Executive Summary: Key Legal and Evidentiary Issues

• Characterization of a 2024 cheque as either commercial rent or a partial repayment of a 2020 personal debt
• Application of the three-year extinctive prescription and whether a 2024 payment interrupted prescription under article 2898 C.c.Q.
• Credibility assessment between the lender’s and the debtor’s conflicting versions regarding the purpose of the payment
• Legal effect of a corporation’s payment (Y. Pronovost électrique inc.) on the personal debt of its sole shareholder
• Distinction between the personal liability of Mr. Pronovost and the absence of contractual privity with the corporation
• Sufficiency of documentary and testimonial evidence to establish a tacit acknowledgment of debt through a simulated “rent” payment

Factual background

Les entreprises Bouchard M.J. inc. and Mr. Yvon Pronovost had a long-standing relationship in the electrical industry. In 2016, Mr. Michel Bouchard, acting for Les entreprises Bouchard M.J. inc., advanced a substantial loan of $250,000 to Mr. Pronovost. Over time, partial repayments were made, including by way of property transfers, such as the delivery of a tractor. On 29 January 2020, Mr. Pronovost signed a formal acknowledgment of debt (reconnaissance de dette) in favour of Les entreprises Bouchard M.J. inc. for a remaining balance of $51,450. No precise repayment schedule, deadline or term was stipulated; Mr. Bouchard preferred to leave repayment to Mr. Pronovost’s financial capacity. Mr. Bouchard maintained that he followed up several times between 2020 and 2024 to seek repayment, whereas Mr. Pronovost denied that such discussions took place. The turning point came on 30 January 2024, during a meeting at Mr. Bouchard’s office. At that time, Y. Pronovost électrique inc., a company wholly controlled by Mr. Pronovost, issued a cheque for $862.31 payable to Les entreprises Bouchard M.J. inc. The amount corresponded to $750 plus taxes. The nature and legal characterization of this payment lay at the heart of the dispute.

Positions of the parties

Les entreprises Bouchard M.J. inc. claimed that the cheque issued in January 2024 was a partial repayment of the 2020 acknowledged debt. According to Mr. Bouchard, he agreed, as a matter of convenience, that the payment be recorded in the books as “rent” for an alleged commercial space so that the new corporation, Y. Pronovost électrique inc., could claim tax deductions while still reducing Mr. Pronovost’s personal indebtedness. In his version, this was a simulation: the accounting label was “loyer” but the true cause of the payment was debt repayment. The defendants, Mr. Pronovost and Y. Pronovost électrique inc., argued that the 2020 debt was prescribed. They contended that between January 2020 and January 2023, no payment or written acknowledgment occurred, so the three-year prescription had fully run its course. They further argued that the cheque paid in 2024 was unrelated to the 2020 loan and instead represented the monthly rental of a 2,000-square-foot commercial premises owned by Les entreprises Bouchard M.J. inc. On that view, the company’s rent payment could not revive a personal debt already extinguished by prescription. Separately, Y. Pronovost électrique inc. sought complete dismissal of the claim against it on the basis that it was never a party to the original loan or the 2020 acknowledgment of debt and that no contractual nexus existed between it and Les entreprises Bouchard M.J. inc. for the remaining $50,700.

Legal framework and prescription analysis

The Court examined article 2898 of the Civil Code of Québec, which provides that recognition of a right interrupts prescription. That recognition may be tacit and may arise from a partial payment, provided that the payment clearly and unequivocally relates to the debt in question. The burden lay with Les entreprises Bouchard M.J. inc. to demonstrate that the 2024 payment was such a recognition, thereby interrupting prescription. The legal debate thus centred on whether the cheque for $862.31 represented a genuine rental obligation, in which case it would have no effect on the older debt, or whether it instead evidenced a partial repayment of the 2020 acknowledged balance, in which case it would interrupt the running of prescription and restart a new three-year period. The Court focused on the factual context of the payment, the parties’ conduct, and the surrounding evidence to determine if the alleged “rent” label was a mere accounting device masking a debt payment.

Assessment of evidence and credibility

On the evidentiary front, the Court rejected the version advanced by Mr. Pronovost regarding a bona fide lease of commercial premises. His testimony was found to be lacking in credibility. Notably, he admitted that he never received keys for the supposed premises and had not visited the space since 2019, yet maintained that his company had rented it in 2024. He could not reliably identify either the exact floor area or even the address of the premises he claimed to have hired. Given his marginal business revenues and absence of active contracts, it strained credulity that he would agree to pay over $750 per month for storage space he did not actively use. In contrast, the Court found the testimony of Mr. Bouchard, supported by that of Ms. Sabourin, more coherent and persuasive. Ms. Sabourin confirmed that she was instructed to deposit the cheque and record it as “rent” for accounting purposes, while clearly understanding that the sum represented a payment on the outstanding loan. The amount of $750 plus taxes also fit logically within a plan for structured, periodic repayments proposed by Mr. Bouchard to accommodate the debtor’s cash-flow constraints. The Court therefore accepted that the rent characterization was a simulation and that the true nature of the payment was a partial repayment of the personal debt.

Corporate payment and personal debt

The Court also addressed the distinct question of how a payment by a corporation affects a shareholder’s personal obligations. The evidence showed that the original loan and the 2020 acknowledgment of debt involved Mr. Pronovost personally, together with an entity named Écurie Shadow, rather than Y. Pronovost électrique inc. While the January 2024 cheque was drawn by Y. Pronovost électrique inc., the Court held that this payment occurred within the framework of a tax-driven simulation by which the company paid on its sole shareholder’s behalf. This created a commencement of written proof that, when combined with the oral evidence, established that the payment was made toward the personal debt of Mr. Pronovost. However, the Court emphasized that the fact a legal person pays money for a third party does not, without more, transform that legal person into the debtor of the entire obligation. In the absence of a clear intent to novate the debt or assume it, there is no automatic transfer of full liability. The record contained no agreement or undertaking by Y. Pronovost électrique inc. to become jointly or solidarily liable for the remaining balance of $50,700. Accordingly, while the corporation’s payment could evidence acknowledgment of the shareholder’s personal debt, it did not make the corporation itself liable for that debt.

Ruling and overall outcome

The Court ultimately concluded that the 30 January 2024 payment, though booked as “rent,” was in substance a partial repayment of the personal debt acknowledged in 2020. As such, it amounted to a tacit recognition of the obligation within the meaning of article 2898 C.c.Q., interrupting prescription and starting a new three-year prescriptive period. Because the collection proceedings were instituted shortly thereafter, the claim against Mr. Pronovost was held to be timely and not prescribed. At the same time, the Court drew a clear line between personal and corporate liability. It found that there was no contractual foundation to bind Y. Pronovost électrique inc. for the entire balance of the loan, and that its role was limited to having made a single payment on behalf of its shareholder in the context of a simulated rental arrangement. The company therefore bore no independent liability for the outstanding amount. In the result, Les entreprises Bouchard M.J. inc. succeeded in part. The Court ordered the personally liable debtor, Mr. Yvon Pronovost, to pay the sum of $50,700 to Les entreprises Bouchard M.J. inc., together with legal interest and the additional indemnity under article 1619 C.c.Q. from 24 July 2025, plus court costs (dépens) against him, while dismissing the action against Y. Pronovost électrique inc. The exact monetary total of interest, additional indemnity and taxed costs cannot be determined from the judgment because those amounts are not numerically specified.