2020 QCCQ 202, 2020 QCCQ 202

Dancik c. Faubert 2020 QCCQ 202 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-32-703993-172 DATE: January 9, 2020 ______________________________________________________________________ BEFORE THE HONOURABLE ENRICO FORLINI, J.C.Q. ______________________________________________________________________ ROBERT DANCIK Plaintiff v.

FRÉDÉRICK FAUBERT And LOUIS-RENÉ AUCLAIR Defendants ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] On November 27, 2015, Robert Dancik’s contract of employment with Hibernum Créations Inc. (‘’ Hibernum ’’) was terminated for cause by his employer [ 2 ] Mr. Dancik claims that his employer owes him unpaid wages and accrued vacation pay.

He also denies that his employer had serious reasons to terminate the contract of employment and thus claims he is entitled to damages in lieu of reasonable notice of termination. [ 3 ] Given that Hibernum made an assignment in bankruptcy, Mr. Dancik claims from Frédérick Faubert and Louis-René Auclair, directors of Hibernum at the time of the dismissal (collectively, the ‘’ Directors ’’), $15,000 in damages, representing unpaid wages, vacation pay, and pay in lieu of reasonable notice of dismissal pursuant to

section 119 of the

Canada Business Corporations Act (R.S.C., 1985, c. C-44 , ‘’ CBCA ’’). [ 4 ] The Directors deny all liability and argue: a. The corporation was not indebted towards Mr. Dancik following the termination of his employment because he failed to reimburse advances on commission which were paid to him but not earned. Therefore, while Hibernum did owe Mr. Dancik sums for unpaid wages and accrued vacation pay, it was entitled to effect compensation between the unreimbursed advances in commissions and those sums owed to him such that there was no debt owed to him; b.

The contract of employment was terminated for a serious reason; c. Even if the corporation was indebted towards Mr. Dancik, his claim under

section 119 CBCA must be dismissed because his claim for debt was never proved since he did not file a proof of claim with Hibernum’s trustee in bankruptcy; d. Subsidiarily, other than that portion of his claim which includes accrued vacation pay and unpaid wages, the other heads of damages he claims are not recoverable under

section 119 CBCA . [ 5 ] Mr. Dancik counters by arguing that he was not terminated for cause and adds that the contract of employment does not provide for the reimbursement of the advances on commission paid to him. [ 6 ] The parties admit that Hibernum made an assignment in bankruptcy under the Bankruptcy and Insolvency Act on September 16, 2017. [ 7 ] The evidence also discloses that in February 2016, Mr. Dancik filed a lawsuit before the Québec Superior Court (file # 500-17- 092839-169) against Hibernum claiming $164,084.58 in damages on the grounds that his contract of employment was illegally terminated.

In October 2018, this lawsuit was stayed given the bankruptcy proceedings. [ 8 ] In August 2016, the Commission des normes, de l’équité, de la santé et de la sécurité au travail (‘’ CNESST ’’) filed a lawsuit against Hibernum on behalf on Mr. Dancik before the Court of Québec, Civil Division (court file # 500-22-233046-161) claiming

$10,668.64 in damages, which included $8,907.20 for pay in lieu of notice of termination, unpaid wages and vacation pay, plus $1,781.44 representing the 20% penalty provided for by

section 114 of the Act Respecting Labor Standards ( CQLR, c. N-1.1 ). [ 9 ] The CNESST lawsuit was initially suspended in April 2017 pending the outcome of the Superior Court lawsuit. However, the CNESST’s lawsuit was ultimately also stayed in October 2018 given Hibernum’s assignment in bankruptcy. [ 10 ] Mr. Dancik’s claim against the Directors raises the following issues:

a) Should Mr. Dancik’s claim against the Directors of Hibernum based on

section 119 CBCA be dismissed because he did not file a proof of claim with Hibernum’s trustee in bankruptcy?

b) Has Mr. Dancik proven that the corporation was indebted towards him following the termination of his contract of employment?

c) Did Hibernum terminate the contract of employment for a serious reason?

d) Is all or a portion of Mr. Dancik’s claim for damages not recoverable under

section 119 CBCA ? Notably is a claim for pay in lieu of notice of termination, a claim for moral and punitive damages, or the 20% penalty under

section 114 of the Act respecting labour standards recoverable against directors under

section 119 CBCA ? Analysis and Decision

a) Should Mr. Dancik’s claim against the Directors of Hibernum based on

section 119 CBCA be dismissed because he did not file a proof of claim with Hibernum’s trustee in bankruptcy? [ 11 ] Hibernum was established under the

Canada Business Corporation Act in January 2006. The company operated a business which specialized in video game and animation production. [ 12 ] At the time of the dismissal, Hibernum employed roughly 140 persons. Frédérick Faubert and Louis-René Auclair were its Directors. [ 13 ] Mr. Faubert was president and mainly responsible for the creative and product development aspects of the business. [ 14 ] Mr. Auclair was Hibernum’s vice-president and was mainly responsible for business development. [ 15 ] On November 28, 2014, Mr. Dancik and Hibernum entered into an employment agreement whereby the latter hired Mr.

Dancik in the position of business development director, cinematic and animation (‘’ Employment Agreement ’’). [1] [ 16 ] The Employment Agreement was for an indeterminate term and provided for a base annual salary of $90,000. [2] The Agreement also stipulated that Mr.

Dancik could receive a commission on sales he generated up to a maximum of $112,500 per annum. [3] The agreement further provided that ‘’the employer (Hibernum) undertakes to pay the advance commission of $25,000 for the first year in twenty-six (26) installments every two (2) weeks less the usual legal deductions…’’. [ 17 ] The Employment Agreement came into force on January 5, 2015, and Mr. Dancik began working at Hibernum on that day. [ 18 ] On November 27, 2015, Mr. Faubert and Mr. Auclair met with Mr. Dancik to inform him that Hibernum was terminating his contract of employment for cause.

He was remitted a letter of termination on that same day [4] which informed him that the termination of his Employment Agreement resulted from his ‘’unhabiltily ( sic ) to meet Hibernum’s performance standards in spite of Hibernum’s ongoing support during a reasonable period of time and in spite of the disclosure of clear objectives’’. [ 19 ] Hibernum offered to pay Mr. Dancik one week pay in lieu of notice of termination as well as any vacation pay owed. Finally, the termination letter also requested Mr.

Dancik to reimburse the advance on commission that he had received given that he had not realized any sales during his period of employment with Hibernum. [ 20 ] On or about November 30, 2015, Hibernum sent Mr. Dancik an invoice claiming he owed the corporation $17,263.94. This amount represented the pro rata advance on commission that it had paid out to him ($22,115.42) less amounts owed by Hibernum to Mr.

Dancik for one week severance pay ($1,730.77), vacation pay ($3,234.15) and unpaid wages for the week of November 16 to 27 ($3,461.44). [5] [ 21 ] On August 18, 2017, Hibernum filed a notice of intention to file a proposal under the Bankruptcy and Insolvency Act . [6] [ 22 ] On September 22, 2017, Hibernum filed an assignment in bankruptcy, effective September 16, 2017. [ 23 ] Mr. Dancik admits that he never filed a proof of claim with Hibernum’s trustee in bankruptcy. [ 24 ] Mr. Dancik’s lawsuit against Mr. Faubert and Mr. Auclair is based on

section 119 CBCA which provides as follows:

Responsabilité des administrateurs envers les employés 119 (1) Les administrateurs sont solidairement responsables, envers les employés de la société, des dettes liées aux services que ceux-ci exécutent pour le compte de cette dernière pendant qu’ils exercent leur mandat, et ce jusqu’à concurrence de six mois de salaire. Conditions préalables à l’existence de la responsabilité

(2) La responsabilité des administrateurs n’est engagée en vertu du paragraphe (1) que dans l’un ou l’autre des cas suivants :

a) l’exécution n’a pu satisfaire au montant accordé par jugement, à la suite d’une action en recouvrement de la créance intentée contre la société dans les six mois de l’échéance ;

b) l’existence de la créance est établie dans les six mois de la première des dates suivantes : celle du début des procédures de liquidation ou de dissolution de la société ou celle de sa dissolution ;

c) l’existence de la créance est établie dans les six mois d’une cession de biens ou d’une ordonnance de faillite frappant la société conformément à la

Loi sur la faillite et l’insolvabilité . Limite

(3) La responsabilité des administrateurs n’est engagée en vertu du présent

article que si l’action est intentée durant leur mandat ou dans les deux ans suivant la cessation de celui-ci. Obligation après exécution

(4) Les administrateurs ne sont tenus que des sommes restant à recouvrer après l’exécution visée à l’alinéa (2)a). Subrogation de l’administrateur

(5) L’administrateur qui acquitte les dettes visées au paragraphe (1), dont l’existence est établie au cours d’une procédure soit de liquidation et de dissolution, soit de faillite , a droit à toute priorité qu’aurait pu faire valoir l’employé et, si un jugement a été rendu :

a) au Québec, est subrogé dans les droits constatés par celui-ci ;

b) ailleurs au Canada, a le droit d’en exiger la cession. Liability of directors for wages 119

(1) Directors of a corporation are jointly and severally, or solidarily, liable to employees of the corporation for all debts not exceeding six months wages payable to each such employee for services performed for the corporation while they are such directors respectively. Conditions precedent to liability

(2) A director is not liable under subsection (1) unless (

a) the corporation has been sued for the debt within six months after it has become due and execution has been returned unsatisfied in whole or in part; (

b) the corporation has commenced liquidation and dissolution proceedings or has been dissolved and a claim for the debt has been proved within six months after the earlier of the date of commencement of the liquidation and dissolution proceedings and the date of dissolution; or (

c) the corporation has made an assignment or a bankruptcy order has been made against it under the Bankruptcy and Insolvency Act and a claim for the debt has been proved within six months after the date of the assignment or bankruptcy order. Limitation

(3) A director, unless sued for a debt referred to in subsection (1) while a director or within two years after ceasing to be a director, is not liable under this section. Amount due after execution

(4) Where execution referred to in paragraph (2) (

a) has issued, the amount recoverable from a director is the amount remaining unsatisfied after execution. Subrogation of director

(5) A director who pays a debt referred to in subsection (1) that is proved in liquidation and dissolution or bankruptcy proceedings is entitled to any priority that the employee would have been entitled to and, if a judgment has been obtained, the director is (

a) in Quebec, subrogated to the employee’s rights as declared in the judgment; and (

b) elsewhere in Canada, entitled to an assignment of the judgment. (Underlining added) [ 25 ]

Section 119 CBCA creates an exceptional recourse for employees of a corporation in that it renders the directors of the corporation personally liable for unpaid wages (not exceeding six months) payable to each employee for services performed for the corporation. [ 26 ] This recourse is exceptional as it runs counter to the principle that a corporation’s legal personality remains distinct from that of

its members. [7] [ 27 ] Accordingly, the conditions which gave rise to a director’s liability under

section 119 CBCA must be interpreted restrictively. [8] [ 28 ] In the instant case, Mr. Dancik’s claim against the Directors Faubert and Auclair is premised on Hibernum’s assignment in bankruptcy and thus rests on section 119 (2) (

c) CBCA . [ 29 ] Misters Faubert and Auclair admit that they were directors of the corporation during the relevant timeframe and that the lawsuit was brought in a timely manner. The parties admit that Hibernum made an assignment under the Bankruptcy and Insolvency Act on September 16, 2017. [ 30 ] However, the Directors argue that Mr. Dancik’s claim must be dismissed because he has not satisfied one of the conditions precedent to a claim under s. 119(2) (

c) CBCA in that he has not proved his claim in the bankruptcy proceedings. [ 31 ] For the reasons that follow, the Directors are correct. [ 32 ] A claim under s. 119(2) (

c) CBCA can only succeed if the employee notably proves that the corporation has made an assignment under the Bankruptcy and Insolvency Act and that his/her “claim for the debt has been proved within six months after the date of the assignment or bankruptcy order’’. [ 33 ] Mr. Dancik’s claim against the Directors must fail because he has not proven that his claim for paid wages, vacation pay, pay in lieu of notice of termination, and moral and punitive damages has been proved within six months after the date of the assignment or bankruptcy order. [ 34 ] As the statute clearly lays out, a condition precedent to the liability of a director under

section 119 CBCA in the context of a bankrupt corporation requires that the employee establish that ‘’a claim for the debt has been proved within six months after the date of the assignment or bankruptcy order’’. Failure to establish this condition precedent is fatal to an employee’s claim under section 119(2) (

c) CBCA . The courts have consistently applied this rule. [ 35 ] For example, in Masson v. Thompson , Justice Paul Chaput writes: 40 Certes, le recours des employés aux termes de l'article LSA est distinct de leur réclamation proprement dite dans le cadre de la faillite.

Ainsi, selon l'article 119 LSA , il y a déchéance du droit au recours contre les administrateurs si l'employé ne dépose pas de preuve de réclamation entre les mains du syndic dans les six mois de la faillite, alors que le droit de déposer une preuve de réclamation dans le cadre de la faillite ne s'éteint qu'une fois faite la distribution par le syndic. [9] [ 36 ] In La cessation d’emploi chez l’employeur insolvable : qui en paie le prix? , Louise Lalonde writes: 2.1.3 Conditions préalables à l’existence de la responsabilité des administrateurs Sans en faire une étude complète, nous soulignerons ci-après les conditions édictées aux articles 96 LCQ et 119 LCSA.

Bien que ces conditions soient similaires, elles comportent tout de même des différences, notamment à l'égard des délais. Aux termes de l'article 96 LCQ, les administrateurs n'encourront de responsabilité que si (1) la compagnie est poursuivie dans l'année du jour où la dette est devenue exigible et que l'exécution n'a pu satisfaire au montant accordé au jugement en totalité ou en partie, ou (2) si la compagnie, pendant cette même période, fait l'objet d'une ordonnance de mise en liquidation ou devient faillie au sens de la LFI et qu'une réclamation de cette dette est déposée.

En ce qui concerne l'article 119 LCSA, cette responsabilité n'existera que si (1) l'exécution n'a pu satisfaire au jugement à la suite d'une action en recouvrement intentée contre la société dans les six mois de l'échéance, ou (2) l'existence de la créance est établie dans les six mois du début des procédures de liquidation ou de dissolution ou dans les six mois d'une cession de biens ou d'une ordonnance de mise sous séquestre en vertu de la LFI .

Ainsi, essentiellement, les cas donnant ouverture à la responsabilité des administrateurs sont les mêmes mais les délais se distinguent. 2.1.3.1 Qui doit instituer la poursuite ou établir la créance Ces dispositions prévoient uniquement que la compagnie doit être poursuivie ou qu'une preuve de réclamation doit être déposée mais ne précise pas par qui le recours doit être institué ou la preuve déposée. [10] (Underlining added) [ 37 ] In La responsabilité des administrateurs pour salaire impayé dans une perspective du droit de l’emploi au Québec , Francis L.

Racine writes : 4.4 LCSA - Conditions d’ouverture du recours et mise en œuvre Si la société est en faillite ou mise en liquidation, les conditions d'ouverture du recours prévu à l'article 119 LCSA sont les suivantes : • Être un salarié/employé. • Avoir une créance salariale à l'encontre de la société et établir l'existence de cette créance salariale dans les six mois de la première des dates suivantes : celle du début des procédures de liquidation ou de dissolution de la société, ou celle de sa dissolution, ou dans les six mois d'une cession de biens ou d'une ordonnance de faillite frappant la société conformément à la LFI.

L'existence de la créance salariale s'effectue par le dépôt d'une réclamation auprès du liquidateur ou du syndic. • Avoir une créance salariale insatisfaite en tout ou en

partie après le processus de mise en liquidation ou de faillite.

Il importe de noter la différence entre la LCSA et la LSAQ eu égard au délai de déchéance. - Le délai de déchéance de la LSAQ établit un lien avec la créance salariale et l'événement (faillite ou mise en liquidation), c'est-à- dire qu'une faillite ou une liquidation doit survenir dans un délai d'un an de la naissance de la créance salariale, et ne prévoit pas d'échéance particulière pour le dépôt de la réclamation ; hormis, implicitement, les modalités établies par le liquidateur ou le syndic. - Le délai de déchéance de la LCSA établit un lien avec la créance salariale et l'établissement de l'existence d'une telle créance, c'est- à-dire qu'un employé/salarié doit déposer sa réclamation auprès du liquidateur ou du syndic dans un délai de six mois de la survenance d'un tel événement. [11] (Underlining added) [ 38 ] In Turcot v.

Conso Graber inc . [12] , the Québec Court of Appeal held that where the employer has made an assignment in bankruptcy, the filing of a proof of claim with the trustee in bankruptcy is a condition precedent to the liability of a director under section 114(1) of

Canada Business Corporations Act [s. 114 became

section 119 CBCA following the consolidation of the statute]: La prescription ou la déchéance : [7] L'une des conditions essentielles du recours prévu à l'article 114 de la Loi est le dépôt d'une preuve de réclamation auprès du syndic dans les six mois de la cession de biens (art. 114(2)c)). [8] Rappelons que le recours de l'appelant pour congédiement injustifié fut signifié le 4 décembre 1984 à Conso Graber Inc. Cette dernière fit cession de ses biens le 12 décembre 1984. Ce n'est que le 17 mars 1986, soit après plus d'un an, que la preuve de réclamation de l'appelant était déposée chez le syndic.

Ce n'est que le 12 mai 1986 qu'une action amendée était signifiée désignant pour la première fois comme défendeur l'intimé Gordon T. Cléments personnellement, à

titre d'administrateur de la corporation Conso Graber Inc. [9] L'article 114(2) prévoit que la responsabilité des administrateurs n'est engagée en vertu du paragraphe (1) que dans le cas

c) où l'existence de la créance est établie dans les six mois d'une cession de biens ; l'article 114(3) fixe aussi un délai de deux ans à la suite de la cessation du mandat de l'administrateur concerné. [10] Ici, l'appelant n'a pas fait valoir sa créance dans les six mois de la cession de biens. Il n'a pas déposé une preuve de réclamation auprès du syndic comme l'y obligeait la

Loi sur la faillite. D'autre part, il a présenté sa réclamation plus de deux ans après la faillite, qui marque aussi la fin du mandat de l'administrateur Cléments. [11] En effet, en vertu de l'article 95(1) de la

Loi sur la faillite, il s'agissait d'une réclamation prouvable qui devait selon l'article 97(1) et (2) être prouvée par la remise d'une preuve de réclamation : 95.

(1) Toutes créances et tous engagements, présents ou futurs, auxquels le failli est assujetti à la date de la faillite, ou auxquels il peut devenir assujetti avant sa libération, en raison d'une obligation contractée antérieurement à la date de la faillite, sont réputés des réclamations prouvables dans des procédures entamées en vertu de la présente loi. (...) 97.

(1) Chaque créancier doit prouver sa réclamation, faute de quoi il n'a pas droit de partage dans la distribution qui peut être opérée.

(2) Une réclamation doit être prouvée par la remise au syndic, d'une preuve de la réclamation selon la forme prescrite. (...) … [14] Le recours prévu par la

Loi sur les sociétés commerciales canadiennes,

article 114, est un recours exceptionnel qui ne peut être exercé qu'aux conditions strictes prévues. Dans l'espèce, on ne peut parler d'impossibilité d'agir de la part de l'appelant ni non plus d'interruption de prescription par l'effet de la

Loi sur la faillite : celle-ci ne pouvant affecter que cette

partie de la réclamation distincte contre Conso Graber Inc. et non pas celle contre Cléments qui comporte un fondement tout à fait différent. (References omitted) [ 39 ] In Bergeron v. St-Pierre [13] , Justice Richard P. Daoust, reiterated that the filing of a proof of claim is a condition precedent to trigger a director’s liability under

section 96 of the Québec Companies Act (CQLR, c. C-38 ), which was at the time the provincial equivalent to

section 119 CBCA (and which has now been replaced by

section 154 of the Québec Business Corporations Act , [CQLR c. S-31.1]). [14] [17] Cela étant, bien que les sommes réclamées peuvent l'être par le demandeur, il faut qu'il respecte les critères de l'alinéa b) du deuxième paragraphe de l'

article 96 . En fait, il faut que la compagnie soit devenue en faillite dans l'année où les sommes sont dues et une réclamation du salarié doit être produite au syndic dans le cadre de la faillite de l'employeur. [18] Si l'employé ne produit pas de preuve de réclamation dans le cadre de la faillite de son employeur, il ne peut bénéficier du recours direct contre des administrateurs prévu à l'

article 96 . [ 40 ] In the instant case, Mr. Dancik admits that he never filed a proof of claim with Hibernum’s trustee in bankruptcy. This is fatal to his claim against the Directors as he has not satisfied one of the conditions precedent to the Directors’ liability.

b) Has Mr. Dancik proven that the corporation was indebted towards him following the termination of his contract of employment?

[ 41 ] In light of the conclusion reached above, it is not necessary for the Court to address the other issues raised by Mr. Dancik’s lawsuit. However, the Court will nonetheless make the following comments. [ 42 ] The Directors argue that their liability under

section 119 CBCA is not triggered because the corporation did not owe anything to Mr. Dancik given that he failed to reimburse the advances on commissions which were paid to him, but that he had not earned, when his contract of employment was terminated. [ 43 ] Accordingly, the Directors argue that while Hibernum did owe Mr. Dancik monies for unpaid wages and accrued vacation pay [15] , the employer was entitled to effect compensation between the sums it owed to Mr.

Dancik and the sums that the latter owed to Hibernum on the non-reimbursed commission such that in the end, the corporation owed him nothing. [ 44 ] Under the Employment Agreement, Mr. Dancik was paid a base annual salary of $90,000. The Agreement further provided that he was entitled to commissions on sales that he generated which were calculated as per the formula contained in

Schedule B of the Agreement, up to a maximum commission payment of $112,500 per annum. [ 45 ] Paragraph 3 of

article 7.1 of the Employment Agreement further stipulated: The employer undertakes to pay the advance commission of $25,000 for the first year in twenty-six (26) installments every two (2) weeks, less the usual legal deductions, including, where applicable, reasonable contributions to the employee benefit plans. [16] [ 46 ] Mr. Dancik received advance commission payments of $22,115.42 between January 5 and November 27, 2015.

However, he recognizes that he did not earn any commission based on the terms of the employment agreement as he did not generate any sales during his employment with Hibernum. [ 47 ] Was he required to reimburse the advance commission paid when his contract of employment was terminated? [ 48 ] Mr.

Dancik argues that the Employment Agreement does not contemplate the reimbursement of the advance on commission and therefore he was entitled to keep any monies received on that basis despite the fact that he did not earn the commissions. [ 49 ] The Employment Agreement does not contain any language which requires the employee to reimburse a commission not earned upon the termination of the contract of employment. [ 50 ] In 1991, the Québec Court of Appeal decided in Labrosse v.

Créadis Inc. [17] that an employee is not required to reimburse advances on commissions not earned upon the termination of the contract of employment unless the employment agreement contains specific language requiring the employee to reimburse the commissions paid. [ 51 ] This decision has been followed consistently and represents the state of the law on this issue. [18] [ 52 ] Considering the rule expressed by the Court of Appeal in Labrosse and considering the Employment Agreement between Hibernum and Mr.

Dancik does not contain any language requiring him to reimburse the advance on commission, the Court concludes that he had no obligation to reimburse monies received in the form of advance commissions from his employer when he was dismissed. [ 53 ] Accordingly, Hibernum did not have a certain, liquid and exigible claim against him and could not effect compensation against the moneys it admits were owing to Mr. Dancik. Therefore, the corporation was indeed indebted towards Mr. Dancik for wages at the time of the termination of his employment.

c) Did Hibernum terminate the contract of employment for a serious reason? [ 54 ] While the Court need not answer this question considering the conclusion reached above with respect the first question in issue, it will nonetheless summarily address it. [ 55 ] The Directors argue that the corporation was not indebted towards Mr. Dancik because it had serious reasons to terminate the contract of employment. That said, they admit that Hibernum owed Mr.

Dancik unpaid wages in the amount of $3,461.54 (for the period November 16 to 27), as well as accrued vacation pay of $3,234.15 at the time of his dismissal. [ 56 ] Hence, whether or not Hibernum had serious reasons to dismiss Mr. Dancik is only relevant insofar as to his entitlement to pay in lieu of a reasonable notice of termination. Mr. Dancik claims $2,211.53 under this head of damages. [ 57 ] Even if the Court decided that Hibernum did not have serious reasons to terminate the contract of employment, the Supreme Court of Canada decided in Barrette v.

Crabtree Estate that amounts payable in lieu of notice of termination do not constitute a debt for which the directors of a corporation may be personally liable under section 119(1) CBCA . [19] [ 58 ] Therefore, it is not necessary to decide this issue because even if the Court were to conclude that Hibernum did not have serious reasons to terminate the employment agreement, it could not order the Directors to pay the damages that Mr. Dancik is seeking with respect to this portion of his claim.

d) Is all or a portion of Mr. Dancik’s claim for damages not recoverable under

section 119 CBCA ? Notably is a claim for pay in lieu of notice of termination, a claim for moral and punitive damages, or the 20% penalty under

section 114 of the Act respecting labour standards recoverable against directors under

section 119 CBCA ? [ 59 ] As stated above, the Court need not address this issue considering its conclusion reached above. That said, it will nonetheless make the following comments.

[ 60 ] Mr. Dancik claims $15,000 from the Directors, including $10,688.64 for unpaid wages, accrued vacation pay and pay in lieu of reasonable notice of termination plus $4,311.36 for “moral and punitive damages.” [ 61 ] The claim for $10,688.64 can be further broken down as follows: a. Unpaid wages: $3,461.52; b. Accrued vacation pay: $3,234.15; c. Pay in lieu of notice of termination: $2,211.53; d. 20% penalty—section 114 Act Respecting Labour Standards ( CQLR, c. N-1.1 ) : $1,781.44. [ 62 ] If Mr.

Dancik had proven all the conditions required to trigger the Directors’ liability under section 119(1) CBCA , the Court would have awarded him $3,461.52 for unpaid wages and $3,234.15 for accrued vacation pay. [ 63 ] However, for the reasons expressed above, the Court would not have awarded Mr.

Dancik damages corresponding to pay in lieu of reasonable notice of termination as such damages are not recoverable from directors of a corporation under section 119(1) CBCA . [20] [ 64 ] Moreover, the Court would not have awarded him the penalty recoverable under s. 114 of the Act Respecting Labour Standards ( $1,781.44), as this amount can only be claimed by the CNESST. It is akin to a payment to a third party rather than a wage payable for services performed for the corporation. [21] [ 65 ] As for the head of claim covering moral and punitive damages, Mr.

Dancik did not break down what portion of his claim covers punitive damages and what portion covers moral damages. [ 66 ] In any event, insofar, as punitive damages are claimed, the conditions required by

article 1621 of the Civil Code of Québec and

article 49 of the Québec Charter of Human Rights and Freedoms to justify such an award of damages were not proven by M. Dancik and thus no damages would have been awarded to him under this head. [ 67 ] Moreover, even if he had proven that punitive damages were warranted, this type of damage is not contemplated by

section 119 CBCA . As the Court of Appeal recently stated in Ortslan , the personal liability of the directors of a corporation under s. 119 CBCA or s. 154 QBCA does not extend to all or the corporation’s debts. Directors may only be personally liable for those debts that result from services performed by the employee for the benefit of the corporation.

The debt must relate to consideration that was promised by the corporation to the employee, but that was not paid, despite the work that was performed. [22] [ 68 ] In this sense, punitive damages claimed by an employee do not fall within the scope of s. 119 CBCA as they do not entail consideration promised for work performed. The same reasoning applies for moral damages or non-pecuniary damages. [ 69 ] Likewise, Mr. Dancik did not prove that the circumstances of the termination warrant an award for moral damages.

He admits that while he was shocked to learn that he was fired, the dismissal was not carried out abusively or in a reprehensible fashion. [ 70 ] Moreover, a claim for moral damages is not contemplated by

section 119 CBCA for the reasons expressed above. Conclusion [ 71 ] Mr. Dancik’s claim against the Directors will be dismissed because he has not satisfied one of the conditions precedent to trigger their liability under s. 119 CBCA in that he did not prove his claim during the bankruptcy proceedings. [ 72 ] Even if he had satisfied this condition precedent, their liability would have been limited to $6,695.67 ($3,461.52 + $3,234.15).

FOR THESE REASONS, THE COURT: [ 73 ] DISMISSES Robert Dancik’s Application against Frédérick Faubert and Louis-René Auclair; [ 74 ] WITH LEGAL COSTS of $202 payable by Robert Dancik to Frédérick Faubert and Louis-René Auclair. __________________________________ ENRICO FORLINI, J.C.Q. Date of hearing: January 6, 2020