Court of Appeal for Ontario
Date: 2019-01-11
Docket: C65504, C65239 & M49809
Judges: Strathy C.J.O., Lauwers and Zarnett JJ.A.
Parties
Between
Healthy Lifestyle Medical Group Inc., Rochak Badhwar, Gore Doctors Medical Inc., Ashok Badhwar, Usha Badhwar, Aash Karia, Bindaas Capital Inc., and Marvin Talsky
Appellants
and
Chand Morningside Plaza Inc., and Joshi Group of Companies Ltd.
Respondents
and
Mark Klaiman and Jeb Assaf
Intervenors
Counsel
Paul Robson and Karanpaul Randhawa, for the appellants
Jonathan L. Rosenstein, for the respondents
Scott Hutchison and Lauren Mills Taylor, for the intervenors
Heard: December 20, 2018
On appeal from: The judgment of Justice A. Pollak of the Superior Court of Justice, dated January 3, 2017.
Reasons for Decision
The Guarantee and Summary Judgment
[1] The appellants, Ashok Badhwar and Usha Badhwar, are Rochak Badhwar's parents. At his request, they signed a guarantee in favour of the respondents, guaranteeing the debts of Healthy Lifestyle Medical Group Inc. in the principal sum of about $607,000.
[2] The motion judge granted summary judgment in favour of the respondents against the appellants in the amount of $954,842.55. If the judgment stands, the appellants will lose their house.
The Pleading Issue
[3] The appeal turns largely upon whether the motion judge was right to refuse to consider a defence she observed was potentially a genuine issue for trial – that there was no consideration for the guarantee because it was signed after the loan to Healthy Lifestyles had been advanced – because in her view the defence was not pleaded. The motion judge stated, at para. 13:
The Badhwars did not plead the defence of "no consideration because the Guarantee was signed after the loan monies were advanced" in their defence. They specifically plead that there was no consideration because they personally did not benefit from the Guarantee. They did not ask to amend the Statement of Defence at the hearing of this motion to include the above-noted defence. The Plaintiffs submit that they would have adduced further evidence had such a pleading been made in the Statement of Defence and that it would therefore be prejudicial and improper for this Court to consider the defence of no consideration because the Guarantee was signed after the loan monies were advanced. I agree that in the absence of a motion to amend pleadings, which the Defendant could have made at the hearing of this motion but did not, the Court has no option but to find that this defence cannot be considered on this motion even though had it been properly pleaded, it could have potentially established a genuine issue requiring a trial on this motion. [Emphasis added.]
The Amended Statement of Defence
[4] It was common ground on the appeal that although the original statement of defence did not refer to a "no consideration" defence, what was before the motion judge was a fresh as amended statement of defence, which provided:
These Defendants admit that the signatures contained on the Guarantee, Promissory Note and Charge/Mortgage and Acknowledgement produced to them in connection with the litigation (collectively, the "Documents") are theirs. These Defendants' understanding, at all material times, was that they were guaranteeing the obligations of their son, the Defendant Rochak Badhwar ("their son" or "Rochak"). They were aware that their son had entered into business ventures involving multidisciplinary health care centres in Scarborough and Brampton.
These Defendants were not given an explanation for why they themselves were required to sign a Promissory Note. They received no monies or monetary benefit by signing same and received no consideration in return for their having executed any of the Documents. These Defendants were not and have never been directors, officers, shareholders, employees, agents, creditors or otherwise of their son's corporations. They had nothing to gain by signing the Documents and did so gratuitously, out of natural love and affection. (Emphasis added.)
These Defendants were presented with the Documents for the first time on October 7, 2010. Their signatures were hurriedly taken. The Documents were not explained to them. They met with a solicitor, Amritpal Singh Mann, at the offices of the Plaintiff's solicitor, Jagmohan Singh Nanda. They believed that Mr. Mann worked for or with Mr. Nanda. Mr. Nanda himself met with them, briefly, and provided them with a brochure entitled Homeowners Insurance, published by the Co-Operators. Mr. Nanda (not Mr. Mann) telephoned, on their behalf, the Co-Operators insurance representative and, as such, influenced or participated in the process of their renewing their insurance. These Defendants state that the advice they received from Mr. Mann was not independent or not truly independent and was, instead, a mere formality and given in a perfunctory manner. These Defendants plead and rely on the doctrine of non est factum and state that the Documents were signed under duress. These Defendants never received a reporting letter or invoice from Mr. Mann.
The Documents themselves, while signed on October 7, 2010, bear different dates. The Promissory Note and Guarantee are both dated October 1, 2010.
These Defendants state, in any event, that there is sufficient equity in the Morningside Properties, that the Plaintiffs have not taken steps or sufficient steps to realize on such equity and that, having regard to the existence of sufficient equity in the Morningside Properties, it would be unconscionable or inequitable for the Plaintiffs to continue their Power of Sale Proceedings against These Defendants. The Residence has a special and emotional significance to These Defendants. It is where they have lived for approximately 20 years and it is where their daughter will be married this summer or fall.[1]
The Intervenors' Position
[5] The intervenors are former counsel for the appellants, against whom the appellants make allegations of ineffective representation. Counsel argues that the amended statement of defence advanced two versions of the "no consideration" argument. The first is that, as noted in para. 8 of the amended statement of defence, the appellants "received no monies or monetary benefit by signing same [the promissory note] and received no consideration in return for their having executed any of the Documents", but that they signed the documents "gratuitously, out of natural love and affection."
[6] The second, according to the intervenors, is the issue that past consideration is no consideration, since the amended statement of defence alleged in para. 9 that the signing of the documents by the appellants followed by several days the actual advance of the monies by the creditor to their son, facts from which that legal issue could be argued. This very point was made in the factum filed by the appellants' motion counsel on the summary judgment motion and in the August 2016 affidavit of Ashok Badhwar that was also before the motion judge. The intervenors urge this court not to hold against the appellants the election made by their motion counsel not to request leave to amend because, in the context, counsel was faced with uncertainty about whether the motion judge would grant leave to amend and did not want to concede the argument to the other side that both aspects of a no consideration argument had already been alleged adequately.
The Court's Analysis
[7] As noted, the motion judge observed that the defence that past consideration is not valid consideration could have been a genuine issue for trial, but she refused to consider it. In our view she erred. The motion judge did not consider the principles by which a court assesses the adequacy of pleadings. In considering whether a pleading discloses a reasonable defence, a court is obliged to read the pleading generously to allow for drafting deficiencies, and if the defence has some chance of success, it must be permitted to proceed. A statement of defence is required to contain the material facts on which a party will rely. Here the facts on which the legal argument about consideration would be based were alleged.
[8] Read generously, the amended statement of defence does plead the defence of "no consideration" on the two grounds noted above. Accordingly, the decision of the motion judge on the consideration issue cannot stand.
Partial Summary Judgment
[9] The motion judge's analysis was sparse and perfunctory, and did not address the full scope of the defences raised. In Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, this court cautioned against partial summary judgment where it is possible that the trial judge "will develop a fuller appreciation of the relationships and the transactional context than the motions judge" which could risk "inconsistent findings and substantive injustice" para. 37; see also Butera v. Chown, Cairns LLP, 2017 ONCA 783, 137 O.R. (3d) 561, and Mason v. Perras Mongenais, 2018 ONCA 978. The respondent did not argue that if we disagreed with how the motion judge dealt with the pleading point we should preserve specific other parts of her decision.
Disposition
[10] In all the circumstances of this case, including the contentious issues of fact and law raised by the appellants, we allow the appeal, set aside the judgment and direct that the matter proceed to trial on all issues, without prejudice to the rights of the parties to file amended pleadings and to seek further relief under the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. If the parties are unable to reach agreement respecting costs, then each may provide a written costs submission limited to 3 pages, within 10 days of the release of these reasons.
"G.R. Strathy C.J.O." "P. Lauwers J.A." "B. Zarnett J.A."
Footnote
[1] In an interlocutory decision prior to the hearing of the appeal, Paciocco J.A. observed that the statement of defence made no mention of an absence of consideration. That comment was apparently based on the original statement of defence, the amended version having not been brought to his attention.
