Executive Summary: Key Legal and Evidentiary Issues

• The parties disputed the terms of a verbal agreement for the buyout of shares in a jointly owned corporation operating a seniors' residence.

• The appellant challenged the trial judge’s finding that he was personally liable for unpaid amounts under the agreement and for sums paid by the respondent as guarantor.

• The appeal raised a separate claim for contribution over tax debts, but it was denied due to prescription under the Loi sur l’administration fiscale.

• The court found no manifest or determinative error in the trial judge’s evaluation of credibility and documentary evidence.

• An attempt to reframe the claim in civil liability failed due to lack of evidence of fault and joint decision-making around non-payment of source deductions.

• The appeal was dismissed in full, with costs awarded to the respondent.

Background and shareholder dispute

Réjean Therrien and Daniel Chabot were equal shareholders in a corporation operating a seniors’ residence. In 2015, they reached a verbal agreement to terminate their partnership, with Therrien buying out Chabot’s shares and repaying certain advances Chabot had made to the corporation. Although both acknowledged the agreement and the price, they disagreed on some of the repayment terms. The dispute escalated into litigation in Superior Court, where Chabot sought to enforce the agreement and recover the unpaid balance.

Trial court ruling

The trial judge ruled in favor of Chabot. Relying on partial written records and witness testimony, the judge found that Therrien was personally liable for the unpaid balance on the share purchase, a portion of shareholder advances, and additional amounts paid by Chabot in his capacity as guarantor. The judge treated documents as a valid “commencement de preuve” and concluded that the verbal agreement was binding and enforceable.

Therrien appealed, challenging both the interpretation of the agreement and the judge’s assessment of the evidence. He also sought reimbursement for 50% of payments he had made to tax authorities as a former director, arguing that Chabot had failed in his duties and should share responsibility.

Issues on appeal

The Québec Court of Appeal rejected all grounds of appeal. It found no reversible error in the trial judge’s conclusions, emphasizing that appellate courts do not reassess factual findings absent a clear and determinative mistake. The Court agreed that Therrien remained personally liable under the verbal agreement, and his repayment obligations were properly supported by the record.

On the tax liability issue, Therrien’s claim for contribution was denied because it was time-barred. Under article 24.0.2 of the Loi sur l’administration fiscale, directors can only be held liable for unpaid source deductions within two years of ceasing to act as directors. Since this time had elapsed for Chabot, the Court held that Therrien’s claim was prescribed.

Therrien further argued that Chabot had committed a civil fault by failing to act prudently as an administrator. The Court rejected this, finding that both parties had knowingly agreed to suspend source deduction payments due to the company’s financial hardship, and that Therrien was fully aware of the risks when he assumed responsibility in 2015.

Outcome

The Québec Court of Appeal dismissed the appeal in its entirety, upholding the original judgment and ordering Therrien to pay legal costs. The ruling confirms that verbal agreements between shareholders can be enforceable and highlights the strict application of limitation periods in director liability cases under Québec tax law.