Bulletins

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The Court of Appeal Considers the Impact of the COVID-19 Crisis on Contractual Relationships

As of April 16, 2020, there have been some 27 published judgements rendered by Quebec courts and tribunals that mention COVID.

One decision is of particular interest as it addresses the impact that COVID-19 could have going forward. In Naimer c. Naimer, 2020 QCCA 567, Justice Geneviève Marcotte of the Court of Appeal ruled on April 8th to grant part of the Respondents’ Application for safeguard order. Respondents sought to force a share purchase agreement. Justice Marcotte held that the financial climate created by the unique COVID-19 crisis favoured ordering that the transaction go forward.

The Respondents argued that the transaction, which included a $5.5 million payment to them from the Appellants, must go forward:

[T]he Appellants’ refusal to close the transaction is affecting [the Respondents’] ability to earn a living and to fulfill their obligations to their employees and suppliers and that this will “most undoubtedly cause their company to go bankrupt because there is a lack of available funding”. This is in addition to the COVID-19 crisis which has delayed the opening of their business to the end of the month.

Appellants countered by arguing that there was no urgency given the COVID-19 crisis had suspended Respondents’ business operations, regardless of whether they received the $5.5 million payment or not.

Justice Marcotte wrote:

The lack of funding of the Respondents’ business as a result of being “indefinitely” deprived of the payment of substantial sums of money while having forgone any further remuneration or salary, combined with the COVID pandemia militates in favour of granting the order rather than the opposite, as the situation can only logically aggravate the financial pressure brought upon the Respondents.

It appears that our courts will, in certain circumstances, consider the financial impact of COVID-19 on businesses.

Should you have any questions regarding how COVID-19 is affecting your business please reach out to any member of our Business Law Group who will be eager to work with you.

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Authors

Jean-Pierre Sheppard

Lawyer, Partner and Head of the Civil and Commercial Litigation Group

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