Court File and Parties
Citation: Diagnostic Imaging International et al., v. Quinte Magnetic Resonance Imaging, Inc. et al., 2010 ONSC 2960 Divisional Court File No.: 142/10 Court File No.: CV-384970 Date: 2010-05-27
Ontario Superior Court of Justice Divisional Court
Between:
Diagnostic Imaging International Corp. and Canadian Teleradiology Services, Inc., Plaintiffs
– and –
Quinte Magnetic Resonance Imaging, Inc., Dawn C. Haider and Syed Islam Haider, Defendants
Counsel: Patrick Summers, Counsel for the Plaintiffs, Moving Parties on the Motion for Leave Robert Benjamin Mills, Counsel for the Defendants, Respondents on the Motion for Leave
Heard at Toronto: April 29, 2010
Endorsement
Greer J.:
[1] The Plaintiffs move for an Order granting them Leave to Appeal from the Order of Mr. Justice Newbould, ("the Motions Judge") dated March 10, 2010 ("the Order"), ordering the Plaintiff, Canadian Teleradiology Services, Inc.("CTS") to do the following:
To pay into Court the amount of $150,000 for the period of the Consulting Contract up to March 2, 2010, made between CTS and one of the Defendants, Syed Islam Haider ("Dr. Haider"); and
To pay into court on a bi-weekly basis for the second year of the Consulting Contract made between it and Dr. Haider, in the amount of $150,000 per annum payable in bi-weekly instalments under the terms of paragraph 6 of the Consulting Contract; and
That the action be transferred from Toronto to Belleville; and
That the Plaintiffs pay, within 30 days of the Order, to the Defendants its Costs, inclusive of disbursements and GST of $22,000.
[2] The Defendants' Motion before the Motions Judge involved the enforcement of a Security Agreement between the Defendants and CTS. While the Motions Judge made the Orders as noted above, he also left for trial, a number of issues between the parties.
Grounds for Leave
[3] The Plaintiffs say that the Motions Judge made the following errors:
(a) In finding that irreparable harm "could well occur" to the Defendants and failing to consider, at all, any risk or peril until trial for the Plaintiffs relating to the assets/collateral secured under the Security Agreement in the contracts between CTS and radiologists and hospitals, and the revenues generated by those contracts.
(b) in his application of S.67 of the Personal Property Securities Act, R.S.O. 1990, c.P10 ("the PPSA"), he erred in making the Orders he did when there were material facts in dispute.
(c) he improperly relied upon evidence that was not properly before the court, in particular a letter dated March 1, 2010, from the solicitors for the Plaintiffs to the solicitors for the Defendants, and relying upon an undertaking as to damages made by one of the Defendants only provided on the day the motion was heard, which undertaking was not subject to rebuttal or cross-examination.
(d) erred in law in disregarding authority to the contrary of his findings in relation to the above.
(e) erred in ordering that the venue of the action be changed from Toronto to Belleville and failed to consider authority that a Court should only order a change of venue if the Defendants' suggestion is significantly better than the Plaintiffs' suggestion.
(f) with respect to the issue of irreparable harm, by improperly focusing on the financial circumstances of DIIC, one of the Plaintiffs.
[4] The Plaintiffs say that Leave should be granted under both branches of rule 62.20(4) of the Rules of Civil Procedure. They further say that the Motion for Leave raises matters of public importance that concern secured lenders and parties in connection with the interpretation and application of the PPSA. They say it touches upon the relationship between the statutory scheme imposed by the PPSA and involves circumstances not considered previously by the Courts of Ontario.
[5] The Plaintiffs further say that there are conflicting cases in Ontario that give rise to the appeal. They say this purchase of a business by them from the Defendants, which is secured by an agreement provided by the purchaser Plaintiffs to the vendor Defendants, and the Plaintiffs later raising the issue of set-offs in relation to that purchase, is an issue that has not been previously considered by the Courts of Ontario in the context of this type of motion. These issues, say the Plaintiffs, transcend the interests of the immediate parties. They also say it is of importance to the public.
Some background facts
[6] These important background facts are set out in the Motions Judge's Reasons. CTS was founded by Dr. Haider in 2004. It links subscribing hospitals which have the necessary equipment and technicians to take MRIs and other diagnostic images in Ontario. Those hospitals must also have radiologists who can read the images. CTS provided equipment needed to the hospitals and its revenues were derived from being paid a percentage of the reporting radiologist's fee. This was CTC's most valuable asset.
[7] The action arises from the sale of the shares of CTS by the Defendants to the Plaintiff, Diagnostic Imaging International Corp. ("DIIC"). In connection with such purchase, there was a Consulting Contract, made between CTS and Dr. Haider under which he was to perform consulting services for a period of time. Part of the purchase price for the shares was also to be paid over time. Further a security agreement was made between CTS and each of the Defendants under which all of the assets of CTS were secured to the Defendants. Dr. Haider provided the services agreed upon from March 2, 2009 to August 31, 2009, when CTS purported to terminate the consulting contract with him. Payments to him were also terminated.
[8] On August 13, 2009, prior to the purported termination of the consulting agreement, the Plaintiffs commenced this action claiming damages for various alleged breaches of the purchase and consulting agreements and claimed damages for alleged breach of fiduciary duty owing by Dr. Haider to CTS. On September 16, 2009, Dr. Haider counterclaimed for damages of $300,000, being the total amount to be paid to him under the Consulting Contract.
The Test under rule 62.02(4)
[9] The test under rule 62.02(4) is a two part test. It states that Leave to Appeal shall not be granted unless either subrule a) or subrule b) is found by the Judge to apply. It reads:
Leave to appeal shall not be granted unless,
(a) There is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal, and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or
(b) There appears to the judge hearing the motion there is good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.
Analysis under Rule 62.02(4)
[10] I find that the Plaintiffs have not met either test under rule 62.02(4). I dismiss the Motion for Leave for the reasons as set out below.
[11] The Motions Judge gave very extensive, detailed reasons in coming to the decisions he did regarding the two issues before him, namely the change of venue issue and the payment into Court issue.
[12] With respect to the change of venue issue, the Motions Judge ordered that the case be moved from Toronto to Belleville. He made no error in this regard. In paragraphs 47 to 55 of his Endorsement, the Motions Judge properly applied rule 13.1.02(1) to the transfer of venue and took all factors into consideration. He followed the decision of Master Glustein in Borden v. Rai, [2008] O.J. No. 1815 in his analysis of the factors and came to a conclusion that was not incorrect. Change of venue is not a matter that involves anyone but the parties.
[13] There is no conflicting decision by another judge or Court in Ontario or elsewhere on the change of venue issue involved in the proposed Appeal. The Plaintiffs cite a number of cases, which they say are conflicting with respect to the issue of the change of venue. I have reviewed these and note that each turns on the facts of the case. In Eveready Industrial Services Corp. v. Jacques Daoust Coatings Management Inc. (2005), 76 O.R. (3d) 390 (S.C.J.), Mr. Justice Stinson points out that rule 13.1.02(2)(b) sets out all the factors to be considered by a Judge hearing the Motion to change venue. I cannot see where the Motions Judge erred in coming to the conclusion he did, given that he took all these factors into account.
[14] Even though the Motions Judge said, in his Endorsement, that "there is much to be said for either Toronto or Belleville being the venue for the action", he determined it was preferable to have it move to Belleville, where Dr. Haider and other witnesses reside. See: para. 18 in Siemens Canada Ltd. v. Ottawa (City) (2008), 93 O.R. (3d) (S.C.J.)
[15] Motions under rule 13.1.02(2)(b) are fact specific and require weighing and balancing all the enumerated factors under the rule, as noted in Nutech Brands Inc. v. Air Canada, [2007] O.J. No. 5031 (S.C.J.) in para. 21. The Motions Judge was aware of this and set out the facts he took into account under each factor. He then concluded in para. 55 of his Endorsement that it is "...desirable and in the interests of justice to transfer the action from Toronto to Belleville." He made no error in doing so, and there are no conflicting decisions, each venue change Motion being determined on the weighing and balancing of all the facts. The Motions Judge did not stray from the proper test as set out in Siemens, supra.
[16] With respect to the issue of payment of monies into Court, the Motions Judge in his Endorsement, in paragraphs 13 to 43 analyzes all of the Plaintiffs' arguments that the money should not be paid into Court, and concludes in paragraph 45 that Dr. Haider:
...has established a right to have money paid into court. He has established in my view a strong prima facie case that he is entitled to payment of consulting fees under the consulting agreement. The plaintiffs have certainly not established anywhere near a strong case that they are entitled to set off amounts otherwise payable under the consulting agreement. Moreover, in light of the apparent financial circumstances of the plaintiffs, Dr. Haider has established that irreparable harm could well occur if an order is not made protecting him.
[17] Nor did the Motions Judge err is his application of S. 67.1(e) of the Personal Property Security Act, R.S.O. 1990, Ch. P-10. It reads:
- (1) Upon application to the Superior Court of Justice by a debtor, a creditor of a debtor, a secured party, an obligor who may owe payment or performance of the obligation secured or any person who has an interest in collateral which may be affected by an order under this section, the court may,
(e) make any order necessary to ensure protection of the interests of any person in the collateral, but only on terms that are just for all parties concerned;
[18] The Motions Judge's Reasons are seventeen (17) pages in length. There is a full analysis of all the issues, which were before him. In paragraph 14 of the Reasons, the Motions Judge notes that Dr. Haider was relying on S.67 of the PPSA, which gives a court authority to make any order necessary to ensure protection of the interests of any person in the collateral secured on terms that are just for all parties concerned. Dr. Haider therefore asked for the Order that the Plaintiffs immediately pay into Court all amounts now due and owing under the Consulting Contract. The Motions Judge finds in paragraph 17 that the provision secures any obligation whatsoever and howsoever incurred. There were no material facts in dispute in the Security Agreement and Consulting Contract.
[19] In paragraph 19, the Motions Judge found that this was not a case of an attempt to secure execution before judgment. The Consulting Contract in question is a secured obligation and the Motions Judge found that there would be irreparable harm if the payment into Court was refused. He found that the balance of convenience lies with the Defendants. It was within the Motions Judge's discretion to make an order preserving rights in the pending litigation and it was within his discretion to craft the order to suit the circumstances of the case before him.
[20] The Security Agreement was entered into contemporaneously with the Consulting Contract. As found by the Motions Judge in paragraphs 17 and 18 of his Reasons, Article 4 of that Agreement encompasses the obligations to pay set out in the Consulting Contract. The Motions Judge had before him DIIC's June 30, 2009 Quarterly Report filed with the United States Securities and Exchange Commission. DIIC also reports on CTS. That Report said that the companies "incurred net losses of $664,193 for the six months ended on June 30, 2009, as well as working capital deficit of $391,257", raising a doubt as to the company's ability to continue as a going concern. The Motions Judge did not err in taking this fact into account in coming to the decision he did. The Report encompassed both Plaintiffs and he was entitled to consider this fact, in his application of S.67 of the PPSA, since he found that it applied to the Consulting Contract.
[21] The Motions Judge says that the money to be paid into Court was available to the Plaintiffs from the income stream they received under the contract from the various participating radiologists. Not paying the money into Court would result in irreparable harm to the Secured Parties under the Security Agreement. In paragraph 23 of his Endorsement , the Motions Judge adopts the principles set out in Altricor Financial Management Inc. v. Nu-Port Homes Inc. (2003), 7 R.P.R. (4th) 33 (S.C.J.) in coming to this finding.
[22] The fact that the Motions Judge allowed a letter to be submitted on the day of the Motion and relied on its contents, is not an error. It was within the Motion Judge's discretion to allow it in and review it and refer to it in his Endorsement. The Defendants say that there was no dispute regarding the contents of the letter.
[23] The proposed appeal does not involve matters of importance to anyone other than the parties themselves. The purchase of the business did not involve matters of importance to the public. The fact that S. 67.1(e) of the PPSA may not have been cited elsewhere, does not mean that the Motions Judge erred in his application of it in his Endorsement.
[24] Lastly, the set off issue between the parties and raised by the Plaintiffs, was carefully analyzed by the Motions Judge in paragraphs 31 to 41 of his Endorsement, with the validity of the $67,000 claim left for the Trial Judge to determine.
Conclusion
[25] The Plaintiffs' Motion for Leave to Appeal is therefore dismissed. Neither subparagraphs a) or b) of rule 62.02(4) apply in the circumstances of this Motion.
[26] The Defendants, being the successful parties, are entitled to their Costs. If the parties cannot otherwise agree on Costs, I will receive brief written submissions from the parties, no longer than three pages in length, plus a Bill of Costs from the Defendants and their counsel's time dockets. The Defendants shall send their submissions to the Plaintiffs by June 11, 2010 and the Plaintiffs shall respond by June 18, 2010.
Greer J.
Released: May 27, 2010