1485625 Ontario Inc. v. Peel Halton Kitchens Inc., 2004 CanLII 11170 (ON SCDC)

COURT FILE NO.: 282/03

DATE: 20040419

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN: )

1485625 ONTARIO INC., AMRIT PAL ) Peter M. Callahan for the Appellants SINGH, MANJIT KAUR, GURBAX ) SINGH RAVI AND RAJWANT ) KAUR RAVI )

Appellants )

-and- )

) David R. Rothwell for the Respondent

PEEL HALTON KITCHENS INC. )

Respondent ) HEARD: November 12, 2003

THEN J.:

1This is an appeal by 1485625 Ontario Inc., Amrit Pal Singh, Manjit Kaur, Gurbax Singh Ravi and Rajwant Kaur Ravi (Appellants) from the judgment of Case Management Master MacLeod, dated May 9, 2003 granting summary judgment against all of the Appellants ordering that the Appellants shall, jointly and severally, pay to the Respondent the sum of $80,000 plus pre-judgment interest thereon calculated at the rate of 3% per year from September 10, 2002 to the date hereof.

2The Appellants seek an order setting aside the judgment of the Master or in the alternative, an Order staying the execution of the judgment pending the disposition of this action and the action in Court File No. 03-BN-2885 (commenced in Brampton).

BACKGROUND

3This matter arose out of dispute over an outstanding debt. The Company 1485625 Ontario Inc. purchased a business, ‘Your Host Caterers’ from the Respondent Peel Halton Kitchens Inc. The named individuals signed four promissory notes each in the amount of $150,000 payable every three months commencing on the third month following the closing of the sale transaction in satisfaction of the outstanding portion purchase price for ‘Your Host Caterers.’ At the time of the hearing before the Master a total of $520,000 had been paid to the Respondent in satisfaction of three of the four promissory notes and in partial satisfaction of the fourth note. A total of $80,000 remained outstanding. The Appellants refused to forward the remaining amount to the Respondent as they had commenced a second action in Brampton against the Respondent alleging that he had breached the non-competition provision of the ‘Agreement of Purchase and Sale’ and the terms of a packaged foods supply agreement. The Respondent brought an action to recover the outstanding amount due on the promissory note.

4The Respondent then brought a motion for summary judgment. On May 9, 2003 the Master granted the motion ruling that the neither absence of any consideration received by the individual defendants in respect of the Promissory note nor the claim for set-off raised a triable issue. He also found that there was no reason to stay the judgment pending the outcome of the Brampton action.

STANDARD OF REVIEW

5It is clear that the interlocutory decision of a Master are to be reviewed according to the same standard as the decisions of judges (Marleen Investments Ltd. v. McBride et. al (1979), 1979 1895 (ON SC), 23 O.R. 125; also see McBride v. Pilon (2002), 2002 53260 (ON SCDC), 163 O.A.C. 101). The decisions of judges are not to be interfered with unless it can be demonstrated that the judge was clearly wrong. (Walsh v. 1124660 Ontario Ltd., [2000] O.J. No. 4069 at para. 14)

6However, there is some dispute as to the proper standard of review to apply to a decision of a Master that is final or vital to the disposition of a case – as the decision granting summary judgment clearly is. The traditional approach has been that Masters’ orders vital to the final disposition of the case should be reviewed by way of a hearing de novo (Stoicevski v. Casement (1983), 1983 1679 (ON CA), 43 O.R. (2d) 436). This assumption was challenged by Justice Morden of the Court of Appeal of Ontario (see: Carter v. Brooks (1990), 1990 2623 (ON CA), 2 O.R. (3d) 321).

7The distinction between the standard of review for the decision of a Master compared to a decision of a judge has been based upon the assumption that Master’s rarely hear oral evidence. This distinction becomes hard to justify when one considers that the decisions of judges are entitled to a high level of deference even when a judge has heard no oral evidence. If the discretionary or interlocutory orders of Masters are generally reviewed according to the same standard as the discretionary orders of judges there seems to be little reason to treat final orders of Masters differently on the basis of their not having heard oral evidence. There is even less reason to impose a different standard of review in cases where the Master did hear oral evidence.

8Given that the Master heard oral submissions from counsel for both the plaintiff and the defendants there is no reason to grant his decision any less deference than that given to the order of judge. Therefore, unless it can be demonstrated that the Master was clearly wrong, his decision should stand.

ANAYLSIS

9The key issues involved in this appeal are

(i) Whether the Master erred in his determination that the absence of any consideration received by the individual defendants in respect of the promissory note did not raise a triable issue

(ii) Whether the Master erred in denying the defence of set-off to the Appellants.

(iii) Whether the Master should have stayed execution of his judgment.

CONSIDERATION FOR PROMISSORY NOTE

10In his reasons, the Master found that there was no need to fully consider the defence of failure of consideration with respect to the personal defendants (Appellants), partly because the pleadings as framed did not raise a triable issue and the Appellants made only bald denials with respect to this issue in their affidavit material provided to the Master. (See: McBride v. Pilon (2002), 2002 53260 (ON SCDC), 163 O.A.C. 101 (S.C.J.).

11However, the main reason the Master did not fully deal with the issue of consideration was that funds to satisfy the judgment had been paid into court and the corporate defendant was an still is an operating entity. As there was no issue as to the liability of the corporation on the promissory note, the Master did not have to determine the liability of the individual defendants in order to find that the fund held in trust and paid into court was the property of the Respondent.

12Notwithstanding the approach taken in his reasons, the Master in his order found the individual defendants jointly and severally liable. In my view he was correct in doing so. The maker of a promissory note is prima facie liable. Section 57 of the Bills of Exchange Act, R.S.C. 1985, s. B. 4 deems the existence of consideration in the absence of proof to the contrary. A bald assertion that no consideration was received is not sufficient to rebut the presumption that consideration was received. The individual defendants were therefore individually liable as signatories of the promissory note.

13Moreover, the order made by the Master is supported by the jurisprudence.

14In Currie v. Misa (1875) L/R/ 10 Exch. 153 consideration was found to consist of some right, interest, profit or benefit accruing to one party or some forebearance, detriment, loss or responsibility, given, suffered or undertaken by the other. It is a reasonable inference that the individual Appellants did gain some form of benefit or profit from the willingness of Peel Halton Kitchens to allow 1485625 Ontario Inc. to pay its debt over time through the use of the promissory notes in view of the evidence of their connection to 1485625 Ontario Inc.

15It is also clear that the promise need not benefit the promisor. If B lends money to X in exchange for A’s promise to guarantee repayment, there is no doubt that there is a bargain between A and B and that A’s promise is enforceable without any inquiry into whether A benefited by the advance of the money to X (See S.M. Waddams, The Law of Contracts, 3rd Edition (Toronto: Canada Law Book Inc. 1993): para 118; also see Caligiuri v. Tumillo, [2003] M.J. No. 345). In this case the individual defendants essentially agreed to guarantee the promissory note for the benefit of 1485625 Ontario Inc.

16The Master did not err when he determined that the defence of failure of consideration did not raise a triable issue and while it was unnecessary for the Master to determine individual liability of the personal defendants in the circumstances of this case he did not err in doing so.

SET-OFF

17The Master determined that the Appellants’ claim for set-off did not raise a triable issue that would prevent a judgment from issuing. The Appellants claimed that the debt claimed against them by Peel Halton Kitchens should be set-off against the claims made by the Appellants against Peel Halton Kitchens in Court File No. 03-BN-2885, a separate action commenced in the Superior Court of Justice in Brampton.

18The Master found that the defence of set-off did not exist in this case. Set-off requires that the defendant owe a debt to the plaintiff such that the two debts may cancel each other out. The Master pointed out that it is settled law in Ontario that equitable set-off is not available against a negotiable instrument such as a promissory note (Iraco Ltd. v. Stainman Steel Ltd. (1986), 1986 2739 (ON SC), 27 D.L.R. (4th) 69). Consequently, the pleading of set-off cannot be a bar to summary judgment on the promissory note.

19In addition set-off requires an actual debt. Legal set-off requires a liquidated, or proven debt, but even equitable set-off requires more than simple allegations or claims of money owing. The Brampton action is not an action to reclaim a debt owing. It is a claim for damages. In my view, unproven allegations that a defendant owes damages to a plaintiff is insufficient to engage the defence of set-off. The Master was correct in finding that there was no basis for a defence of set-off.

20In addition, claiming a defence of set-off is generally accomplished through filing a counter-claim. The Appellants did not file a counterclaim. They instead chose to commence a separate action. As the Master found, although the statement of claim in that separate action may raise a triable issue, the Appellants, having elected to pursue those claims in a separate action rather than through filing a counterclaim in this action, left no basis upon which to stay the judgment within the context of the motion for summary judgment.

21The Master therefore, did not err in finding that the defence of set-off did not raise a triable issue.

22Since neither the lack of consideration defence nor the set-off defence were found to be available, the Master did not err in granting the motion for summary judgment. He was also correct in finding that there was no reason to stay the judgment.

23The Appeal is dismissed.

24If the parties cannot agree as to costs, brief submissions in writing may be made within 30 days of the release of the judgment.

Then J.

Released:

COURT FILE NO.: 282/03

DATE: 20040419

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

B E T W E E N :

148625 ONTARIO INC., AMRIT