Gadbois v. Transport H. Cordeau Inc.
ITA-1384-97
Morneau P.
19/12/97
16 pp.
Issue whether, in garnishment proceedings under R. 2300, judgment creditor can rely on Civil Code of Québec, art. 1452 to avail herself of apparent contract entered into between garnishee Transport H. Cordeau Inc. (Cordeau) and judgment debtor-Cordeau operating general transportation and snow removal business-In 1995, experiencing liquidity problems and in serious financial difficulty-Judgment debtor, Gilbert Gadbois, granting Cordeau advances totalling $63,000 between February and May 1996-Advances, apparently granted pursuant to open-end oral agreement, proving insufficient-Apparent contract, namely notarial act between Gadbois and Cordeau dated May 10, 1996, executed-Notarial act, in addition to providing for new loan of $75,000, indicating past advances in amount of $250,000 rather than $63,000-Act accordingly bearing total amount of $325,000-Despite notarial act, Gadbois in reality advancing Cordeau only $160,300-Contrary to all expectations, Cordeau not going bankrupt and Gadbois eventually receiving $225,000 in repayment-However, Crown undertaking to attach difference between total amounts of notarial act and oral agreement, or $100,000, in Cordeau's hands-Crown referring to C.C.Q., art. 1451 to conclude situation one of simulation-According to Crown, oral agreement counter letter expressing true intent of parties and notarial act apparent contract-Notarial act partially concealing oral agreement between parties-Two acts similar in nature-By referring to past advances of $250,000 in lieu of amounts actually advanced, namely $63,000, notarial act recreating and attesting to claim for purposes of Cordeau's anticipated bankruptcy-Purpose not to defraud Crown in short or medium term-Oral agreement should be considered counter letter to apparent act, namely notarial act, within meaning of C.C.Q., art. 1452-Whether Crown third person in good faith within meaning of art. 1452-Third persons in good faith those not knowing about counter letter when entering into contract-Crown not having to deal with Cordeau or Gadbois on basis of apparent contract, or notarial contract-Not relying on apparent contract either to assess Gadbois or to commit self in any other way-Not clearly established Crown knowing about oral agreement when affidavit in support of garnishee order to show cause drafted-Burden on Crown to clearly establish conditions under which art. 1452 applicable-Crown could not in circumstances of case at bar consider self third person in good faith within meaning of C.C.Q., art. 1452-Civil Code of Québec, S.Q. 1991, c. 64, arts. 1451, 1452-Federal Court Rules, C.R.C., c. 663, R. 2300.