Executive Summary: Key Legal and Evidentiary Issues

• The dispute focused on whether a $35,000 transfer was a repayable loan or a form of compensation for work or profit sharing.

• Defendants acknowledged receipt of the funds but contested their characterization as a loan.

• The court accepted oral testimony due to the business context despite the usual documentary evidence requirement.

• Plaintiff successfully established the payment’s loan nature through consistent conduct and circumstantial proof.

• Defendants failed to substantiate their claim that the funds were payment for owed wages or profits.

• The court declined to pierce the corporate veil, as there was no evidence of fraud or abuse of legal personality.

Facts and procedural background

In 9385-1780 Québec inc. v. 9423-4028 Québec inc., the plaintiff, 9385-1780 Québec inc. (9385), claimed it loaned $35,000 to the defendants—9423-4028 Québec inc. (9423) and its shareholder-director, Steve Legros—in August 2021. The funds were allegedly provided to help 9423 purchase a truck as part of a joint trucking venture between Mr. Legros and Mr. Egor Sevciuc, the principal of 9385. The plaintiff sought reimbursement after the business relationship between the parties deteriorated.

The defendants admitted to receiving the funds but argued they represented compensation owed to Mr. Legros for work previously performed under a shared venture, or a share of profits from the business operated by another company, 9343-4280 Québec inc. (9343), also controlled by Mr. Sevciuc. There was no written agreement or documentation clearly characterizing the transaction as a loan.

Legal analysis and decision

Central to the case was the legal qualification of the $35,000 payment. The plaintiff bore the burden of proving that the sum constituted a loan under Article 2314 of the Civil Code of Québec, requiring evidence that the recipient was obliged to repay an equivalent amount. Although no written contract existed, the court allowed oral evidence, since the transaction occurred in the context of business operations, as permitted by Article 2862.

The court found Mr. Sevciuc’s testimony credible and consistent with the broader financial pattern of the parties' dealings. It accepted his explanation that the transfer was made on the understanding that it would be repaid, especially since similar prior contributions to 9343 had been treated as loans. The court also found it implausible that 9385, a company with no direct business relationship with 9423 or Mr. Legros, would gratuitously pay what amounted to wages or profit-sharing entitlements allegedly owed by a different company (9343).

Defendants did not produce any documentation to support their claims of unpaid wages or undistributed profits. In contrast, banking records demonstrated consistent injections of funds from 9385 to 9343, totaling over $100,000, which had been at least partially repaid—reinforcing the interpretation of those payments, and by extension the $35,000 transfer, as loans.

Outcome and conclusion

The court held that 9385 had proven the $35,000 transfer was a loan: $25,000 to 9423 and $10,000 personally to Mr. Legros. Each was ordered to repay their respective amounts, with legal interest and indemnity from the date of formal notice in March 2023. However, the court refused to apply Article 317 of the Civil Code to pierce the corporate veil and make Mr. Legros jointly liable for the corporate debt, since no fraud or abuse of legal personality was established.

In conclusion, the claim was partially granted, with both defendants held financially responsible for their respective loan portions, and court costs awarded to the plaintiff.