2019 QCCQ 8358, 2019 QCCQ 8358

Encore Industries Inc. c. Place Montreal West Inc. 2019 QCCQ 8358 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-32-706567-189 DATE: October 28, 2019 ______________________________________________________________________ BY THE HONOURABLE ARMANDO AZNAR, J.C.Q. ______________________________________________________________________ ENCORE INDUSTRIES INC. Plaintiff and cross-defendant v. PLACE MONTREAL WEST INC.

Defendant and cross-plaintiff ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Plaintiff claims from Defendant the sum of $14,718.62 in reimbursement of the “taxes” that it has paid to said Defendant pursuant to two commercial leases concluded between the parties regarding a local situated at 146 Ronald Drive in Montreal West. [ 2 ] In the Demand filed into the Court record, Plaintiff enunciates his claim in the following manner : “1.

The Plaintiff is suing the Defendant for the following reasons: The plaintiff first lease with the defendant on January, 1 st 2001. The conditions of this lease stated that the plaintiff would pay the municipal property tax and tenant defendant would pay the business tax. While still occupying the premises, the parties signed another lease on January 1 st 2005 with further extensions of time up to November 30 th 2017 with the same conditions. The plaintiff was informed by the city of Montréal tax department and the municipality of Montréal West that they both haven’t collected business or surtax since 2002.

The plaintiff has already paid the business taxes from the beginning of the lease. The plaintiff request the reimbursement of all taxes he paid. SEE ANNEX. 2. The facts occurred on or around November 30, 2017, at Montréal (Quebec). 3. The amount of the claims is $14,718.62. 4. The total amount claimed by the Plaintiff is broken down as follows: Reimbursement of business taxes paid during the lease” [ 3 ] Defendant contests Plaintiff’s claim. More particularly, in the Contestation filed by it into the Court record, the defence is stated as follows :

a) The lease agreements provide for the payment of additional rent and

b) Plaintiff’s claim is prescribed. [ 4 ] In addition to its contestation, Defendant has filed a Cross-demand claiming from Plaintiff the payment of the sum of $6,669.50 representing “unpaid surtax” allegedly owed to it by Plaintiff pursuant to the commercial lease binding the parties for the years 2014, 2015, 2016 and 2017. This cross-demand is contested by Plaintiff. [ 5 ] The Court will first dispose of the defense of prescription invoked by Defendant. [ 6 ] The present litigation originates from the

interpretation of clause 3.2 contained in each of the two commercial leases concluded between the parties the object of which is the rental by Defendant of a local situated in the City of Montreal West where said Defendant conducted a business of importer-exporter and distributor. [ 7 ] The first lease (Exhibit P-1) was concluded on October 12, 2001. This lease was for a term of two years commencing on January 1, 2001.

Clause 3.2 reads as follows : “3.2 Other Amounts Payable – The Tenant shall pay all business tax (or any replacement thereof) and water taxes, electricity, heating costs, maintenance and repairs to the leased premises, garbage removal, as well as the cost of cleaning of the Leased Premises. For its

part, the Landlord shall be responsible for the Municipal and School taxes, snow removal, common area maintenance of the Building. The Tenant shall repair, at its own cost, any damages to the Premises or the Building which it or its employees or other persons for whom it is responsible at law could cause by their improper or abusive use of the Premises, as well as to the heating, ventilation, air conditioning and electric systems. *Water taxes to be fixed at 250.00 per year. [ 8 ] The second lease (Exhibit P-1A) was concluded on September 14, 2004 for a term of thirty-two months commencing on January 1, 2015.

Clause 3.2 of the lease reads as follows : “3.2 Other Amounts Payable – The Tenant will be responsible for its Proportionate Share (5%) of any increases in Real-Estate Taxes over the base year of 2004 and the GST and PST imposed on the rental. The Tenant shall have to pay its Proportionate Share of any increases in Real Estate Taxes at the latest five (5) days before said taxes are to be paid by the Landlord to the appropriate municipal authorities.

For the purposes of this Lease, “Proportionate Share” means the proportion of the gross floor area of the Premises bears to the gross leasable floor area of the Building. Additionally the Tenant shall pay water taxes, electricity, heating costs, maintenance and repairs to the leased premises, garbage removal, as well as cleaning of the leased premises, Tenant shall pay business or sur-tax.

For its part, the landlord shall be responsible for the Municipal and School taxes for he base year and all subsequent years, snow removal.” [ 9 ] The second lease (Exhibit P-1A) was subsequently renewed between the parties and was in effect until 2017 with variations as concerns the rent payable by Plaintiff to Defendant. [ 10 ] The litigation opposing the parties stems from the fact that in the first lease (Exhibit P-1), clause 3.2 stipulates that the lessee (i.e., the Plaintiff) must pay “all business tax or any replacement thereof”.

Until 2004, Plaintiff did in fact pay the “business tax” which, until then, was being billed directly to it by the municipal authorities (the City of Montreal). [ 11 ] However in 2003, the business tax payable to the City of Montreal by commercial lessees such as Plaintiff was abolished.

From then on, the City added to the municipal tax bill to be paid by the lessors, an additional amount to compensate for the business tax that had previously been billed to and paid by the lessees. [ 12 ] As of October 1 st , 2004, Plaintiff was billed directly by Defendant for the payment of what the latter considered to be the share of taxes now being billed to the Lessor by the City of Montreal and that was previously billed by the City directly to the lessee. [ 13 ] Commencing on January 1 st , 2005,

article 3.2 of the lease then applicable (Exhibit P-1A) provided that Defendant (the lessee) was responsible for the “payment of the business or surtax”. [ 14 ] Plaintiff was billed by Defendant for a total amount of $14,718.62 commencing on October 1 st , 2004 until May 1 st 2013 inclusively. In this regard, the letters sent to Plaintiff by Defendant requesting payment implicitly referred to the surtax or business taxes mentioned in clause 3.2 of the leases (Exhibits P-1 and P-1A).

Copies of these letters were filed into the Court record (Exhibit P-2). [ 15 ] In a statement of account dated July 28, 2019 (Exhibit P-8), Plaintiff has detailed the dates of the payments made by it for the “business taxes” for which it is seeking reimbursement by alleging that they were not legally payable as they were not a “business tax or replacement thereof or surtax” as provided for in clause 3.2 of the leases (Exhibits P-1 and P-1A). [ 16 ] The evidence has revealed that Mr. Marc Percher, president and owner of Plaintiff, is an experience businessman.

He is not a newcomer without experience in matters relating to commercial leases. [ 17 ] As mentioned previously, the parties concluded a new lease for the year commencing January 1 st , 2005. In this lease, clause 3.2 refers to the lessee’s obligation to pay the “business or surtax” that was going to be billed to Plaintiff by Defendant. [ 18 ] It is Mr. Percher’s testimony that when this lease was signed (Exhibit P-1A), no one informed him of the new tax situation although Mr.

David Hill, representative of Defendant, testified that he was indeed informed of the situation as early as 2004. [ 19 ] As to the actual or presumed knowledge by Mr.

Percher of the tax situation applicable to the lessee under the new lease, clause 17.2 stipulates : “17.2 Understanding of this Lease – Notwithstanding the fact that the Landlord drafted this Lease and submitted it to the Tenant, the Tenant recognizes the essential stipulations of this Lease were negotiable and that he understands all of its stipulations and that the Landlord gave him adequate explanations with respect to the terms and conditions of this Lease.” [ 20 ] This being said, the evidence has revealed that before 2004, the City would bill the lessee (Plaintiff) directly for the payment of the business tax.

As of 2004, the billing was done by the lessor (the defendant). Plaintiff paid the tax bills sent to it by Defendant as a “business or surtax” from 2004 to 2013 without inquiry and without question. [ 21 ] Although it is his testimony that he asked no questions on this issue, it is unlikely that Mr. Percher would have paid the tax bills sent to Plaintiff by Defendant without questioning why, beginning in 2004, the City had stopped billing the ” business tax” to Plaintiff and why Defendant was now sending him the bills. [ 22 ] Mr. Percher testified that, by reading an

article published on January 26, 2018 in the Montreal Gazette (Exhibit P-4), he realized that the municipal authorities had abolished the “business tax” payable by lessees in 2003. [ 23 ] According to Mr. Percher, only then did he ask Defendant for an explanation concerning the tax bills that had been sent to Plaintiff by Defendant since 2004 and that had been paid without question. Only then did he realize that, according to him, Plaintiff had been illegally billed by Defendant for the payment of these taxes. [ 24 ] Plaintiff sent Defendant a letter dated July 26, 2018 (Exhibit P-6) requesting reimbursement of the sums paid. Subsequently,

Plaintiff initiated its judicial demand in Court on September 5, 2018, more than five years after the last payment dated May 1 st , 2013. [ 25 ] In view of the preceding and for the following reasons, the Court concludes that Plaintiff’s demand is prescribed and must therefore be dismissed. [ 26 ] Articles 2880 and 2925 C.c.Q. state the following : 2880. Dispossession determines the beginning of the period of acquisitive prescription. The day on which the right of action arises determines the beginning of the period of extinctive prescription. 2925.

An action to enforce a personal right or movable real right is prescribed by three years, if the prescriptive period is not otherwise determined. [ 27 ] Alleging that Plaintiff did not have knowledge of its right to claim reimbursement of the moneys paid until Mr. Percher read the

article published by the Montreal Gazette on January 26, 2018, it argues that prescription was suspended until that date. [ 28 ] In fact, Plaintiff invokes

article 2904 C.c.Q. which states the following : 2904. Prescription does not run against persons if it is impossible in fact for them to act by themselves or to be represented by others. [ 29 ] On this issue, the Court is of the opinion that it was not impossible in fact for Plaintiff to act and counter Defendant’s position as early as 2004 at which time the City stopped billing it for the payment of the business tax and Defendant began billing it instead.

Plaintiff should have inquired of the situation at that time but it did not do so until January 2018. [ 30 ] Beginning in 2004, with the signing of the new lease and with the change in the method of billing of the “business tax”, Mr. Percher, an experienced businessman, should have questioned Mr. Hill on the business tax situation. Had he done so, in all probability, he would have been informed of the changes imposed by the City of Montreal and of Defendant’s position regarding the payment of the “business or surtax”. Instead, Mr.

Percher paid Defendant’s bills without question only to inquire about the situation in 2018. [ 31 ] Finally, the evidence has revealed that Defendant acted in good faith and did not, in any way, mislead Mr. Percher when, commencing in 2004, it began billing Plaintiff following the tax changes imposed by the City of Montreal. [ 32 ] Consequently, after consideration of the evidence, testimonial and documentary, the Court concludes that if Plaintiff did not know of its alleged right of action against Defendant, it is only because Mr.

Percher did not act diligently to verify the tax situation when he should have done so. This absence of diligence on his

part is such that the Court concludes that it was not impossible for Plaintiff to act judicially as early as 2004. Prescription was therefore not interrupted. [ 33 ] Consequently, as Plaintiff’s claim is prescribed, it is dismissed. [ 34 ] Regarding Defendant’s Cross-demand, the evidence has revealed that Defendant did not invoice Plaintiff for the payment of the surtax for 2013 à 2017 but by letter dated June 30, 2017, it claimed from Plaintiff the payment of a total sum of $ 6,669.50. [ 35 ] As Plaintiff’s demand was introduced in Court on September 5, 2018, by virtue of

article 2896 C.c.Q. , prescription was interrupted at that time in favour of Defendant. [ 36 ] However, as concerns Defendant’s claim regarding tax years 2014 and 2015, according to the evidence, the amounts claimed should have been billed by the end of June or beginning of July of the applicable year.

Consequently, it is clear that this part of Defendant’s claim is prescribed as more than three years had elapsed from the due date of the amounts claimed and the date when the action was instituted by Plaintiff. [ 37 ] As for Defendant’s claim regarding the taxes allegedly payable by Plaintiff for 2016 and 2017, no conclusive supporting evidence was filed by Plaintiff to establish the exact amounts of taxes that should have been paid by Plaintiff, if any. Therefore, the Court concludes that Defendant has not satisfied its burden of proof. [ 38 ] Consequently, Defendant’s Cross-demand is dismissed.

WHEREFORE, FOR THE FOREGOING REASONS, THE COURT : DISMISSES Plaintiff’s demand, without costs ; DISMISSES Defendant’s cross-demand, without costs. __________________________________ ARMANDO AZNAR, J.C.Q.

Date of hearing: October 22, 2019