Executive Summary: Key Legal and Evidentiary Issues

• Central dispute concerns unpaid invoices for personnel placement services and whether the client could refuse payment by invoking a contractual right to retain sums pending payroll and tax documentation.
• Interpretation of a clause on caducity and retention of sums raised whether failure to provide documents within three days extinguished the staffing agency’s right to payment or merely postponed exigibility.
• Application of the civil law doctrine of exception d’inexécution required assessing if the documentation default was sufficiently substantial and whether the client’s refusal to pay was proportionate and in good faith.
• Evidentiary issues focused on the adequacy and completeness of payroll journals and proof of remittances (TPS/TVQ and source deductions), and on the credibility of the agency’s claim that employee confidentiality barred disclosure of cheque copies.
• The court evaluated the real utility of the requested information in light of time elapsed, prescription of potential wage claims, and the absence of concrete signs of tax or labour non-compliance.
• Ultimately, the judge found the client’s continued non-payment unjustified and ordered payment of the outstanding principal plus contractual interest, while rejecting the agency’s separate claim for additional damages and awarding no costs.

Facts of the case
Solutions Globales de Recrutement Prestige Inc. (SGRP) is a licensed personnel placement agency under Québec’s Act respecting labour standards. It supplies non-specialized labour to client businesses and is responsible as employer for paying wages, making source deductions and remitting employer contributions and taxes. Natur+L XTD Inc. (XTD) operates in the food processing sector, performing processes that extend the shelf life of products for food producers at its plant in Saint-Hyacinthe. In early 2022, XTD was struggling to meet its labour needs due to the continuing effects of the Covid-19 crisis and turned to SGRP for temporary labour.
On 10 February 2022, the parties concluded a written service contract under which SGRP agreed to provide workers to XTD. The relationship continued until late November 2022, when XTD terminated the contract. During this period, several individuals recruited and employed by SGRP worked under XTD’s direction at its plant. SGRP also arranged transportation from Montréal to the worksite and supplied certain ancillary items needed for the work.
SGRP invoiced XTD periodically for hours worked and related transport charges. By the time the relationship ended, two invoices remained partially unpaid. SGRP sued XTD in the Court of Québec (civil chamber) claiming 25,689.52 CAD as the unpaid balance of the price of services for the last two pay periods, including transport charges and any premiums provided under the contract.

Elements of the claim that were not contested
XTD did not dispute that it had received the services corresponding to the two final billing periods. It acknowledged that the hours of work underlying the claimed sums were actually performed by SGRP’s workers under its supervision and that the amounts matched the contractual rates and hours recorded. Nor did it offer proof that the invoices were inflated or inaccurate, despite earlier generic allegations in its pleadings that the sums did not reflect the “reality of the services rendered” and were “greatly exaggerated”. At trial, its principal ultimately conceded that the quantum was not in issue.
Although XTD complained in evidence about the punctuality and quality of the workers supplied, these complaints had not been invoked at the time of termination or in the defence. XTD did not quantify any alleged impact, formulate a counterclaim or seek a set-off based on poor performance. It had in fact continued the contractual relationship for months, even though the contract allowed termination at any time and without cause. The judge therefore treated these criticisms as irrelevant to the dispute.

Contractual framework and clauses at issue
The contract fixed a specific hourly rate payable by XTD to SGRP for each hour worked by the assigned employees. In turn, SGRP undertook to pay the workers a set hourly wage which varied by shift (day, evening or night), with an additional hourly premium if a worker met certain attendance targets over a pay period. As employer, SGRP confirmed its obligation to make all mandatory payroll deductions and remit the employer’s share of contributions, as well as TPS (GST) and TVQ (QST) collected in connection with the contract.
Crucially, the contract contained a series of clauses designed to reassure XTD, in light of its statutory exposure under the Act respecting labour standards to solidary liability for unpaid wages and to ensure transparency about tax and social contributions. SGRP expressly undertook to:

• Remain responsible for all mandatory payroll deductions and employer contributions (employment insurance, Québec Pension Plan, CNESST, parental insurance, paid leave and statutory vacation indemnity) and for TPS/TVQ applicable to each temporary employee assigned to XTD.
• Provide, at all times, the payroll journal for employees who worked at XTD for the relevant period.
• Provide, on request, (i) a journal showing source deductions and employer’s contributions, plus proof of payment for specified pay periods; (ii) copies of cheques cashed by employees working at XTD corresponding to a predetermined payroll journal, subject to obtaining the employees’ written consent for privacy reasons; and (iii) a journal showing TPS/TVQ in and out, as well as the related payment for a given reporting period.
  The contract then stipulated that if SGRP was “incapable of providing the requested documentation within three business days, the present agreement becomes null and void (caduque) and without effect”, and that in such a case “XTD reserves the right to retain sums owed to SGRP for as long as the requested documentation is not provided to XTD.”
  Later in 2022, after many months of uncontroversial collaboration, XTD decided to end the relationship when its business conditions allowed it to hire enough workers directly and no longer rely on an agency. Shortly thereafter, on 5 December 2022, XTD invoked the contractual documentation clause. It requested from SGRP all payroll journals for the last six pay periods, demonstrating government deductions and employer’s share, plus TPS/TVQ journals and the latest remittance report to the government, together with a bank statement showing the payment of those remittances. XTD followed up on 6 December 2022 to add a request for the bank withdrawals that reconcile with the payroll journal.

Evidence about documentation and confidentiality
SGRP’s representative acknowledged receipt of XTD’s 5 December message and indicated its accounting department would gather the required material. In fact, on 8 December 2022, SGRP prepared a response intended for XTD, attaching proof of TPS/TVQ payments and explaining that its accounting department makes global weekly remittances covering all its employees placed with various clients. It also stated it could not provide full bank statements because doing so would breach confidentiality owed to other business partners, since those global remittances aggregate amounts attributable to multiple clients. However, this email, with attachments, was mistakenly sent to another client who had the same first name as XTD’s representative. The error was discovered only on 13 December, after XTD had firmly adopted its position on non-payment.
On 12 December 2022, before realizing it had never actually received any documents, XTD wrote to SGRP to assert that the three-day deadline had expired and to claim that SGRP’s accounting system “did not faithfully reflect the reality” of government remittances. It declared that, as a manager, it had to protect itself from possible government claims and would therefore keep all sums otherwise owed, as allowed by the contract. Notably, XTD did not mention concerns about wages or its solidary liability for salary under the Act respecting labour standards; its focus was on tax and remittance risk, prompted by an industry investigation it had heard about involving another company and alleged fictitious TPS/TVQ billing.
Once SGRP discovered the email error, it resent to XTD a list of payments made to Revenu Québec, with additional details covering TPS, TVQ and source deductions. The payroll journal sent contained most of the requested fields, although some deduction categories were incomplete. XTD never specifically asked for the missing details or highlighted the deficiencies. Instead, it maintained that late delivery alone proved SGRP’s system was unreliable and justified permanent non-payment.
SGRP did not provide copies of cheques cashed by employees. Its representative testified that SGRP had included confidentiality provisions in employment contracts with its workers and that employees had refused consent to disclose cheque images, both when XTD first requested them and again when SGRP allegedly re-approached employees during the evening between the two trial days. The judge found this evidence weak: SGRP produced no sample employment contracts or written consents, despite claiming to rely on them; it offered no documentary proof of efforts to obtain employee authorizations; and its explanations about the logistics of contacting all concerned workers years later were vague and internally inconsistent. In addition, given the precarious status and limited bargaining power of the workers (new arrivals awaiting status, with no local work experience), the idea that they had insisted on robust confidentiality clauses about their pay struck the court as improbable.

Client’s motives and claimed risks
XTD’s representative candidly stated that an investigation by tax authorities into another company’s dealings with placement agencies had heightened his concerns about possible fictitious TPS/TVQ schemes. However, the very tax case that underpinned this anxiety had ultimately resulted in the courts (Tax Court of Canada and Federal Court of Appeal) rejecting the authorities’ allegations of sham transactions. The Court of Québec judge highlighted that those decisions stressed the need for the invoice recipient to be part of some stratagem for a “sham” or “accommodation” invoice scenario to arise. In XTD’s situation, there was no evidence that its relationship with SGRP involved anything similar, nor did XTD point to factual circumstances suggesting a real, imminent risk of reassessment or liability.
Moreover, XTD could not identify any triggering event that led it to seek extensive documentation only after it had already decided to terminate the contract and had no further need for SGRP’s services. It had done business with SGRP for many months without making such requests or raising concerns over remittances. The extremely short three-day deadline for voluminous documentation, the timing of the request at the very end of the relationship, and the representative’s admission that a similar contractual mechanism had earlier induced another agency to abandon its claim for payment, led the judge to question XTD’s good faith and genuine motivation.

Legal analysis: right of retention and exception d’inexécution
The central legal question was how to interpret the documentation and caducity clause and to qualify XTD’s refusal to pay in light of Québec civil law, particularly the exception d’inexécution (defence of non-performance). The clause provided both that: (a) failure to provide documents within three business days made the agreement “caduque et sans avenue”; and (b) XTD could retain sums owed “for as long as the requested documentation is not provided”. The judge held that, properly read, the clause created two distinct consequences. First, it allowed XTD to treat the contract as lapsed (caduc) for the future if documentation was not timely furnished. Second, it granted XTD a right to retain payment until SGRP complied, but without extinguishing the underlying debt for services already rendered. In other words, the clause did not erase SGRP’s accrued right to remuneration; it merely postponed exigibility until the correlative information obligation was met.
Interpreted through the lens of the Civil Code’s exception d’inexécution, the court emphasized that this mechanism is temporary and proportionate: it allows a party to suspend its own performance while the other is in default, but it does not cancel obligations, nor does it operate as a forfeiture without judicial oversight. The Court of Appeal’s decision in a construction context, where payment was withheld until safety documentation was produced, was particularly influential. There, the appellate court held that a contractual condition linking payment to documents should be treated as an instance of non-performance to be assessed by a court, not as an automatic bar to the creditor’s claim. The Court of Québec followed that approach, finding that XTD’s reliance on permanent non-payment went well beyond a legitimate, proportionate suspension.
The judge then assessed both the seriousness of SGRP’s default and the proportionality of XTD’s response. SGRP had clearly not provided the full suite of documents (especially cheque copies and some detailed deduction breakdowns) and its justification based on employee confidentiality and alleged efforts to secure consent did not withstand scrutiny. In that respect, SGRP breached its contractual information obligations and bore some responsibility for the ensuing conflict. However, XTD’s complete refusal to pay the outstanding invoices, despite uncontested receipt of work and absence of any concrete evidence of wage or tax non-compliance, was disproportionate and inconsistent with good faith. Comparative case law cited by the court also stressed that withholding tens of thousands of dollars in payment solely because certain compliance documents were missing or late is excessive where the risk the party seeks to avert has, with time, largely evaporated.

Impact of time, utility of information and caducity
A key factor for the court was the passage of time between the services rendered and the trial. By then, any wage claims by employees for the periods in question were likely prescribed, making the risk of solidary liability under the labour standards legislation “practically non-existent”. The only concrete harm XTD could plausibly claim was loss of the opportunity to verify fully whether SGRP had paid wages and remitted contributions as promised. Even on that point, the court noted that the type of documentation requested—especially cheque copies and broad bank statements—would have offered limited, ambiguous insight, given that SGRP’s employees worked for multiple clients and that payroll entries aggregated work for different employers. Demanding access to information concerning other clients’ business appeared neither reasonable nor strictly required by the contract’s wording.
Against this background, the judge interpreted the three-day deadline in a flexible manner. Considering the nature and volume of documents sought, the time needed for compilation, and the secondary, accessory character of the documentation obligation relative to SGRP’s principal obligation to supply labour, the court found it untenable to treat the three-day limit as a fatal term automatically nullifying the contract and definitively cancelling SGRP’s right to payment. Rather, the contract, properly construed, set an indeterminate timeframe, with the three days functioning as a trigger for XTD’s right to regard the contract as lapsed and to suspend payment, not as a license to permanently appropriate the value of services already enjoyed.
The court also highlighted that XTD persisted in invoking its right of retention even when the risk it claimed to fear (regulatory or tax repercussions) had, with the lapse of time and in light of the jurisprudence, become marginal. With the original rationale for withholding payment largely obsolete, continuing to refuse to pay the outstanding balance no longer had a legitimate protective purpose and simply amounted to unjustified enrichment at SGRP’s expense.

Outcome and financial consequences
On the merits, the court concluded that SGRP had fulfilled its essential obligation to provide personnel and that XTD had received and benefited from the work corresponding to the claimed invoices. While SGRP did not fully comply with the documentation and cheque-disclosure requirements and was not entirely above reproach in how it managed employee “confidentiality”, this default, viewed in context and over time, did not justify the complete and continuing refusal to pay. XTD’s use of the contractual clause, combined with its insistence that caducity allowed it to keep all sums despite undisputed services, was incompatible with the good-faith performance of obligations and with the limited, suspensive nature of the exception d’inexécution.
As a result, the court ordered XTD to pay SGRP the outstanding principal of 25,689.52 CAD. Because SGRP had at one point tried to amend its claim to include sums already paid, and because it had not timely and adequately honoured its documentary commitments, the judge ruled that contractual interest at 2% per month (24% annually) would run only from the date of judgment, not from earlier default. SGRP’s separate claim for 4,000 CAD in damages for late payment was dismissed, the court applying article 1617 of the Civil Code of Québec, which restricts compensation for delay in a monetary obligation to interest at the agreed or legal rate. Finally, given that both parties had maintained positions inconsistent with fully good-faith performance—SGRP by not providing all agreed documentation in a timely and convincing way, and XTD by clinging to an overbroad interpretation of its retention right—the court departed from the usual rule on costs and made the judgment without costs, meaning each side bears its own legal expenses. In sum, the successful party is SGRP, which obtained a monetary award of 25,689.52 CAD plus contractual interest at 2% per month from the judgment date, but no additional damages or recoverable costs.