Executive Summary: Key Legal and Evidentiary Issues

• PLC International Inc. sued Solarium Avant-Garde for $6,897.07, representing the unpaid balance of three invoices for goods sold and delivered, plus $1,000.00 for inconvenience.
• Solarium Avant-Garde argued it had already paid two of the three invoices by electronic bank transfer, but the funds were redirected to a fraudster who had hacked the plaintiff's email account.
• Under Article 1557(1) of the Civil Code of Québec, payment must be made to the creditor or an authorized person — a requirement the defendant failed to meet.
• Central to the court's analysis was whether the defendant could invoke the payment-to-a-third-party exception under Article 1559 C.c.Q., which permits a debtor to oppose the true creditor with proof of payment made to an apparent creditor.
• Evidence showed the fraudulent bank details directed payment to a Wealthsimple account in Calgary, Alberta — information that should have alerted the defendant, whose knowledge of the plaintiff's Québec address made the discrepancy apparent.
• Solarium Avant-Garde conceded at the hearing that it owed the amount on Invoice #2803, dated 29 June 2023.

Facts of the case

PLC International Inc., a company specializing in the sale of glass with its principal place of business in Longueuil, Québec, supplied goods to Solarium Avant-Garde on three occasions in 2023. Three invoices were issued: Invoice #2555, dated 26 April 2023, for $3,275.64; Invoice #2565, dated 30 April 2023, for $2,043.11; and Invoice #2803, dated 29 June 2023, for $578.32 — totalling $5,897.07. On 5 March 2024, PLC International sent a formal demand letter to Solarium Avant-Garde for the three unpaid invoices. On 13 March 2024, Solarium Avant-Garde responded in writing, acknowledging that amounts corresponding to the first two invoices had been debited from its bank account on 8 May 2023, but asserting that the funds never reached PLC International due to a bank fraud. The defendant indicated that after consulting its bank, insurers, and legal counsel, it took the position that it should not be required to pay twice, and that it was PLC International's responsibility to claim against its own insurer. At the hearing, the defendant conceded owing the amount on Invoice #2803.

Contractual and legal provisions at issue

The central legal provision was Article 1557(1) of the Civil Code of Québec, which states that payment must be made to the creditor or to a person authorized to receive it on the creditor's behalf. Also at issue was Article 1559 C.c.Q., which provides an exception allowing a debtor to oppose the true creditor with proof of payment made to an apparent creditor. The defendant sought to rely on this exception to excuse its misdirected payment.

Court's reasoning and analysis

The court began by affirming that in civil matters, the plaintiff bears the burden of proof and must establish the merits of its claim on a balance of probabilities, in accordance with Articles 2803, 2811, and 2849 of the Civil Code of Québec. The determinative question was whether Solarium Avant-Garde could oppose PLC International's claim by relying on the payment it made to a third party after being deceived by a fraudster posing as the plaintiff.

The court found that on 4 May 2023, Guy Proulx, a representative of PLC International, emailed Solarium Avant-Garde an invoice and a valid void cheque specimen to facilitate a direct deposit, showing the plaintiff's account at the Royal Bank of Canada and its registered address in Longueuil. The defendant, however, claimed not to have received that email, and on 8 May 2023 sent a follow-up requesting banking details. It was in response to this follow-up that the fraudster — who had gained access to PLC International's email account — sent fraudulent banking details, including a Wealthsimple cheque specimen bearing a Calgary, Alberta address.

The court noted that the address on the fraudulent cheque — in Alberta — was plainly inconsistent with the defendant's own knowledge of the plaintiff's place of business in Longueuil, Québec, and the fact that it collected its orders in Montréal. The court held that a simple phone call to PLC International's representative would have been sufficient to avoid the fraud. The plaintiff's email server analysis revealed no security breach on its end, and no other clients reported receiving similar fraudulent emails.

The court concluded that the unknown fraudster was neither an "apparent creditor" nor an authorized person within the meaning of Article 1557 C.c.Q., and therefore the defense of payment to a third party was not opposable to PLC International. The Article 1559 exception did not apply.

Ruling and overall outcome

The court partly granted PLC International Inc.'s action. Solarium Avant-Garde was ordered to pay PLC International the sum of $5,897.07, representing the cumulative total of all three unpaid invoices, with interest at the legal rate plus the additional indemnity provided by law, running from 5 March 2024 — the date of the formal demand letter. The court rejected the additional $1,000.00 claim for stress and inconvenience, finding that such damages are reserved for exceptional circumstances not established by the evidence. Given the defendant's testimony regarding its financial condition and its having been victimized by similar fraud on other occasions, the court authorized payment by monthly instalments of $1,000.00 on the first day of each month, with a final balance payment of $897.07. In default of any instalment and failure to remedy within ten days, the defendant would forfeit the benefit of the term and the entire outstanding balance would become immediately due. Notably, the court exercised its discretion to depart from the usual costs rule, ordering each party to bear its own legal costs in view of the unfortunate and regrettable circumstances of the case.