2023 QCCQ 4913, 2023 QCCQ 4913

Construction KRP Inc. c. Santillo Construction Inc. 2023 QCCQ 4913 COURT OF QUÉBEC CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTRÉAL “Civil Division” No: 500-22-269035-211 DATE: July 27, 2023 ______________________________________________________________________ PRESIDED BY THE HONORABLE MÉLANIE DUGRÉ, J.C.Q. ______________________________________________________________________ CONSTRUCTION KRP INC. Plaintiff v.

SANTILLO CONSTRUCTION INC. and JOEY SANTILLO and 9422-4839 QUÉBEC INC. and 9402-2977 QUÉBEC INC. and ALBERTO PELUSO Defendants __________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Construction KRP Inc. ( KRP ) claims $18,545.75 from Santillo Construction Inc., Joey Santillo, 9422-4839 Québec Inc. ( 9422 ), 9402-2977 Québec Inc. ( 9402 ), and Albert Peluso for materials that remain unpaid because the cheques were issued from a closed bank account. [ 2 ] Mr.

Joey Santillo was personally named as Defendant, but KRP is no longer seeking any conclusion against him, since he filed for bankruptcy on March 24, 2022, and will not be discharged before December 24, 2023. [1] [ 3 ] 9422, 9402 and Mr. Peluso contest KRP’s claim on the basis that they did not contract with KRP. Mr. Peluso also alleges that the facts and circumstances of the case do not justify that the corporate veil be lifted to trigger his personal liability. As for Santillo Construction Inc., it did not raise any grounds of defense and no representative was present at trial. ISSUES [4]

a) Are Santillo Construction Inc., 9422 and 9402 jointly liable for the amounts owed to KRP for materials that remain unpaid after cheques were issued from a closed bank account?

b) Are conditions met to lift the corporate veil in order to retain Mr. Peluso’s personal liability? ANALYSIS AND DECISION

a) Are Santillo Construction Inc., 9422 and 9402 jointly liable for the amounts owed to KRP for materials that remain unpaid after cheques were issued from a closed bank account ? [5] Mr. Rafi Moubaid has been the manager of KRP since it was incorporated in 2018 [2] and is in charge of administrative matters. [6] Mr.

Santillo is the sole shareholder and a director of Santillo Construction Inc., which was incorporated on January 8, 2020, and also operates under the name of Nettoyage Net Pro. [3] [7] 9422 was incorporated on August 7, 2020, and also operates under the names of Nettoyage Net Pro and Santillo Construction. [4] [8] 9402 was incorporated on July 26, 2019. [5] [9] Mr. Peluso is the sole shareholder and a director of both 9422 and 9402. [6]

[10] At the end of May 2021, Mr. Santillo contacted Mr. Moubaid to order one roof box and 28 doors for a construction project ( the Project ) located at 208 Migneron Street in Saint-Laurent. [11] Three invoices were issued by KRP for these items for a total of $19,545.75. [7] [12] Mr. Santillo remitted two cheques drawn from Santillo Construction Inc.’s bank account to Mr.

Moubaid: 1) cheque No. 000132 dated June 16, 2021, for $2,299.50, and 2) cheque No. 000134 dated June 18, 2021, for $17,246.25. [8] [13] On June 21 and 22, 2021, KRP was informed by the National Bank of Canada ( NBC ) that the cheques had bounced because they were issued from a closed account. [9] [14] Mr. Moubaid reached out to Mr. Santillo who tried to reassure him by sending him on June 30, 2021 the notice of the legal hypothec that 9402 had registered on June 25, 2021 on the property located at 208 Migneron Street, in the context of the Project. [10] [15] Mr. Santillo also remitted to Mr.

Moubaid $1,000 in cash and another cheque from Santillo Construction Inc. for $18,545.75 dated July 2, 2021. [11] [16] Unfortunately, KRP was again informed by the NBC on July 7, 2021, that the cheque had bounced because it was issued from a closed account. [12] [17] On July 12, 2021, KRP’s attorneys sent a demand letter to the Defendants, claiming $18,545.75. This demand letter has remained unanswered. [18] Mr. Peluso testified that he knows Mr. Santillo, but alleged that his interactions with him regarding the Project were limited to Mr.

Santillo suggesting him to present a bid, which he did through 9402. [19] Mr. Peluso admitted that 9402 was involved in the Project, but specified that its role was limited to building the divisions, the plumbing, and the sprinklers. [20] Mr. Peluso denied having ever dealt with Mr. Moubaid or having ordered any roof box or door for the Project, either directly or through 9402. This version is not contradicted as Mr. Moubaid admits having never met Mr. Peluso and having dealt exclusively with Mr. Santillo. [21] Nevertheless, Mr.

Peluso acknowledges that 9402 registered a legal hypothec on the Project’s property, [13] which confirms that it did perform work and had a significant level of participation. [22] Despite Mr. Peluso’s efforts to convince the Court that he does not know Mr.

Santillo and/or Santillo Construction Inc., the Court finds his testimony to be vague and confuse. [23] The evidence offered supports the conclusion that Santillo Construction Inc. and 9402 were related and involved to some extent in the Project for the following reasons. [24] Santillo Construction Inc. issued the cheques from its closed bank account and has offered no defense. [25] On June 25, 2021, 9402 registered a legal hypothec on the Project for an amount of $170,622.90. [14] [26] Mr. Peluso could not explain how Mr.

Santillo, who was apparently not involved in the Project, had access to this legal hypothec, which he sent to Mr.

Moubaid on June 30, 2021, in an attempt to reassure him after concerns were raised regarding the cheques issued from the closed bank account. [27] Furthermore, the Court file contains judicial admissions from Defendants regarding KRP’s claim. [28] First, paragraph 19 of the plea dated March 14, 2022, filed on behalf of all Defendants, states that: [19] THAT moreover, Defendants have not been paid by the company they did the work for, that is Q-ZN Solutions Inc., a case in Superior Court bearing number 500-17-117897-218 is pending and as soon as there is final judgment in that case, this case will be dealt with, regarding to what is owed by these Defendants to Plaintiff ; [emphasis added] [29] Secondly, in the Motion to postpone the trial presented by Defendants on April 19, 2023, and whose content was approved by Mr.

Peluso, it is stated at paragraphs 8 and 9 that: [8] Il appert que la compagnie Q-ZN Solutions était l’entrepreneur général d’un projet et la compagnie 9402-2977 Québec inc. a engagé des sous-traitants dont la compagnie Construction KRP inc. pour ledit projet ; [9] Or, il appert que la compagnie 9402-2977 Québec inc. n’a à ce jour pas été [payé] par l’entrepreneur général Q-ZN Solutions inc., d’où sa demande reconventionnelle, et par conséquent, elle n’a pu payer ses sous-traitants . [emphasis added] [30] Despite Mr.

Peluso’s allegation that there was no relationship between 9402 and KRP, there is therefore an admission that 9402 did contract with KRP in the context of the Project and retained its services as a subcontractor for the roof box and doors. [31] The evidence regarding 9422 is, however, not as strong. The Québec Enterprise Register’s ( REQ ) reports show that 9422

operated under the name of Santillo Construction and that both 9402 and 9422, which shared the same sole shareholder and director (Mr. Peluso), also operated under the name of Nettoyage Net Pro. [32] Mr. Peluso and Mr. Santillo sold their respective companies, 9422 and Santillo Construction Inc., to the same individual, Abdelkader Chakouri, a few months after the legal proceedings were filed. [33] It appears that Mr.

Chakouri, who did not testify at trial, became the sole shareholder and director of Santillo Construction Inc. on January 24, 2022, [15] and assumed the same roles for 9422 on February 1 st , 2022. [16] [34] These facts do trigger questions as to the nature and extent of the relationships between Mr. Santillo and Mr. Peluso, on one hand, and Santillo Construction Inc., 9402 and 9422, on the other hand. [35] Nevertheless, 9422 is a distinct corporate entity which, based on the evidence presented, was not involved in the Project, and had no direct relationship with KRP. Furthermore, there is an admission from Mr.

Moubaid that he has never met or dealt with Mr. Peluso, who was the sole shareholder and director of 9422 at the relevant time. [36] As a result, the Court cannot conclude that there is a sufficient legal link between KRP and 9422 to retain 9422’s liability for the cheques issued by Santillo Construction Inc. from the closed bank account. [37] The Court therefore finds Construction Santillo Inc. and 9402 solidarily liable for the amounts owed to KRP, due to cheques having been issued from the closed bank account.

b) Are conditions met to lift the corporate veil in order to retain Mr. Peluso’s personal liability ? [38] KRP is also seeking the personal liability of Mr. Peluso. At the relevant times, Mr.

Peluso was the sole shareholder and director of both 9422 and 9402. [17] [39] These companies have their own legal personality, [18] and it is only under limited circumstances that the corporate veil can be lifted to seek the personal liability of its directors. [40] The Civil Code of Québec provides that: “ The juridical personality of a legal person may not be invoked against a person in good faith so as to dissemble fraud, abuse of right or contravention of a rule of public order”. [19] [41] To support its position, KRP alleges that Mr.

Peluso was necessarily in bad faith and knew, or had to know, that the cheques issued by Santillo Construction Inc. were issued from a closed account, especially the second time around. [42] Mr. Peluso was also responsible for instructing employees of 9402 to forward a copy of the legal hypothec to Mr. Santillo, who used this document in an attempt to reassure Mr. Moubaid that KRP would be paid. [43] In a recent case, the Court of Appeal stated the following: [20] [11] La Cour est d’avis que l’appelant a raison sur cette question.

Le juge a commis une erreur de droit en levant le voile corporatif alors que les critères le permettant n’étaient pas remplis en l’espèce. Dans l’arrêt Denis Lanoue [c] La brasserie Labatt Limitée, la Cour, sous la plume du juge Forget, souligne qu’il existe beaucoup de confusion en jurisprudence entre le soulèvement du voile corporatif et la responsabilité des administrateurs. Elle mentionne ceci : À ce sujet, le professeur Martel dans un

article récemment publié dans la Revue du Barreau fait une étude de la jurisprudence depuis la mise en vigueur de l'

article 317 C.c.Q. et déplore la confusion qui semble régner entre « le soulèvement du voile corporatif » et la responsabilité des administrateurs; il conclut ainsi: Tant que nos tribunaux ne feront pas preuve d'une plus grande rigueur juridique dans leur application de l'article 317 et que des incertitudes demeureront quant à sa portée, le flot des demandes de « soulèvement du voile corporatif » demeurera intense.

Cette rigueur est nécessaire, car sans elle on continuera d'assister à une érosion anarchique et injustifiée de ce que le juge Chamberland de la Cour d'appel a, à juste titre, décrit comme étant «au cœur même de notre droit corporatif », soit la reconnaissance de la personnalité juridique distincte de la compagnie. La codification du « soulèvement du voile corporatif » apportée à l'

article 317 visait à en préciser les balises pour réduire l'arbitraire en ce domaine. Paradoxalement, c'est l'entrée en vigueur de cette disposition qui crée un flottement judiciaire et suscite des initiatives que personne n'aurait même songé à prendre sous l'ancien droit, comme faire de la mauvaise foi, réelle ou présumée, d'un administrateur une source de responsabilité personnelle pour les violations contractuelles ou tout simplement l'insolvabilité de sa compagnie. Tant que les procureurs auront l'impression que l'

article 317 est une disposition passe-partout d'équité accordant une grande latitude aux tribunaux, et tant qu'ils se croiront obligés de l'invoquer, plutôt que l'article 1457, aussitôt qu'ils seront en présence d'une fraude ou même de la simple mauvaise foi de la part d'une compagnie ou de son administrateur, le corps jurisprudentiel du « voile corporatif » continuera d'engraisser. Espérons que la présente analyse servira à convaincre nos juristes que l'

article 317 ne vise que des circonstances qui se produisent rarement en pratique, et qu'il ne doit être invoqué que dans ces circonstances. […] [Références omises] [44] The Court does not find that the evidence offered is sufficient to conclude that either a fraud, an abuse of right or a contravention to a rule of public order was committed by Mr. Peluso, as required to justify the lifting of the corporate veil. [45] Furthermore, the evidence is also insufficient to conclude to Mr. Peluso’s extracontractual liability. Mr. Moubaid admitted that

he never met Mr. Peluso and did not deal with him; his relationship regarding the orders placed for the roof box and the doors was exclusively with Mr. Santillo. [46] The communication of the legal hypothec by 9402’s employees to Mr. Santillo, who sent it to Mr. Moubaid, is not in itself evidence that Mr. Peluso was aware that Santillo Construction Inc. had issued cheques from a closed bank account, and that Mr. Santillo was trying to hide behind the legal hypothec. [47] The Court does not conclude that the facts and circumstances justify that the corporate veil be lifted to trigger Mr.

Peluso’s personal liability, or that he should be found liable on an extracontractual basis. FOR THESE REASONS, THE COURT: GRANTS in

part Construction KRP Inc.’s application; CONDEMNS Santillo Construction Inc. and 9402-2977 Québec Inc. solidarily to pay to Construction KRP Inc. $18,545.75 with interests at the legal rate and the additional indemnity under

article 1619 C.C.Q. since the demand letter of July 12, 2021; THE WHOLE, with costs. __________________________________ MÉLANIE DUGRÉ, J.C.Q. Me Daniel Ovadia DANIEL OVADIA AVOCAT INC. Plaintiff Me Marie-Louise Beauchamp MARIE LOUISE BEAUCHAMP, AVOCATE Defendants Dates of hearing: May 5 and 11, 2023