2020 QCCQ 2058, 2020 QCCQ 2058

Clifford Albert Medical Services Inc. c. Potofsky 2020 QCCQ 2058 COURT OF QUÉBEC Small Claims Division CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division No: 500-32-157869-183 DATE: May 14, 2020 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ CLIFFORD ALBERT MEDICAL SERVICES INC. Plaintiff v. JEFFREY B.

POTOFSKY Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] The Plaintiff, Clifford Albert Medical Services Inc., a company controlled by its sole shareholder Dr. Clifford Albert, sues the Defendant, Jeffery B. Potofsky, for the recovery of money advanced to him, alleging fraud and illegal misappropriation of funds. The amounts in issue are slightly higher than $ 15,000, the monetary limit of the Small Claims division, and the Plaintiff voluntarily limited its claim to that amount. [ 2 ] Mr.

Potofsky denied the claim but made no relevant allegation in his written contestation, which was limited to statements against the character of Dr. Albert, not relevant to the issue. [ 3 ] Mr. Potofsky did not attend the hearing, despite having been duly summoned, and the Court proceeded in his absence. [ 4 ] The circumstances arose in the context of the creation of a new venture to develop a needle-free syringe-delivery system, a new medical device. Dr. Albert and Mr. Potofsky, together with a third business partner, Mr.

Joel Cohen, put together a business arrangement using the corporation Gentex Medical Canada Inc. incorporated on April 4, 2014 ( P-8 ). The name of the corporation was changed to Bee Needlefree Inc. on November 18, 2014. Dr. Albert was to act as a medical adviser, Mr. Cohen would have a role in raising funds and Mr. Potofsky was in charge of day-to-day operations. The three men were directors of the corporation. [ 5 ] It was agreed that cash-flow needs in the interim would be met by equal advances of cash by Mr. Potofsky and Dr. Albert [ 6 ] The claim arises out of several amounts for which Mr.

Potofsky was reimbursed, either because he claimed to have paid for various expenses directly with his own funds, amounts totalling $ 13,980.44, or for the reimbursement of expenses from the petty cash account of the corporation, amounts totalling $ 1,250. [ 7 ] A key step in the project was the fabrication of a prototype of the device, an invention for which a patent application had been filed in the United States Patent and Trademark Office, on behalf of the new corporation.

A notice of abandonment was issued by that authority, apparently because of a want of prosecution of the application, an omission that was within Mr. Potofsky’s scope of action. [ 8 ] The largest single amount in the Plaintiff’s claim relates to a contract with a firm known as Apex Precision Inc. (“Apex”) who had the task of making the prototype, under a contract entered into with Bee Needlefree Inc ., ( P-11 ) represented in the matter by Mr. Potofsky. [ 9 ] To create the appearance of payment to Apex, Mr.

Potofsky remitted a series of four postdated cheques ( P-1 ) in the amount of $ 4,500 each payable to Apex, who had begun work on the project in the summer of 2016 billing an initial amount of $ 7 183.64. [ 10 ] The four cheques totalling $ 18,000, drawn on Mr. Potofsky’s personal account, gave the appearance of an advance by him as a shareholder to Bee Needlefree Inc. and induced his co-shareholder, the Plaintiff Clifford Albert Medical Services Inc., to reimburse him half of that amount, $ 9,000 in order to equalise the advances between the two shareholders, by cheque dated June 12, 2016. [ 11 ] In fact, Dr.

Albert, after the payment to his co-shareholder was made, was told by Apex in an email on August 18, 2016 ( P-14 ) that Mr. Potofsky had failed to follow up with them on some technical issues. Mention was also made of an unpaid account. On October 13, 2016, Dr. Albert corresponded about the payment problem with Apex and learned that the initial bill had never been paid. The cheques given by Mr. Potofsky could not be deposited because Mr. Potofsky had incorrectly written the name of the payee on them. He had promised Apex that Bee Needlefree Inc. would be replacing them.

Through this stratagem, he effectively tricked Clifford Albert Medical Services Inc. into giving him $9 000 back in June, ostensibly under the equalisation agreement between the shareholders. [ 12 ] When Dr. Albert began to check into the business of the corporation that Mr. Potofsky had been appearing to carry out, he found

a series of doubtful transactions that caused him to investigate further. He discovered other losses to Clifford Albert Medical Services Inc. in addition to the $9,000 of which he was already aware. He provided evidence in the form of testimony, as summarised in a letter of demand ( P-5 ) and copies of the cheques given to Mr. Potofsky ( P-1 , en liasse ). In each case, Clifford Albert Medical Services Inc., had paid Mr. Potofsky for relatively small amounts that the latter claimed to have paid from his own funds for various company activities.

In some cases he had actually given cheques which were not honoured and in some cases he did not pay at all. [ 13 ] Of course, normally any such payments should have been made on the bank account of Bee Needlefree Inc. signed by the two directors as signing officers. Due to the pressures of his medical practice, Dr. Albert did not see to the administration of the company’s books, nor to the maintenance of working capital in the corporate account. He simply trusted Mr. Potofsky when the latter represented to him that he had made the payments and the reasons justifying them.

The payments made by Clifford Albert Medical Services Inc. on the faith of these representations occurred over a brief period in September 2016 and each of them was for a small amount having the appearance of legitimate expenses covered by Mr. Potofsky. This preceded the events in October 2016, when the true situation started to emerge. [ 14 ] The Court obtained testimony from Dr. Albert to justify the loss incurred by Clifford Albert Medical Services Inc. to the extent of $6,100.43 in connection with this petty fraud on the part of the Defendant.

There were additional amounts, but they would have pushed the claim beyond the monetary limit, and, in the interest of the efficient use of the Court’s time, evidence was not adduced for further amounts. [ 15 ] In the absence of any plausible defense, or, in fact, of any defense at all, the Court relies upon this prima facie evidence, which remained unchallenged, to establish the claim for a total of $ 15,000. BY THESE REASONS, THE COURT; CONDEMNS the Defendant to pay the Plaintiff the amount of $ 15,000 together with interest at the legal rate of five per cent per annum plus the additional indemnity provided in

article 1619 of the Civil Code of Quebec , calculated from May 8, 2017. LEGAL COSTS in favour of the Plaintiff. __________________________ David L. Cameron, J.C.Q. Date of hearing: January 9, 2020