Executive Summary: Key Legal and Evidentiary Issues

• Determining whether three cash transfers totaling $40,000 made between December 2015 and December 2018 were unsecured loans or withdrawals of the Plaintiff's capital contribution to the partnership.
• Assessing whether a société en participation (undeclared partnership) formed in 2014 to acquire and operate the Place Donnacona property terminated when the Plaintiff allegedly withdrew his contribution in December 2018.
• Evaluating whether non-monetary contributions, such as identifying the business opportunity or managing the property, were sufficient to sustain the partnership even if the monetary contribution had been withdrawn.
• Weighing the evidentiary value of admissions made during examination on discovery against testimony given at trial regarding the nature of the transfers.
• Establishing the correct valuation date for the Plaintiff's share in the partnership, given competing expert appraisals of the property.
• Calculating the final amount owed after accounting for the property's value, outstanding mortgage, and disputed acquisition-related expenses.

Facts of the case

In 2014, Carlo Di Girolamo (the Plaintiff) and his sister Silvana Di Girolamo agreed to acquire a building at Place Donnacona in Dollard-des-Ormeaux for rental income and eventual resale at a profit, following a pattern they had used for other properties in the past. Although Carlo identified the property and negotiated a favourable purchase price of $400,000 (down from an asking price of $539,000), the acquisition was ultimately made through the Defendant company, 9307-6792 Québec Inc., of which Silvana is president and co-owner with her husband. Each party contributed $40,000 toward the purchase, and it was agreed that the Defendant would handle all management of the building and its rental. No written agreement documented any aspect of the arrangement. Roughly a year after the purchase, the Plaintiff, facing financial difficulties, asked his sister for money, and the Defendant issued him a $10,000 cheque in December 2015, followed by another $10,000 in July 2016 and $20,000 in December 2018. In November 2021, when the Plaintiff requested a further $10,000, the Defendant refused and instead demanded repayment of the $40,000 already transferred within a week, stating that otherwise "the deal is off." The Plaintiff did not repay the sum and instead sought a share of the partnership's profits as of November 14, 2021, the date he considered the business relationship to have ended.

Agreement terms at issue

Because the partnership was entirely verbal, the dispute turned on the characterization of the parties' oral understanding rather than any written clause. Both parties agreed that they had formed a société en participation in 2014, with each contributing $40,000 and splitting profits equally, and with the Defendant solely responsible for managing the property. The central disagreement concerned how the three later transfers should be characterized: the Plaintiff maintained they were interest-free loans without a fixed term, consistent with previous loans Silvana had made to him, including a $62,500 loan in 2010 and a notarized $625,000 loan in 2017 that was later repaid. The Defendant, by contrast, argued the transfers were withdrawals of the Plaintiff's capital contribution, which she claimed effectively ended the partnership once the full $40,000 had been returned to him in December 2018.

Reasoning and analysis

The Court found that the preponderance of the evidence favoured characterizing the transfers as loans without a fixed term, similar to other loans the Defendant had previously and generously extended to the Plaintiff, rather than as withdrawals from the partnership. The Court noted that the Plaintiff's admissions during his examination on discovery, where he agreed he had "withdrawn" the funds, reflected the Defendant's mathematical framing of the transactions rather than an acknowledgment of their true legal nature, particularly since he consistently maintained at trial that the funds were loans. The Court also observed that the Defendant could not explain why the Plaintiff would have chosen to withdraw his investment when she was willing to lend him money directly, as she had done before, including a $40,000 loan to his company, Jake Auto, around the same period. Even assuming the transfers had been withdrawals, the Court held that the partnership did not dissolve in December 2018, since the Plaintiff continued to contribute non-monetary value, namely his initial discovery and sharing of the business opportunity, while the Defendant continued managing the property. The Court relied on prior decisions, including Mireault c. Donnadieu and Fredette c. Maltais, to support the principle that the discovery and sharing of a business opportunity can constitute a sufficient contribution in kind to maintain a partnership. The Court further noted that the Defendant's own conduct, such as offering the Plaintiff the chance to repay the sums rather than treating the partnership as dissolved, was inconsistent with the partnership having ended in 2018.

Ruling and outcome

The Court ruled in favour of the Plaintiff, Carlo Di Girolamo, finding that the partnership's value should be assessed as of November 14, 2021, rather than December 2018 as argued by the Defendant. Both parties had submitted expert valuations of the property, with the Plaintiff's expert estimating $662,000 and the Defendant's expert estimating $615,000; the Plaintiff accepted the Defendant's lower figure at trial, and the Court adopted it. After deducting the estimated $270,000 mortgage and the $40,000 owed by the Plaintiff, the Court calculated that $132,500 was due to him, rejecting the Defendant's request for additional deductions for acquisition-related costs, since the supporting evidence was found to be fragmentary. The Court ordered the Defendant, 9307-6792 Québec Inc., to pay the Plaintiff $132,500.00, with interest and the additional indemnity under article 1619 of the Civil Code of Québec running from April 25, 2023, and awarded costs in the Plaintiff's favour.