support the argument that the fault could be extracontractual. In any event, the Court is of the opinion that the qualification of Mr. Gilmour’s fault is irrelevant to the present debate because this fault was committed against Gourou, and not against Mr. Raikles personally. [ 29 ] The Court therefore reiterates that the absence of Gourou from the proceedings is fatal to Mr. Raikles’ claim.

b) If so, were damages suffered and what is the value of such damages?

[ 30 ] Given the above conclusion, it is not relevant to comment on the amounts claimed by Mr. Raikles that relate to suppliers’ collection notices and expenses. The Court nonetheless emphasizes that it is not possible to conclude that had it not been for Mr. Gilmour’s fault, the company would have made profits, because such a scenario is highly speculative and hypothetical. [ 31 ] Indeed, based on the very limited sales that actually took place, the Court cannot assume that profits would necessarily have been generated, had the business pursued its activities.

Furthermore, before Gourou could report any profits, expenses would have had to be deducted, and there is no guarantee that 51% of the retail price would have gone into Mr. Raikles’ pockets. [ 32 ] Regarding the claim of $10,000 in moral damages, the Court is of the opinion that both parties have been negligent in their business partnership. The agreement was exclusively verbal. None of its terms and parameters were confirmed in writing. Mr. Raikles, although he was funding the business, was overconfident in Mr. Gilmour’s management skills, without following what was happening with the suppliers. Mr.

Gilmour poorly managed the business and its inventory, in addition to keeping from Mr. Raikles the fact that he had not returned some products and sold them outside Gourou’s channel. [ 33 ] The Court is of the view that a portion of the loss and the unfortunate outcome of this business endeavour is the result of the parties’ own negligent conduct. [ 34 ] For these reasons, Mr. Raikles’ claim against Mr. Gilmour for moral damages is dismissed.

c) Is Mr. Gilmour’s cross-application well founded in law and has he proven the damages claimed? [ 35 ] As previously mentioned, the parties to the current proceedings are Marshall Raikles and Rodney Gilmour personally, with the noteworthy absence of Gourou. [ 36 ] During his cross-examination, Mr. Gilmour admitted that should the various amounts he is claiming for website development, Internet, and storage fees advertising costs be payable, [9] the financial responsibility for payment of these amounts would belong to Gourou, and not Mr. Raikles. [ 37 ] Gourou’s absence is therefore not only fatal to Mr.

Raikles’ application, but also to Mr. Gilmour’s cross-application. The evidence confirms that the expenses incurred by Mr. Gilmour in the fall of 2020 were reimbursed through Interac transfers from Gourou’s bank account, after Mr. Raikles had deposited funds from his personal account into Gourou’s account. As a result, Mr. Gilmour’s cross-application that relates to reimbursement of expenses should have been directed against Gourou, and not Mr. Raikles personally. [ 38 ] Given this conclusion, the Court will not comment on whether Mr.

Gilmour would be entitled to the amounts claimed for various expenses. [ 39 ] Mr. Gilmour also claims $17,500 from Mr. Raikles personally for damage to his reputation, and $12,000 in moral damages. [10] While Mr. Raikles could potentially be personally liable for these damages, Mr. Gilmour has offered no evidence to support the existence of a fault committed by Mr. Raikles, nor evidence of actual damages to his reputation or moral damages. [ 40 ] The Court also dismisses the portion of the cross-application against Mr. Raikles for moral damages and damages to Mr. Gilmour’s reputation.

FOR THESE REASONS, THE COURT: DISMISSES Marshall Raikles’ application; DISMISSES Rodney Gilmour’s cross-application; THE WHOLE, without costs. __________________________________ MÉLANIE DUGRÉ, J.C.Q. Me Sheena Magli Legal Magli Plaintiff Rodney Gilmour Self-represented Dates of hearing: January 18 and 19, 2023