DES Studio inc. c. Shuchat, 2022 QCCS 3475  
DES Studio inc. c. Shuchat  
2022 QCCS 3475  
September 26, 2022  
LOUIS charette, j.S.C.  
Plaintiffs/Cross Defendants  
249825 CANADA INC.  
Defendants/Cross Plaintiffs  
Impleaded Party/Cross Defendant  
1] After more than fourteen years of collaboration, Studio Inc. (“DES”) and DS Lab Inc. (“DS  
Lab”) resiliated Debbie Shuchat’s employment contract as creative director with the latter  
because she breached her duty of loyalty. Ted Rozenwald, president of plaintiff companies  
explains that Shuchat[1] competed with those companies by developing a clothing collection  
for Coco Rocha (the “CRC”) for her own benefit and that of her company The Paragon Project  
Inc. (‘Paragon”) and used DES and DS Lab resources to do so.  
2] DES and DS Lab therefore claim the reimbursement of Shuchat’s salary and the expenses  
paid by them for the development of this collection. Manhattan International Trade Inc.  
“Manhattan”) claims the reimbursement of the service fee it paid to Shuchat’s  
company 6249825 Canada Inc. (“624 Inc.”).  
3] Shuchat answers that Rozenwald’s justification for her termination is a mere front as he  
was not only aware that she was developing the CRC but had expressly authorized her to do  
so. As damages caused by the unjustified resiliation of her employment contract, she claims  
her loss of salary, loss of her share in the profits of DES and DS Lab, and moral damages. 624  
Inc. claims for the loss of the service fee.  
4] Shuchat further argues that Plaintiffs failed to cooperate in the conduct of the proceedings  
by not disclosing all of the emails of her account which would support her position. She  
therefore seeks the fees of the expert retained to demonstrate that the disclosure was  
5] The following questions arise out of the termination of Shuchat’s employment contract  
and of 624 Inc.’s service agreement:  
. Was Shuchat authorized to develop the CRC for her own benefit? Did the CRC compete  
directly or indirectly with DES, DS Lab or Manhattan?  
. Did Shuchat use DES and DS Lab resources to develop the CRC?  
. Are Plaintiffs entitled to damages from Shuchat, 624 Inc. and Paragon?  
. Are Shuchat and 624 Inc. entitled to damages for termination of her employment contract  
and wrongful termination of the service fee?  
. Are Defendants entitled to recover the expert fees incurred to analyze the data provided by  
Plaintiffs in response to the undertaking to provide all her emails in Plaintiffs’ possession?  
DES and DS Lab  
6] Rozenwald is the president and indirectly owns a group of companies known as  
Manhattan Group” which specializes in the design, manufacture and distribution of clothing,  
casual wear and athletic leisure clothing.  
7] In the fall of 2000 and winter of 2001, to generate a new source of revenues, Rozenwald  
was looking to add women’s apparel to Manhattan Group’s offer of goods.  
8] In June 2001, Rozenwald hired Shuchat as the creative director and incorporated DES,  
which stands for “Deborah Elaine Shuchat”, to design, manufacture and distribute women’s  
clothing and apparel.[2]  
9] As president of his group of companies, Rozenwald is responsible for day-to-day  
operations including financing, accounting, credit and the logistics for the orders and  
10] As creative director, Shuchat assembled and supervised a design team and was  
responsible for designing, creating, developing, and overseeing the manufacturing of the  
women’s collections.  
11] The business model was initially based on Shuchat’s own brand “Debbie Shuchat” and  
those of “DES Studio” and “DS Lab”. Each of these targeted a different clientele and had  
different price points. For example, whereas “Debbie Shuchat” was a marquee brand for high-  
end retailers, “DS Lab” was aimed at younger edgier clientele for lower tier big box vendors  
and “DES Studio” was designed as a less edgy crossover collection aimed at women aged 35 to  
12] Once the collections were developed, Shuchat was also responsible for client  
development and sales.  
13] Shuchat benefitted from a great deal of autonomy in her role. Her projects included the  
redesign of the Air Canada’s uniforms and the design of collections for various retailers  
including Dillard’s, Home Shopping Network, QVC UK, Sears and Zellers.  
14] As business evolved, Shuchat collaborated with celebrities seeking to market  
personalized clothing collections. These included, for example, collections for La La Anthony,  
Bagley Mischka, Jay Emmanuel, Naeem Khan, Julien MacDonald, Gwen Stefani, Christian  
Syriano, Twiggy and Heidi Weisel. With the exception of the “L.A.M.B.” collection for Gwen  
Stefani, these collaborations were successful for DES.  
15] In addition, Shuchat worked on research and development projects for which she  
obtained grants thus adding to DES’ annual revenue.  
16] As of 2014, DES’s activities and employees were transferred to DS Lab[3]. The business  
model and Shuchat’s employment conditions and her role and responsibilities remained  
17] In November 2014, Shuchat was approached to develop of a collection for Coco Rocha  
who is a renowned fashion model with a substantial following on social media.[5]  
18] Shuchat met with Rocha at the DES showroom in New York and the latter outlined that  
she sought to develop a personalized athletic leisure clothing line. She was impressed by the  
sample clothing designed by DES for “DS Lab” and the “L.A.M.B.” collection and wanted to  
collaborate with Shuchat.  
19] Shuchat asked her DES team to develop mood boards outlining potential colours, prints  
and styles that would set a vision for the CRC. She subsequently requested that they prepare  
storyboards of sketches for the collection.[6]  
20] In late January 2015, Shuchat discussed the CRC project with Rozenwald. Given DES’s  
losses in the “L.A.M.B.” collection, he advised Shuchat that he had no interest in any further  
celebrity collaborations and that DES was to have no involvement in this project.  
21] In the following months, Shuchat actively worked on the CRC for her own benefit and  
that of Paragon.  
22] In January 2016, Rozenwald learned that Shuchat was developing the CRC for her own  
benefit and using DES resources.  
23] On February 5, 2016, Rozenwald met with Shuchat and terminated her employment  
with DES and DS Lab as well as 624 Inc.’s service agreement with Manhattan. He cited her  
breach of loyalty in developing a line of clothing for her own benefit which competed with the  
companies’ business as cause for the termination.[7]  
1.1 Legal principles  
24] Article 2088 C.C.Q. sets out an employee’s obligation to act faithfully and honestly and  
the obligation not to use confidential information obtained in the course of her employment:  
088. The employee is bound not only to perform his work with prudence and diligence, but  
also to act faithfully and honestly and not use any confidential information he obtains in the  
performance or in the course of his work.  
These obligations continue for a reasonable time after the contract terminates and  
permanently where the information concerns the reputation and privacy of others.  
25] This obligation of loyalty entails the employee’s obligation not to cause prejudice to her  
employer and to favour the interests of her employer over her own and not to place herself in a  
situation of conflict of interest. This further requires that an employee not appropriate the  
employer’s goods and services or use them to her personal advantage.[8]  
26] The duty of loyalty is particularly important in the context of a relationship of trust  
between an employer and an employee when the latter holds a key position within the  
employer’s business model.[9]  
27] An employer may, however, authorize an employee to conduct herself in a manner that  
may otherwise be precluded.[10]  
28] Pursuant to article 2094 C.C.Q., an employer may unilaterally resiliate an employment  
contract without prior notice where there is serious reason to do so.[11] The employer must  
prove a serious fault, or a just and sufficient cause associated with the employee’s conduct or  
failure to perform the terms of the employment contract must be demonstrated.[12]  
29] A breach of the obligation of loyalty constitutes such a serious reason as it is an  
essential element of the trust between the parties.[13] In that respect, establishing a business  
which competes, directly or indirectly, with one’s employer or concealing facts from the  
employer may constitute a breach of the duty of loyalty.[14]  
1.2 Discussion  
30] Whether Shuchat breached her duty of loyalty depends first on whether she was  
authorized to undertake projects independently of her employment with DES. Second, if she  
was not authorized, does the CRC compete with the interests of the Manhattan Group?  
31] Shuchat asserts that she was expressly authorized to take on projects independent of  
her employment with DES and she refers to two occasions where Rozenwald would have  
agreed to such projects.  
32] First, Shuchat refers to her meeting with Rozenwald in November 2013 to discuss the  
payment of the monthly service fee. As of May 2006, Rozenwald had agreed to increase  
Shuchat’s income by way of an additional monthly service fee of $7,500 paid by Manhattan to  
24 Inc. However, in June 2013, Rozenwald unilaterally ceased paying the fee. Despite  
requests to discuss the issue, Rozenwald only met with Shuchat in November 2013 and  
advised that he had ceased the payments because he held her responsible for DES’s ongoing  
lack of profitability.  
33] When she protested, Rozenwald responded that she was free to augment her income by  
taking on independent projects as long as they did not interfere or compete with the business  
of the Manhattan Group.  
34] Shuchat’s version of this discussion is credible and uncontradicted. Indeed, although  
Rozenwald testified with respect to this meeting and his version of the facts is similar to  
Shuchat’s, he never denied that he indicated to Shuchat that she could augment her income by  
taking on independent projects.  
35] Second, Shuchat argues that in her meeting of January 2015 when Rozenwald  
instructed that DES was to have no involvement in the CRC, she would have made it clear that  
she would continue the project independently.  
36] Shuchat’s own evidence, however, does not support her position. Both during her pre-  
trial examination[15] and at trial, she testified that she protested when Rozenwald indicated  
that DES was to have no involvement with the CRC because she believed in its potential. When  
she told Rozenwald that there was work done by her team, he instructed her to leave the  
material on the company server. At no time did she advise Rozenwald that she would  
independently pursue her collaboration with the CRC.  
37] Her argument is also inconsistent with other facts in evidence. For example, in  
November 2015, she emailed Rozenwald using her Paragon email account and immediately  
thereafter indicated to him that, by error, she had used the account of her husband’s  
38] In fact, Paragon was incorporated in the State of California by Shuchat in January  
015. In addition to herself, the shares were held by designer Paula Bradley, with whom  
Shuchat had worked on the “L.A.M.B.” collection and who had agreed to cooperate on the  
CRC,[17] and by Bruce Kirkland who was a music industry consultant, both of whom are based  
in Los Angeles.  
39] Both Shuchat and Bradley confirmed that Paragon was established specifically to  
partner in the joint venture with Rocha to develop the CRC.  
40] Although Shuchat testified that her husband was involved in Paragon, her testimony in  
that respect is not credible. Not only was she vague in this regard but the incorporation  
documents do not refer to him and no evidence supports him having any contribution in the  
project. Moreover, during her examination for discovery, Shuchat stated that her husband had  
no involvement in Paragon.[18]  
41] The Court further notes that by 2014, Shuchat was unhappy with her working  
conditions and her increasingly difficult relationship with Rozenwald. She admits that by this  
time she was considering relocating to Los Angeles. Bradley testified that she was aware of  
Shuchat’s plan and had looked at real estate opportunities with Shuchat in planning the  
latter’s move to Los Angeles.  
42] Had Shuchat advised Rozenwald that she was actively working on the CRC, there  
would have been no need for her to try to distance herself from Paragon.  
43] Hence, although Rozenwald indicated that she augment her income by taking on  
independent projects insofar they did not compete with company business, Shuchat never  
advised him of her ongoing collaboration in designing the CRC. In fact, she made efforts to  
keep her involvement from him.  
44] Because Rozenwald did not authorize Shuchat to develop the CRC while she worked for  
DES, the Court must determine whether independently working on the CRC competed with  
the interests of the Manhattan Group.  
45] Shuchat admits that she pursued the CRC for her own benefit and that of Paragon  
following her meeting with Rozenwald in January 2015. She produced two collections, one in  
the spring of 2016 and one in spring 2017.  
46] Although Shuchat attempted to minimize her involvement, the evidence demonstrates  
that she played a pivotal role. She admitted that in addition to the funding provided by  
Kirkland, she raised financing through Chinese suppliers. In addition, the emails exchanged  
with various persons including Rocha, her husband James Conran, her licensing agent Shelly  
Marchetti and Bradley illustrate her involvement in every aspect of the design of the  
collection, choice of materials, quality control of the samples, meetings with Rocha and her  
team, with suppliers and with clients, financial projections and the launch of the  
47] Although both DES and DS Lab designed women’s collections, neither of them  
designed athletic leisure wear.[20]  
48] However, Manhattan, which operates out of the same premises as DES, designed  
athletic leisure wear for women. Moreover, in April 2014, Rozenwald asked Shuchat to assist  
in the design of the “Industry” athletic leisure clothing line designed, manufactured and  
distributed by Manhattan. In compensation for this collaboration, the service fee paid to 624  
Inc. was reinstated by way of payment by Manhattan of $5,000 per month.  
49] Although the CRC may not have competed directly with DES, it indirectly did so in that  
it was aimed at a similar clientele. Moreover, it directly competed with the interest of  
Manhattan with whom Shuchat collaborated for the design of athletic leisure clothing as of  
As creative director, Shuchat held a position of trust, and had access to confidential  
information including business strategy, financial projections, client lists and price lists. She  
thus had a duty to be honest and forthcoming with Rozenwald which she failed to do.  
51] In developing the CRC of athletic leisure wear and in establishing Paragon for this  
specific purpose and not divulging this project to Rozenwald, Shuchat breached her duty of  
loyalty to DES and Manhattan.  
52] Rozenwald may have had other reasons to be dissatisfied with Shuchat, including the  
fact that DES had not been profitable since at least 2013. The fact remains, however, that  
Shuchat’s development of the CRC constituted a breach of her duty of loyalty.  
53] Shuchat’s breach of her duty of loyalty constituted a serious reason to resiliate her  
employment contract. For the same reasons, Manhattan was justified in terminating the  
service agreement with 624 Inc.  
54] Whether Shuchat used DES and DS Lab resources in developing the CRC is raised in  
the context of both the serious reason to resiliate her employment contract and the  
determination of damages such that the Court addresses the issue as a distinct question.  
55] Although Plaintiffs argue that Shuchat used DES resources for her own benefit as of  
November 2014 when she was initially approached for the CRC, the evidence does not support  
their argument.  
56] Indeed, Rozenwald confirmed that over the years, Shuchat developed a number of  
celebrity collaborations and that although he was kept aware of such projects, he would not  
have been involved in the initial development or in the design. Hence, although Rozenwald  
may not have been aware of the CRC prior to January 2015, there is no evidence that during  
this period Shuchat kept the information from him or that her initial discussions were for her  
own benefit.  
57] Shuchat admitted that she met with Rocha in the DES showroom in New York in  
November 2014 and that, in December, she requested that her DES team develop the initial  
mood boards for the CRC. DES employee Hugo Duchesne testified that when Shuchat  
requested these mood boards, she presented the project as a new opportunity for DES.  
58] Had Shuchat’s intention at the outset been to develop the CRC for her own benefit, to  
the exclusion of DES, she would not have discussed the project with Rozenwald in January  
015 nor would she have advised him of the work done by her team.  
59] Any work by Shuchat and her team prior to the meeting of January 2015 was for the  
benefit of DES.  
60] Although she admits pursuing the CRC for her own benefit following that meeting,  
Shuchat denies using DES resources. The evidence, however, illustrates that on several  
occasions, Shuchat called on the resources of DES for the design and development of the CRC.  
61] The most significant example is with respect to the use of the design team, and more  
particularly senior technical designer Duschesne and graphic artist Laydiana Chiv.  
62] Duchesne testified that when he initially joined DES, he worked with Shuchat on the  
design of dresses for the “Debbie Shuchat” label. As of March 2015, Shuchat asked that he and  
other members of the design team, including Chiv, work on the CRC.  
63] Duchesne confirmed that the design team worked from initial sketches that Bradley  
had developed in her role as a designer with Paragon, and that had been used in the  
presentation to ASOS, a potential retailer of the CRC.[21]  
64] Chiv prepared the mood boards which were sent to Shuchat in April 2015.[22]  
65] The emails to and from Shuchat, Duchesne and Chiv illustrate that the DES team  
worked extensively on the CRC designs as of April 2015.[23]  
66] In reviewing the photographs of the CRC which contain approximately sixty-four (64)  
individual pieces, Duchesne identified at least forty-four (44) samples on which the DES  
design team worked.[24] In some cases, the sample was entirely developed by the DES team,  
from the initial design to the manufacturing of the sample. In other cases, the design team  
produced the initial design and the technical package which was sent to a supplier in China to  
manufacture the sample. Yet in other cases, only the print was developed by DES.  
67] Of the CRC samples on which DES team worked, some were initially developed for the  
L.A.M.B. collection and others were developed for the “Industry” collection sold by  
68] Duchesne testified that several DES employees worked on the design and manufacture  
of samples, including himself and Chiv, cutters Yvon Allaire and Libero Rubbio, pattern maker  
Milen Ionov, sewer and “confectionneur” Milad Kaddis, junior designer Nicole Léveillé and  
seamstress Anna Maria Pissignani.  
69] Léveillé, a junior designer at DES, confirmed Duchesne’s testimony. Although she was  
not as precise as Duchesne, she confirmed that a number of styles on which she worked as of  
July 2015 were included in the CRC as opposed to DES collections.  
70] Both Duchesne and Léveillé are credible. Neither currently works for the Manhattan  
Group and they have no interest in the litigation. Moreover, they were honest and  
forthcoming. They admitted when they were unsure of the answer to a question.  
71] When Duchesne reviewed the photos of the CRC samples, he did not hesitate to indicate  
if he had any doubt about DES’s involvement. When he was sure, his testimony was precise.  
He was able to distinguish prints and design details which demonstrate his involvement and  
that of DES employees.  
72] Although Kaddis also testified at trial, his evidence was of limited impact. Despite  
having signed a sworn statement,[25] he could only confirm that he made samples in  
accordance with instructions from Shuchat and the design team. He did not pay attention to  
the label for which a style was developed and had no recollection of the CRC.  
73] Shuchat argues that his testimony discredits Plaintiff’s argument that she used DES  
resources. Kaddis’ testimony may not establish the percentage of the time he spent on the  
CRC, however, the fact remains that he confirmed working on samples as instructed by  
Shuchat’s team.  
74] Moreover, in March 2021, Shuchat communicated by telephone with Kaddis and  
questioned the facts as detailed in his sworn statement. This was an ill-advised attempt to  
influence Kaddis’ testimony.[26]  
75] Shuchat also relied on DES’s resources other than the design team. For example, DES  
employee Theiraruby Easwarathambiah, whose responsibilities included the deliveries of  
garment specifications, materials and samples and inspection of garments confirmed that  
after Shuchat left DES, she became aware that on a number of occasions, samples and  
materials which she shipped to Bradley and to Chinese suppliers were for use in the CRC.  
76] The emails of DES employee Sandy Sahn provide another example. She worked in the  
DES New York showroom and used a Paragon email account to promote the CRC to  
77] Shuchat argued that none of the design work for the CRC was performed by DES  
employees. She asserts that Paragon had its own design team which included Bradley and  
Rachel Harmon who was also based in Los Angeles. Harmon prepared the technical packages  
for all of the samples of the CRC which would then have been manufactured by Chinese  
78] In support of her position, Shuchat refers to the invoices issued to and paid by  
Paragon.[28] These demonstrate that Paragon retained Harmon for design work, paid for  
samples produced by Chinese suppliers and for various expenses including travel, deliveries,  
website design, etc.  
79] However, despite her undertaking to do so, Shuchat did not produce all of the photos of  
the CRC samples. Moreover, although the invoices paid by Paragon refer to a number of the  
CRC samples, there are no invoices for several of the samples for which photos were provided.  
80] Although Paragon had a team in place, Shuchat used DES resources to design the CRC  
even after Rozenwald indicated that DES was to have no involvement. In of itself, this  
constitutes a serious reason to resiliate her employment contract.  
3.1 Legal Principles  
81] Pursuant to articles 1607 and 1611 C.C.Q., the creditor is entitled to damages for injury  
sustained as an immediate and direct consequence of the debtor’s fault:  
607. The creditor is entitled to damages for bodily, moral or material injury which is an  
immediate and direct consequence of the debtor’s default.  
611. The damages due to the creditor compensate for the amount of the loss he has sustained  
and the profit of which he has been deprived.  
Future injury which is certain and assessable is taken into account in awarding damages.  
82] The damages must be certain and proven.[29] The certainty required is relative, taken  
in the context of the balance of probabilities.[30]  
83] Hence, when the fault is proven and it has been established that it is the cause of  
damages, the Court must look to the evidence to determine the probable amount of the  
resulting prejudice.[31] The Court should distinguish between the proof of the existence of the  
damage and the proof of the quantum of damages for which evidence has been adduced.[32]  
84] The Court of Appeal has held that an employer may be entitled to damages from an  
employee who used the employer’s resources in the conduct of a competing business against  
the employer’s interests.[33] The employer may also claim reimbursement of the salary paid if  
the evidence establishes that the employee failed to fulfill entirely her obligations.[34]  
85] An employee whose employment is terminated without serious reason, may claim  
damages from her employer equivalent to a reasonable notice period.[35] This period will  
depend on a number of factors including the position held at the time of the resiliation, the  
years of service and the employee’s age.[36]  
86] The employee must, however, minimize her damages and therefore demonstrate  
having taken reasonable efforts to find new employment.[37] The failure to mitigate does not  
reduce the indemnity but prevents a claim for aggravation of the damages.[38]  
87] An employer’s failure to respect its duty to provide reasonable notice does not in of  
itself warrant an award in moral damages. The evidence must demonstrate a fault committed  
in the manner in which the employer proceeded to the dismissal, such as bad faith.[39]  
88] In the context of a service contract, article 2125 C.C.Q. provides that a client may  
unilaterally resiliate a contract without reason, subject to the obligation to pay for the costs  
and expenses incurred by the service provider.[40] This right must also be exercised in good  
faith, failing which, the client may be condemned to pay damages.[41] The mere fact of  
terminating a service agreement is not an abuse of right.[42]  
3.2 Analysis  
89] Plaintiffs’ claim and Defendants’ cross-claim are both based, in part, on Shuchat’s  
remuneration while employed by DES. This remuneration consisted of her annual base salary,  
which in February 2015 was of $150,000, a cellular phone, a car allowance, and 25% of DES  
90] In addition, at the time of her termination, Shuchat received a monthly consulting fee  
of $5,000 paid by Manhattan to 624 Inc. to compensate her for her collaboration in the design  
of the athletic leisure clothing collection.  
91] Plaintiffs claim $528,824.44 as follows:  
. 50% of Shuchat’s salary for the period of November 1, 2014, to February 5, $110,326.56  
Plaintiffs’ Claim  
. 50% of the service fee paid by Manhattan to 624 Inc. from November  
014 to January 2016:  
. Expenses paid to Shuchat:  
i) Travel:  
ii) Cell phone: $1,439.71  
iii) Mileage: $5,749.09  
. Rent of New York showroom:  
. Salaries paid by DES to employees who worked on the CRC:  
. Expenses paid to suppliers:  
Shuchat’s Salary  
92] Plaintiffs claim 50% of Shuchat’s salary for the period of November 2014 to February 6,  
93] As outlined above, there is no evidence that Shuchat was developing the CRC for her  
own benefit and that of Paragon prior to the meeting of January 2015.  
94] For the period of February 2015 to February 2016, Plaintiffs argue Shuchat developed  
two collections for the CRC while employed by DES, despite the fact that she acknowledges  
that her responsibilities at DES kept her busy on a full-time basis and that she often worked in  
excess of the standard working hours. Hence, given that she developed CRC two collections  
prior the termination of her employment, she had to have done so on DES time. Their  
estimate is that 50% of her time was spent on the CRC.  
95] To succeed in claiming reimbursement of the salary paid, Plaintiffs had the burden of  
demonstrating the Shuchat did not perform her responsibilities as creative director for DES.  
The argument that because she had her plate full at DES, she must have developed the CRC on  
DES time is based on speculation. Plaintiffs have not demonstrated that she failed to  
accomplish her responsibilities.  
96] Although Duchesne testified that Shuchat was often absent on Mondays, neither  
Rozenwald nor any DES employee testified that she did not otherwise perform her tasks as  
creative director.  
97] Shuchat admits that she actively worked on the CRC during this period, however, she  
continued to develop the DES labels and to collaborate with Manhattan, including collections  
for “DES Studio”, “DS Lab” and “DS Dress” as well as developing new business. In addition,  
she continued to work on research and development projects for which DES and Manhattan  
received grants and she collected outstanding invoices from clients.  
98] Plaintiffs did not prove that Shuchat failed to complete her role and tasks as creative  
Service Fee Paid to 624 Inc.  
99] Manhattan claims 50% of service fee paid to 624 Inc. for the period of November 2014  
to January 2016. This fee was reinstituted specifically to indemnify Shuchat for the additional  
services which she provided to Manhattan above and beyond her responsibilities with DES.  
100] No evidence was adduced to demonstrate that Shuchat, through 624 Inc., did not fulfill  
her obligations to Manhattan for which this fee was reinstated.  
Travel Expenses  
101] DES claims the travel expenses paid to Shuchat from November 2014 to February 2016.  
It argues that as of 2013, its sales were down and no profit was being generated such that  
expenses were reduced, notably for travel. It submits that Shuchat’s trips during this period  
were entirely or at least in part for the CRC. It therefore claims the lodging, transportation,  
meals and various other expenses paid to Shuchat for these trips totalling $114,090.05.[43]  
102] DES’s claim includes the reimbursement of the costs of samples, magazines and  
materials (trimming) purchased by Shuchat, be it in Montreal or on these trips. It has not  
demonstrated, however, that these expenses were incurred for the CRC as opposed to DES or  
that they were of no use or benefit to DES. These items must be excluded from the claim.  
103] The Court therefore considers each of the trips for which DES claims reimbursement of  
the travel expenses.  
104] As outlined above, prior to her meeting with Rozenwald on January 22, 2015, Shuchat  
worked on the CRC as a DES project. Hence, Plaintiffs cannot claim the expense incurred  
prior to this date.  
105] As of February 2015, Shuchat travelled on several occasions and Plaintiffs claim  
reimbursement of either 50% or 100% of the expenses. In claiming only 50% of the expenses,  
Plaintiffs acknowledge that the trip included DES business in addition to the CRC.  
106] Plaintiffs identified thirty-seven trips to New York in 2015 and 2016 for which they  
claim 50% of the expenses.[44] Shuchat did not deny taking these trips as New York is the hub  
of the fashion industry in the United States. She testified, however, that they were planned to  
meet with various suppliers and clients. Every trip was primarily for DES business and only a  
few of her meetings pertained to the CRC.  
107] Plaintiffs do not deny that Shuchat conducted DES business on these trips. The Court  
therefore finds that although CRC business was conducted on these occasions, it did not  
constitute 50% of Shuchat’s time. Based on Shuchat’s testimony as to her schedule on these  
trips, the Court estimates the percentage at 30%.  
108] The total cost for the trips to New York amounts to $23,126.91. DES is entitled to  
recover $6,938.07.[45]  
109] Shuchat travelled to Los Angeles on 4 occasions during this period.[46] Rozenwald and  
Manhattan Group’s general manager Samia Bassili testified that, by February 2015, DES had  
no ongoing business in Los Angeles as the L.A.M.B. collection was completed. Moreover,  
Shuchat and Bradley worked on L.A.M.B. from Montreal where the collection was designed  
and manufactured.  
110] Shuchat did not deny travelling to Los Angeles for the CRC. Although she may have  
taken the opportunity to shop for samples and materials, the Court concludes that the primary  
objective of these trips was for the purpose of the CRC and not DES business.  
111] DES is therefore entitled to recover all of the expenses related to these trips, amounting  
to $9,866.43.[47]  
112] Plaintiffs claim the expenses for two trips to Dallas in March 2015.[48] Shuchat testified  
that these trips pertain to Dillards with whom she had negotiated a contract for the design of  
women’s evening apparel on behalf of DES. The evidence does not demonstrate that these  
trips were related to the CRC and that Shuchat worked on any business other than DES.  
113] Shuchat travelled to Korea in April 2015 and DES claims those costs on the basis that it  
had no ongoing business in Korea at the time. Although Shuchat argues the purpose of the trip  
was to source materials for DES, at this time, it had no ongoing business in Korea. Shuchat  
provided no credible explanation for this trip and the Court concludes that it was for the  
benefit of the CRC and that DES is entitled to recover the costs of this trip in the amount of  
114] In August 2015, Shuchat travelled to Hong Kong for which DES claims the  
expenses.[50] Shuchat argues that the purpose of the trip was to work a design for Badgley  
Mischka on behalf of DES and on three 3 styles for the “DS Dress” label. She admitted,  
however, that she also met with suppliers with respect to CRC styles. Emails exchanged with  
suppliers following this trip confirm the work on the CRC.[51]  
115] DES is entitled to recover $2,185.36 representing 50% of the total costs of the Hong  
Kong trip.[52]  
116] Shuchat travelled to London in October 2015. Rozenwald and Bassili testified that DES  
had no ongoing business in London and attribute this trip to the CRC. Shuchat testified that  
she met with on-line retailer QVC UK on behalf of DES. However, Bradley testified that this  
trip was to meet with ASOS which was the on-line platform for the sale of the CRC. This is  
consistent with Shuchat’s emails exchanged in preparation of this trip.[53]  
117] Because the primary objective of the trip to London was for the CRC, DES is entitled to  
recover the expenses in the amount of $5,971.65.[54]  
118] In December 2015 and January 2016, Shuchat travelled to Argentina and El Salvador on  
vacation. Her expenses for airfare, lodging or meals were not billed to DES but she claimed the  
costs of purchasing samples.[55] DES has not demonstrated that these expenses were related  
to the CRC as opposed to DES business.  
119] Based on the above, DES is entitled to recover an amount of $32,704.63 for travels  
expenses paid. Because Shuchat committed a fault in billing these expenses to DES and  
Paragon benefitted from such payment, both are responsible for reimbursing DES for these  
Cell Phone  
120] Shuchat’s remuneration included the costs of her cellular telephone and DES claims  
0% of the expenses for the period of January 1, 2015, to February 1, 2016.[56]  
121] The supporting documents demonstrate that Shuchat used her cellular telephone on a  
daily basis for calls to and from locations not only in Montreal but also where she  
travelled.[57] She also often used her DES email account when dealing with issues pertaining  
to the CRC.[58]  
122] Having concluded that following her meeting with Rozenwald on January 22, 2015,  
Shuchat developed the CRC for her own benefit and that of Paragon, the Court concludes that  
DES is entitled to claim 30% of the cellular telephone expenses from February 1, 2015, to  
February 1, 2016, representing $764.84.  
123] For the period of January 1, 2015, to February 1, 2016, Shuchat was reimbursed for  
mileage expenses and DES now claims 50%.[59]  
124] The supporting documents demonstrate that the travel was within or in the Montreal  
area. No evidence was adduced as to how these expenses may relate to the CRC or to DES.  
Plaintiffs have not proven that these expenses relate to the CRC.  
New York Showroom  
125] Plaintiffs claim 25% of the annual rent paid by DES for the New York show room in  
015, representing $16,394.86.[60] They argue that Shuchat and Paragon used the premises  
for meetings pertaining to the CRC, including meetings with Rocha and with potential buyers.  
126] As outlined above, Shuchat admitted travelling to New York on 37 occasions in 2015  
and 2016.[61] She also acknowledged that she worked primarily out of the DES showroom.  
127] Moreover, Shuchat involved DES employee Sahn, who worked out of the showroom, in  
the promotion of the CRC to retailers.[62]  
128] Although she minimized her use of the DES showroom when dealing with CRC business  
on her trips to New York, Shuchat indeed used the DES showroom for CRC business. DES is  
entitled to 25% of the annual rent, $16,394.86.  
Salaries of DES Employees  
129] DES and DS Lab claim a percentage of the salaries paid to employees who, in 2015,  
worked on the CRC at the request of Shuchat. Because an employee’s total annual salary was  
paid by DES and, or, DS Lab, the claim in the amount of $180,416.09 is summarized as  
2015 Annual % of Salary DES  
DS Lab  
Yvon Allaire  
Ladyana Chiv  
Hugo Duchesne  
Theiraruby Easwarathambiah $30,993.60  
Milen Ionov  
$ 52,768.73  
$ 16,656.80  
$ 36,641.71  
$24,520.40 $14,481.60  
Milad Kaddis  
Nicole Léveillé  
Anna Maria Pissignani  
Libero Rubbo  
Sandra Sahn  
Carrie Zhang  
$ 8,216.92  
$ 2,019.60  
$ 5,755.31  
$USD 60,000 50%  
$45,000.00 50%  
$132,897.70 $47,518.39  
130] In her investigation of Shuchat’s collaboration with the CRC, Bassili met with DES  
employees and prepared a list of employees who worked on the project.[64] Her list, as  
summarized above, is consistent with Duchesne’s testimony.  
131] Based on the information they provided, Bassili estimated the percentage of the time  
which they would have spent on the CRC in the course of their employment with DES in 2015.  
The percentage is of either 25% or 50%. Duchesne, Easwarathambiah, Kaddis and Léveillé  
signed statements confirming the estimated percentage.[65]  
132] The evidence demonstrates that two CRC collections were completed, the first for  
spring 2016, and the second for late fall of 2016 or spring of 2017. Creating a new collection, as  
in the case of the CRC, may take 15 to 18 months before the product can be shipped. In the  
case of an existing label, the time frame is of approximately 12 months.  
133] It is reasonable to conclude that the majority of the work on the 2016 spring CRC was  
done while Shuchat was still employed by DES. The late fall 2016 or spring 2017 collection was  
started in while she was still with DES but completed after her employment was terminated.  
134] Duchesne acknowledged that to the best of his knowledge, DES employees were  
involved only in the first CRC.  
135] Shuchat testified that each of the two CRC collections had 50 to 65 styles.[66] In his  
sworn statement, Duchesne states that he identified 37 CRC samples on which the DES design  
team worked.[67] In his testimony at trial, he identified forty-four (44) samples. This is  
consistent with his statement that in addition to the styles designed specifically for the CRC,  
designs initially produced for the “Industry” and “Fast Fashion” labels were included in the  
136] According to Duchesne and Kaddis, depending on the complexity of the design, the  
sample for each style may take between 18 and 30 hours by the design team, from the initial  
sketches, pattern, technical package and manufacturing of the sample.  
137] The Court accepts Duchesne’s testimony that forty-four (44) samples of the CRC  
involved some work by the DES design team. Assuming an average of 24 hours per sample,  
DES employees spent in excess of 1,000 hours on the CRC in 2015.  
138] Although not a precise scientific approach, this confirms that a considerable amount of  
time was spent on the CRC by DES employees.  
139] DES did not prove, however, that its employees spent up to 25 or 50% of their time of  
the CRC as estimated by Bassili.  
140] The evidence suggests that Chiv, Duchesne and Léveillé, spent 25% of their time on the  
CRC. With the exception of Carrie Zhang, the other employees, worked 15% of their time on  
the CRC.  
141] In the case of Zhang who worked for DES in China, other than Bassili’s reference to her  
discussion with her, there is no corroborating evidence. Plaintiffs have not demonstrated her  
involvement in the CRC allowing for the reimbursement of a percentage of her annual salary.  
142] On the basis of the above, DES is entitled to $65,773.78 for salaries paid to employees  
who worked on the CRC broken down as follows:  
2015 Annual  
% of Salary Attributable  
Attributable to the CRC in 2015  
to the CRC  
Yvon Allaire  
Ladyana Chiv  
Hugo Duchesne  
Theiraruby Easwarathambiah $30,993.60  
15 %  
25 %  
15 %  
Milen Ionov  
$ 52,768.73  
$ 16,656.80  
$ 36,641.71  
Milad Kaddis  
Nicole Léveillé  
Anna Maria Pissignani  
Libero Rubbo  
Sandra Sahn  
$USD 60,000 15%  
$USD 9,000)  
Supplier Invoices  
143] Plaintiffs claim the reimbursement of invoices totalling $11,786.13 which they allege  
were paid by DES but relate to goods and services for the CRC.  
144] Shuchat acknowledged that the invoice issued by Mari C. Design[69] should have been  
paid, in part, by Paragon and not DES. Based on her testimony and that of Duchesne, two  
thirds of the invoice relates to the CRC and DES is entitled to $1,180.41.  
145] No evidence was, however, adduced with respect to the invoices issued to Kristen  
Ami[70] and Mirogolo Lana.[71] The information referred to in the invoices is insufficient to  
allow a determination as to whom the goods and services were provided. Plaintiffs have  
therefore not established that they are related to the CRC as opposed to DES.  
146] Plaintiffs also claim the costs of FedEx shipments to suppliers in China and to Bradley  
in California from February 2015 to January 2016.[72] Easwarathambiah testified that  
shipments which she handled were with respect to the CRC.  
147] Shuchat argues that all of the shipments pertained to the “L.A.M.B.” collection, the last  
of which was completed in February or March 2015 but delivered for sale in the fall of  
015.[73] As of spring 2015, the L.A.M.B. collection had been completed such that deliveries  
were not in relation to this collection. As DES had no ongoing business in Los Angeles, these  
deliveries related to the CRC.  
148] DES is therefore entitled to recover the FedEx invoices subsequent to February 2015  
representing $787.27.  
149] On the basis of the above, DES is entitled to recover the total sum of $117,605.79 broken  
down as follows:  
. Expenses paid to Shuchat:  
i) Travel: $32,704.63  
ii) Cell phone: $764.84  
. 25% of the rent of the DES New York showroom:  
. Salaries paid by DES to employees who worked on the CRC: $65,773.78  
. Expenses paid to suppliers:  
150] Because these damages result from Shuchat’s breach of her duty of loyalty, including  
her use of DES resources, and directly benefitted Paragon as it should have paid these costs of  
the CRC, both Shuchat and Paragon should be condemned to indemnify DES.  
.2.2 Cross Claims  
151] Although the Court concluded that Shuchat’s employment contract and 624 Inc.’s  
service agreement were resiliated for a serious reason, the Court nonetheless considers their  
claims in damages.  
152] Shuchat claims a sum in excess of $360,000 detailed as follows:  
. Twenty-four (24) months of salary as notice:  
. Moral damages  
. 25% of DES and DS Lab profits for 2013 to 2015: undetermined  
153] Shuchat’s Cross Application also seeks an order reserving her right to claim 25% of the  
profits generated by an eventual sale of DES and DS Lab, However, she admitted that she  
never agreed to the partnership agreement offered by Rozenwald such that there is no basis to  
this claim.  
154] At the time that her employment contract was resiliated, Shuchat had been employed by  
DES for over fourteen years. She was specifically recruited to design the women’s apparel  
collections which the Manhattan Group did not previously offer. She held a management  
position and had a great deal of autonomy in managing the design team and the projects that  
she took on.  
155] Because her employment was terminated for cause, Shuchat cannot claim for loss of  
salary. Had Rozenwald not had a serious reason to resiliate her employment contract, she  
would have been entitled to a 15-month notice period, corresponding to approximately one  
month per year of service. Given her salary of $150,000, the total indemnity would have been  
of $187,500.  
156] However, following the termination of her employment contract, Shuchat made no  
effort to minimize her damages.  
157] As of February 2016 and for the following two years, she concentrated on the CRC,  
travelling from Los Angeles to Montreal on a weekly basis. She admitted that she took no  
measures to find other employment but relied on her own investments and that her husband  
offered to support her until she found new work.  
158] Although she made some preliminary calls, her plan was to move to Los Angeles or New  
York. She referred to “a couple of opportunities” but provided no details other than the fact  
that they were too junior. Although she was offered an opportunity to develop a “DS” brand,  
she did not follow-up. She also referred to one telephone conversation with representatives of  
Winners who advised her that they had been told that they could not work with her. She  
assumed this resulted from discussions they would have had with Rozenwald but offered no  
evidence in support.  
159] Shuchat admitted that she did not look for employment in 2017, but continued to  
collaborate with Badgley Mishka and the CRC. The only evidence of the steps she took to find  
new employment were emails dated from April to July 2018, more than 2 years after her  
employment with DES was terminated.[74]  
160] Because Shuchat took no measures to minimize her damages, the indemnity would  
therefore not exceed the 15 months as explained above.  
Moral Damages  
161] Shuchat claims $50,000 in moral damages from Rozenwald because of the manner in  
which her employment contract was resiliated. When she arrived at the meeting of February 5,  
016, Rozenwald held up a bottle of Coco Chanel perfume and waved it at her to illustrate that  
he was aware of the CRC before explaining that he was terminating her employment for cause.  
162] The evidence from Rozenwald and Bassili demonstrates that Shuchat abruptly left the  
meeting saying that her work on the CRC was as an independent contractor. She returned to  
her office and packed her belongings.  
163] Although perhaps not elegant, Rozenwald’s conduct does not constitute bad faith or  
unfair dealing in the course of at dismissal which is required to establish a claim for moral  
164] Shuchat adds that Rozenwald’s decision to terminate her employment for cause was an  
excuse to allow him to avoid paying severance pay and that this demonstrates unfair  
treatment giving rise her claim in damages.  
165] Although Rozenwald may have had other reasons to be dissatisfied with Shuchat,  
including the fact that DES had not produced profits since 2013, her breach of her duty of  
loyalty constituted a serious reason to resiliate her employment contract.  
166] Had Rozenwald committed a fault in the course of the dismissal, Shuchat did not  
adduce evidence of her resulting damages. Her testimony was limited to confirming the  
allegation of her Cross Application that she is claiming $50,000 for stress, inconvenience,  
harassment and anxiety.  
167] Termination of one’s employment undoubtedly results in stress, inconvenience and  
anxiety. Shuchat has, however, not demonstrated that this resulted from an independent fault  
committed in the course of her dismissal. Nor did she provide any explanation of her damages.  
DES Profits  
168] Although Shuchat’s Cross Application includes a claim for 25% of the DES profits from  
013 to 2015, no evidence was adduced in support of the claim nor was the issue argued.  
169] The DES and DS Lab audited financial statements for 2013 to 2015, however, refer to a  
deficit at year end.[75] Hence, there are no profits to share and Shuchat has not established a  
reason to disregard this evidence.  
24 Inc. Service Fee  
170] 624 Inc. claims from Manhattan the unpaid service fee for 2 periods. The first  
corresponds to the unpaid fee of $7,500 per month from June 2013 to March 2014. The  
second refers to the unpaid balance of $2,500 per month for the period of April 2014 to  
January 2016. It also claims $90,000 as a one-year notice of termination of the service  
171] 624 Inc.’s claim for the unpaid fee for the period of June 2013 to March 2014 is  
unrelated to the termination of Shuchat’s employment contract or the termination of the  
service agreement. It is based on Rozenwald’s bad faith and abuse of right.  
172] Following issuance of 624 Inc.’s June 2013 invoice for the service fee, Shuchat  
repeatedly followed up with Bassili.[76] Although the latter indicated that the cheque had  
been submitted to Rozenwald for approval, payment was never issued. Only in November  
013 did Rozenwald advise Shuchat that the fee would no longer be paid because he held her  
entirely responsible for DES’s lack of profitability and the losses resulting from the poor sales  
of the “L.A.M.B.” collection.  
173] Rozenwald had agreed to increase Shuchat’s annual income by way of the service fee.  
The parties agreed it would be paid by Manhattan to 624 Inc. such that Shuchat could also  
benefit from income tax benefits resulting from this structure. No other terms or conditions  
were tied to the payment of this fee.  
174] In the context where the fee paid to 624 Inc. represented 37.5% of Shuchat’s annual  
income, Rozenwald’s unexplained delay in discussing the reasons for terminating the payment  
of the service fee shows warrant disregard for Shuchat and an abuse of right.  
175] The service fee was based on a business relationship and the trust between the parties,  
Rozenwald’s behaviour is inconsistent with the acceptable conduct and constituted an abuse  
of right. 624 Inc. is entitled to damages.  
176] A 5-month notice of termination, equivalent to the period during which Rozenwald  
refused to discuss the issue, amounting to a total sum of $37,500 is warranted.  
177] The second period for which 624 Inc. claims the service fee corresponds to the 22  
months, from April 2014 to January 2016, during which Manhattan paid a fee of $5,000 for  
Shuchat’s collaboration with Manhattan. 624 Inc. argues that it was entitled to $7,500 and  
thus claims the $2,500 for 22 months, for a total of $55,000.  
178] As outlined above, Manhattan could terminate the service agreement insofar as it did so  
in good faith. Having concluded that 624 Inc. is entitled to be indemnified for a 5-month  
period, awarding an additional twenty months for the balance of the fee would result in a  
double indemnity.  
179] Furthermore, there is no evidence that when Rozenwald requested that Shuchat assist  
Manhattan and reinstated the service at $5,000 per month, she did not agree to those terms.  
24 Inc. is therefore not entitled to claim this additional sum.  
180] Finally, having concluded that the service agreement was terminated for cause, 624 Inc.  
is not entitled to the additional notice period claimed.  
181] Defendants seek the expert costs incurred in the context of their efforts to obtain  
complete disclosure of all emails sent to and from Shuchat’s computer during her  
employment.[77] They argue that the expert report was needed to obtain complete disclosure  
of these emails to demonstrate Rozenwald’s knowledge of her involvement in the CRC while  
employed by DES.  
.1 Legal Principles  
182] Article 340 C.C.P. provides that legal costs are owed to the party who succeeds unless  
the Court decides otherwise. These legal costs include expert fees.[78]  
183] It is not necessary that the expert report have been useful to the final decision for a  
party to be entitled to the expert fees. The report must, however, have been useful at the time  
it was requested, given the issues in litigation.[79]  
.2 Analysis  
184] In April 2018, Defendants filed a Notice for Case Management seeking the  
communication of undertakings. The Court ordered, amongst other things, the  
communication of all emails sent to and from Shuchat’s computer until the date of  
termination of her employment.[80]  
185] In June 2018, the parties filed Notices for Case Management to deal with a number of  
outstanding issues. In accordance with the agreement between the parties, the Court ordered  
that the emails to be communicated in accordance with the order issued in April 2018 be as of  
January 2011 and that they not include attachments, subject to Shuchat’s right to request  
copies of relevant attachments.[81]  
186] The emails were communicated to Shuchat in July 2018. Realizing that an error had  
been made in what had been communicated, Plaintiffs sent new USB keys in August 2018.  
187] In March 2019, Defendants presented an Application to Dismiss Plaintiffs’ Origination  
Application on the basis that the emails communicated by Plaintiffs were incomplete. They  
further alleged being unable to access the USB keys on which the emails were communicated.  
At the hearing, DES’s information technology consultant Jonathan Green, who had previously  
provided a sworn statement,[82] testified as to the process pursuant to which Shuchat’s  
emails were archived following the termination of her employment and subsequently  
transferred the USB keys to respond to the undertaking.  
188] The Court postponed Defendants’ Application to Dismiss Plaintiffs’ Originating  
Application and granted Defendants an additional delay to retain its own information  
technology expert to access the emails provided.[83]  
189] On September 3, 2019, Defendants presented an Amended Application to Dismiss  
Plaintiffs’ Originating Application. They alleged that the emails communicated were  
incomplete and more particularly that emails which Shuchat alleged having sent or received  
were not included in the disclosure and had to have been destroyed. In support of their  
Application, Defendants filed the expert report of Gilbert Castilloux who testified at the  
190] In its judgment dated September 9, 2019, the Court concluded that Castilloux’s report  
was insufficient to establish that Plaintiffs had destroyed any evidence or failed to disclose  
emails. Amongst other things, the Court noted that Castilloux had not been provided with all  
of the relevant information and that he failed to refer to the fact that the emails which he  
identified as having altered were those from which attachments were removed as per the order  
of June 2018.[85] Defendants’ Application to Dismiss was therefore denied, with costs to  
191] However, the Court nonetheless noted that the hard drive from Shuchat’s computer  
remained available and therefore ordered that it be made available to Defendants to verify the  
existence of missing emails.  
192] Castilloux did not testify at trial. His report was therefore excluded as Defendants did  
not make him or any other representative of Enquêtes Forensic available for cross-  
examination as requested by Plaintiffs.  
193] Defendants argue, however, that Castilloux testified before the Court at the hearing of  
September 2019 and that given his testimony, the Court ordered that the hard drive from  
Shuchat’s computer be made available which subsequently led to the filing by Defendants of  
additional emails.  
194] Defendants further argue that had it not been for the disclosure of the emails, Plaintiffs  
would not have modified their position with respect to Shuchat’s breach of her duty of loyalty.  
Indeed, Plaintiffs’ Amended Originating Application alleges that Shuchat never presented the  
CRC as something DES would be interested in. However, at trial, Rozenwald acknowledged  
that Shuchat discussed the project with him in January 2015 but that he instructed her not to  
pursue it.  
195] However, in its judgment of September 9, 2019, the Court concluded that although  
Castilloux’s report is critical of the method used by Green to archive Shuchat’s emails, it did  
not conclude to the destruction or alteration of emails.[87]  
196] Moreover, during his testimony at the hearing of September 3, 2018, Green referred to  
approximately 30 emails sent to and from Shuchat’s computer with respect to the CRC.[88]  
197] Despite having been given the opportunity to inspect the hard drive and to retrieve  
additional emails, Shuchat has not established that any of the emails filed demonstrate that  
she had advised Rozenwald of her involvement in the CRC while employed by DES.  
198] Moreover, Shuchat has not demonstrated that Defendants destroyed any evidence or  
that a negative inference should be drawn from the fact that the hard drive was made available  
only as a result of the judgment of September 2019.  
199] Shuchat has not demonstrated that an exception to the principle set out in article 340  
C.C.P. should be made and that she is entitled to recover the expert fees.