Executive Summary: Key Legal and Evidentiary Issues

• Characterization of the relationship as a commercial contract for services between KRN and Gillco, not an employment contract with Mr. Singh personally
• Sufficiency of Gillco’s evidence to justify withholding payment based on alleged damage to its electronic onboard equipment
• Application of the civil burden of proof under the Civil Code of Québec on the party alleging contractual fault and damages
• Legality of redirecting payment from the corporate service provider (KRN) to the individual driver (Mr. Singh) based on an informal conversation with a tax authority
• Distinction between a contract for services and a non-existent employment contract, including the consequences for source deductions and payor identity
• Entitlement of KRN to the full unpaid remuneration and ancillary expenses, together with interest, additional indemnity and costs

Facts of the case

LUV PB06 KRN Transport Inc. (KRN) is a transport company whose sole shareholder is Mr. Lovepreet Singh. KRN and Gillco Transit Inc. (Gillco) entered into a verbal contract for services in March 2023. Under this agreement, KRN would provide the truck-driving services of Mr. Singh to operate Gillco’s trucks, and KRN would be paid based on the number of kilometres driven plus ancillary expenses, such as tolls and other out-of-pocket costs. The arrangement was consistently applied for several months without apparent dispute. KRN later claimed that Gillco failed to pay the remuneration and reimbursable expenses owing for October 2023. Initially, Mr. Singh personally filed a small claims action, but all parties acknowledged that the true contracting party was KRN, not Mr. Singh, so the claim proceeded in the name of KRN as plaintiff before the Small Claims Division of the Court of Québec. Gillco did not dispute the calculation of the amounts claimed for the October services and expenses; instead, it contested whether those sums were payable at all and, if payable, in whose name they should be paid.

Parties’ positions and evidentiary issues

KRN’s position was straightforward: it had fully performed the agreed trucking services through Mr. Singh and had incurred ancillary expenses related to those services. It sought payment of the undisputed amount for October 2023 and reimbursement of ancillary expenses, on the basis that Gillco had no contractual or legal justification to withhold these sums. Gillco raised two main arguments in defence. First, it alleged that Mr. Singh had caused damage to Gillco’s electronic onboard equipment. On this basis, Gillco claimed it was entitled to retain the sums otherwise payable to KRN as a form of set-off or protection against those alleged damages. Second, Gillco argued that, following a telephone conversation between its representative and an agent of Revenu Québec, it was no longer legally allowed to pay KRN. According to Gillco, it was told that paying a corporation for driving services would not be compliant with tax legislation when the driver was not the owner of the trucks. Gillco thus considered itself obliged to treat Mr. Singh as an employee and to pay him directly, after making statutory source deductions, instead of paying KRN under the service contract.

Court’s legal analysis

On the alleged damages to Gillco’s electronic equipment, the court emphasized the basic civil law principle that a party asserting a right must prove the facts on which its claim or defence rests, and that a fact is sufficiently proven where its existence is more probable than its non-existence under the Civil Code of Québec rules on evidence. Gillco’s proof fell well short of that standard. Its president, Mr. Amandeep Gill, testified about the supposed damage but had no personal knowledge of any wrongful act by Mr. Singh. The details of any police complaint, including documentation, scope of the alleged damage, and its value, were entirely absent. On this record, the court found the evidence insufficient to establish any fault by KRN or Mr. Singh that could justify withholding payment of the debt. Turning to the tax-compliance argument, the court held that Gillco bore the burden of showing specific legal grounds that would have made continued payment to KRN unlawful. For seven months Gillco had been paying KRN under the service contract without objection. Its attempt to rely on a vague, hearsay account of a phone conversation with a tax authority was inadequate to displace its contractual obligation to KRN. In addition, the court stressed that the only contract in evidence was the service contract between Gillco and KRN. There was no employment contract between Gillco and Mr. Singh, and Mr. Singh had never provided a social insurance number to Gillco—further confirming the absence of an employer-employee relationship. Gillco could not unilaterally convert a commercial services arrangement into an employment relationship to justify paying someone other than the contractual counterparty.

Outcome and monetary award

Having rejected Gillco’s defences, the court concluded that KRN was entitled to its full contractual remuneration and recognized ancillary expenses. Gillco admitted that 8,667.93 $ was owing to KRN for the trucking services rendered in October 2023. It also acknowledged liability for ancillary expenses totaling 558.23 $, including tolls and similar costs incurred by KRN in performing the contract. The court therefore ordered Gillco Transit Inc. to pay LUV PB06 KRN Transport Inc. a principal sum of 9,226.16 $, representing both remuneration and ancillary expenses, together with interest at the annual legal rate of 5% and the additional indemnity under article 1619 of the Civil Code of Québec from 22 November 2023, plus court costs in favor of KRN, although the exact monetary amount of those costs is not specified in the judgment.