2012 QCCQ 2515, 2012 QCCQ 2515

Hiller c. Taylor 2012 QCCQ 2515 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division No: 500-32-117664-096 DATE: March 27, 2012 ______________________________________________________________________ BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ DEREK HILLER […] LaSalle, Quebec […] Plaintiff v. DANIEL TAYLOR […] Montreal, Quebec […] -and- MICHEL LABROSSE […] Pointe-Claire, Quebec […] -and- 9062-1996 QUÉBEC INC.

BERNARD UZAN 7920 Côte-St-Luc, suite 901 Montreal, Quebec H4W 1R3 Defendants ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] The Plaintiff, Derek Hiller sues the Defendants alleging fault in their handling of the question of property insurance covering the residence that he and his brother, Jeffrey Thomas Hiller jointly sold to the Defendant 9062-1996 Québec Inc. ( "Québec Inc." ) [ 2 ] He asserts that by not immediately publicising the transfer of title, the Defendants created a situation where he remained personally responsible for property insurance premiums after the change of possession. [ 3 ] The amount of this premium accruing to him was eventually paid by the broker using return premiums produced by the cancellation of Derek Hiller's other policies.

He alleges that this led to his reputation being damaged with the insurers. [ 4 ] He claims damages in the amount of $7,000, the maximum that can be claimed in the Small Claims Division. [ 5 ] In a Contestation and Cross-Demand, each Defendant claims $1,000 in moral damages for loss of time, stress and inconvenience, and $500 in punitive damages because of the alleged frivolous and unfounded action. [ 6 ] The substance of their defence is that there is no coherent claim made against them. ISSUES

[ 7 ] The Court must decide: 1. Is the Plaintiff entitled to damages because of mismanagement of the insurance situation with respect to the immovable property, the sale of which was unpublished? 2. If so, what is the accurate assessment of this prejudice? 3. If not, is the claim abusive, giving rise to damages? FACTS [ 8 ] The Defendant, Daniel Taylor describes himself as a "foreclosure consultant" . He is not accredited with any professional order or organisation. He knows the Plaintiff, Derek Hiller, and his brother as clients.

He solicited them for the first time in 2006, when they fell into default on payments towards a hypothecary creditor on their residence, 1661 Lloyd Georges Street, in Verdun. [ 9 ] The index to immovable (D-3) shows a prior notice of a taking in payment on September 12, 2006 as well as a prior notice of sale for failure to pay city taxes one day later. [ 10 ] On March 26, 2007, AGF Trust Company ("AGF") registered a hypothecary loan in the amount of $194,750. [ 11 ] Daniel Taylor's assistance in obtaining this loan apparently justified a fee of $10,000, which the parties admit was paid. [ 12 ] In March 2008, the brothers again faced a prior notice of taking in payment, this time from AGF.

An agreement (P-17) was reached between them and Daniel Taylor and Québec Inc. Daniel Taylor refers to the agreement as a "partnership". [ 13 ] The agreement contemplates the brothers selling the property to Québec Inc. for a consideration equal to the assumption of the debt owing to AGF and an amount owing to Bernard Uzan, the principal of Québec Inc. under a hypothecary loan registered against the property May 23, 2008.

The deed (D-18) mentions a loan of $100,000 to be disbursed. [ 14 ] The agreement foresees the reimbursement of the $10,000 fee paid in 2007, $3,000 upon the signing of the deed of sale and $7,000 when the Hillers vacate the property. [ 15 ] Finally, the agreement contemplates that the Hillers will benefit in 50% of the fruits of the sale of the property to a third party for a price over $300,000 in the event that the Hillers introduce the eventual purchaser to Taylor. [ 16 ] As contemplated, the sale of the property from the Hiller brothers to Québec Inc. takes place on May 21, under a private writing (P-23). [ 17 ] Notary Labrosse is involved in that he gives his "Déclaration d'attestation" as to the identity, quality, capacity of the parties and the validity of the document as to its form and that it represents the express intention of the parties.

He neither drafts the document, nor does he receive it. [ 18 ] There are two texts in the deed of sale that relate to insurance, first in the DECLARATIONS OF THE VENDOR : 15. That the property is insured and will remain insured with Ultima Assurance et services financière under the policy number P14309716PAP and that all insurance premiums are paid to date.

And under the title: TRANSFER OF INSURANCE The vendor hereby transfers to the purchaser all the rights in the fire insurance policy covering the property whereby the purchaser will be subrogated in any rights to any claim. [ 19 ] It is admitted by both parties that the $10,000 was, in fact, reimbursed as contemplated in the agreement and the brothers did move out as foreseen. [ 20 ] The dispute arises in this file because of the singular fact that the sale was not published until much later, on March 31, 2009.

Between May 21, 2008 and the publication, the Hillers still appeared to the public to be the owners of the property. [ 21 ] According to Daniel Taylor, the plan was to renovate the property after the Hillers departed and to eventually sell it. By not publicising the sale immediately, mutation taxes could be avoided. [ 22 ] This decision to keep the sale private had other ramifications, however.

The plan to keep the property insured under the existing policy, while subrogating the purchasers in any claim, was not realistic. [ 23 ] When the insurer became aware, through Derek Hiller's discussion with the brokers, that the property was vacated and was undergoing renovations and that there was another second ranking hypothec of $100,000, it proceeded to cancel the policy. [ 24 ] This is quite understandable because the owner had changed both the material risk because of the fact the property was not occupied and would undergo construction and the moral risk because of the reduction of equity in the property after the registration of the second ranking hypothec. [ 25 ] Derek Hiller testifies that he was not aware that the deed of sale was not to be publicised immediately.

At the hearing, he was visibly unaware that the deed of sale was not in notarial form.

[ 26 ] He also states that he was not aware that Daniel Taylor continued, purportedly, to act under a power of attorney, a document dated May 21, 2008 (P-16) entitled "ADMINISTRATION OF IMMOVABLE AND POWER OF ATTORNEY" . This was a document designed to enable Daniel Taylor to deal on the Hillers' behalf with AGF in relation to the defaulted loan. It contained under

section "C." the power to "Manage all payments due to the Insurer." with reference specifically to policy # P14309716PAP. [ 27 ] He believed that Taylor and/or the Defendant, Québec Inc., were dealing with the insurers as owners . [ 28 ] Mr Hiller received a letter dated June 13, 2008 from the broker, Lareau Courtiers d'Assurances, advising him of the termination June 28, 2008 of Aviva's policy #P14309716PAP. [ 29 ] He received a second letter September 19, 2008 (P-4) from the same broker advising him of the placement of a new policy asking him to complete and return the proposal form.

Then, on October 17, 2008, a letter was issued by the broker (P-5) to the hypothecary creditor Fiducie AGF advising it that this new policy is cancelled due to non-payment of premiums. [ 30 ] The letter states " We were advised that Mr.

Daniel Taylor would take over payment for the insurance on this property following the addition of a second mortgage." , annexed to the letter is a copy of the document entitled "ADMINISTRATION OF IMMOVABLE AND POWER OF ATTORNEY". [ 31 ] The letter goes on to state " You may also note the change of insurance company as we were advised at the same time that the building was vacant and under renovation. We were forced to transfer the insurance from Aviva Canada to the high-risk insurer mentioned above. ("Morin Elliot") As we are unable to contact Mr.

Daniel Taylor, we hereby advise you that as of September 28th, 2008 (renewal) the policy lapsed at it's expiry and your insurable interest is without coverage through our firm for the following location:" [ 32 ] The letter also encloses a document dated June 5, 2008 addressed to the broker by Daniel Taylor. The notice states: Please take notice that on the 23 rd day of May 2008, a second mortgage for an amount of 100,00$ was registered on the said property in favour of a private lender namely, Bernard Uzan.

In accordance with the power of attorney herein attached, I will be managing the above-mentioned property. […] Furthermore, as stipulated in paragraph 10 of the said power of attorney, I will be managing all payments due to the insurer.

Consequently, would you please confirm in writing the appropriate monthly payment, the payment date, to whom the payment is made and the address where I should send the monthly payment. [ 33 ] October 27, 2008, a letter addressed by AGF to Jeffrey Hiller and Derek Hiller advises them of the cancellation of the fire insurance policy, putting them in default to reinstate insurance failing, which AGF will place it on their behalf. [ 34 ] In the meantime, Lareau sends notices November 10 th , (P-6) and November 25 th , (P-9) advising the Hillers of the cancellation of tenants and car insurance policies for failure of payment or premiums. [ 35 ] The invoice (P-13) shows cancellation of several unrelated policies permitting a return premium credit which is then used to pay the premiums owed on the fire policy, put in place by the broker after the change of risk. [ 36 ] This invoice, dated August 19, 2009, shows a debit of $1,790 for the premium on this policy (ME20264).

The rest of the statement shows premiums owed and credits given for cancelled policies, leaving an overall balance of $1,948.36. [ 37 ] When Derek Hiller brought this situation to the attention of Daniel Taylor, the latter's advice was to take the insurer to task for having cancelled the initial policy and for having initiated, without authorisation, the new policy and then to have cancelled other policies in order to generate funds to pay the premiums on the new insurance. [ 38 ] The draft notice, disingenuously drafted to look like a Court document, bears the title "Notice of the intent to take legal action

article 140-01 and 156 C.C.P." . There are signature lines for Derek Hiller, Jeffrey Hiller and Daniel Taylor. [ 39 ] The Hillers declined to act on Mr Taylor's advice and refused to sign the document. [ 40 ] Mr Taylor and Mr Uzan take the position that no premium is owed for the replacement policy because it was never requested. [ 41 ] They take issue with the cancellation of the policy that existed at the time of sale.

At one point in this testimony, Daniel Taylor complained that someone had "let the cat out of the bag " by advising the insurance broker of the change of status of the property. [ 42 ] It is not clear in the evidence how the insurance brokers were instructed to place new insurance. [ 43 ] It is, however, clear that the cancellation of the existing policy was inevitable given the severe aggravation of risk brought about by the vacancy of the property and the placement of a second-ranking hypothec. [ 44 ] Whether the insurance broker acted on instructions that it understood it had received from Derek Hiller or from the apparent property manager, Daniel Taylor, it put new insurers on risk, from June 28, 2008.

This was for the benefit of Quebec Inc. as actual owner, Daniel Taylor as someone who had an indirect investment in the property and Fiducie AGF. Taylor and Uzan took the position that they would have preferred not to have this insurance because was too expensive and did not adequately cover the building. [ 45 ] This is a rather absurd statement because it seems obvious that, if there had been a loss, a fire for example, they would have

been the first to insist on this policy responding to cover their insurable interest. [ 46 ] The Hillers would have been in a position to enforce the contract of sale and call upon the purchaser to hold them harmless from their loan to AGF, an obligation assumed by the purchaser in the deed of sale. [ 47 ] In the event of a loss, therefore the insurance that these Defendants seek to discredit would have indeed been valuable.

LEGAL ANALYSIS [ 48 ] On the balance of probabilities, the broker must have acted on authority when it put in place an insurance policy to cover the risks associated with the building when the initial insurance was cancelled because of the change of risk. [ 49 ] The new owner of the building, nominally Québec Inc. and effectively Taylor and Uzan, cannot complain that Hiller, through the broker, placed this insurance for their benefit. [ 50 ] By not publicising the deed of sale, the normal way the building could be insured was through the actions of the apparent owners, the Hillers. [ 51 ] Taylor took the position with the insured's broker that he was managing the property but, in fact, if he was, he failed to act reasonably in not dealing properly with the insurance issue. [ 52 ] Being, according to him, part of a partnership to develop the building through its renovation, he could not impute the responsibility to pay insurance premiums to cover the risks associated with this project on the Hillers, who had given up their property interest in the deed of sale. [ 53 ] By doing nothing to regularise the insurance situation, and by permitting the vendors to remain financially responsible for a new insurance policy that was, in fact, for their benefit, the Defendants, Taylor, Uzan and Québec Inc., committed a fault. [ 54 ] The amount of the prejudice to the Plaintiff is $1,948.36, the financial impact of the placement of the new policy according to the statement, P-13.

Other damages have not been proved. FOR THESE REASONS, THE COURT: CONDEMNS the Defendant to pay, to the Plaintiff the sum of $1,948.36, together with interest at the legal rate of 5% per annum and the additional indemnity provided at

article 1619 of the Civil Code of Quebec , calculated from the date of the institution of the proceedings; DISMISSES the Cross-demand; CONDEMNS the Defendant to pay, to the Plaintiff, judicial costs in the amount of $157. __________________________________ DAVID L. CAMERON, J.C.Q. Date of hearing: December 5, 2011