Court of Appeal for Ontario
Date: 2021-01-13 Docket: M51825 (C68121, C68122, C68123)
Before: Thorburn J.A. (Motions Judge)
Parties
Docket: C68121
Between: Heliotrope Investment Corporation, Plaintiff (Respondent/Responding Party)
And: 1324789 Ontario Inc., Martha Lorraine Beach, Johnathan Gary Beach and 1073650 Ontario Inc., Defendants (Appellants/Moving Parties)
And: 1324789 Ontario Inc., Martha Lorraine Beach, Johnathan Gary Beach and 1073650 Ontario Inc., Plaintiffs by Counterclaim (Appellants/Moving Parties)
And: Canadian Western Trust Company (In Trust for RRSP Plan Number #10084752 and Plan #10084190), Heliotrope Investment Corporation, Magenta Capital Corporation and Magenta Mortgage Investment Corporation, Defendants by Counterclaim (Respondents/Responding Parties)
Docket: C68122
And Between: Canadian Western Trust Company (In Trust for RRSP Plan Number #10084752 and Plan #10084190), Plaintiff (Respondent/Responding Party)
And: 1324789 Ontario Inc., Martha Lorraine Beach, Johnathan Gary Beach and 1073650 Ontario Inc., Defendants (Appellants/Moving Parties)
And: 1324789 Ontario Inc., Martha Lorraine Beach, Johnathan Gary Beach and 1073650 Ontario Inc., Plaintiffs by Counterclaim (Appellants/Moving Parties)
And: Canadian Western Trust Company (In Trust for RRSP Plan #10084752 and Plan #10084190), Heliotrope Investment Corporation, Magenta Capital Corporation and Magenta Mortgage Investment Corporation, Defendants by Counterclaim (Respondents/Responding Parties)
Docket: C68123
And Between: Canadian Western Trust Company (Incorporation No. A46845), In Trust for RRSP Plan Number #10084752 and Plan #10084190, Plaintiff/Defendant by Counterclaim (Respondent/Responding Party)
And: 1324789 Ontario Inc., 1073650 Ontario Inc., Johnathan Gary Beach and Martha Lorraine Beach, Defendants/Plaintiffs by Counterclaim (Appellants/Moving Parties)
Counsel: Bruce D. Marks, for the moving parties Charles L. Merovitz and Eric Lay, for the responding parties
Heard: January 5, 2021 by video conference
Reasons for Decision
Overview
[1] The moving party appellants (“the Appellants”) seek two orders: (a) an order to extend the time to file a Supplementary Notice of Appeal, and (b) an order to permit them to file fresh evidence.
[2] The appellants have appealed an order for summary judgment and that there be no stay of the order pending appeal. The Appellants resisted the summary judgment motion on two grounds: that the Respondents made representations that the loans would not have to be repaid before development of the properties was completed, and that in any event, judgment should be stayed pending appeal as there was related litigation that, if successful, would reduce the amounts owing by the Appellants. The motion judge rejected both arguments.
[3] The Appellants claim their lawyers filed a Notice of Appeal that focuses on the order denying a stay. The Appellants claim however that they understood the merits of the underlying judgment were being appealed. They wish to file a Supplementary Notice of Appeal to clarify this. Secondly, the Appellants seek to file fresh evidence. They claim that this evidence supports their argument that they did not have independent legal advice when they signed the Joint Venture Agreement, and that they signed the Agreement under duress.
[4] The Respondents claim that the request to file a Supplementary Notice of Appeal is just another delay tactic to prevent the Respondents from recovering monies owing pursuant to simple mortgage collection actions and the request should be refused. Second, they claim the “fresh evidence” is not new as the Appellants knew about their own retainer with counsel and could have adduced this evidence earlier and, in any event, there is no evidence that the Appellants were without legal counsel when they signed the Joint Venture Agreement.
[5] For the reasons that follow, the Supplementary Notice of Appeal may be filed to clarify that the appeal of the underlying decision is in respect of both issues raised by the Appellants on the summary judgment motion. However, the motion to permit fresh evidence is denied.
Background
[6] The parties’ principals, Gavin Marshall and Johnathan Beach, have been involved together in residential land development projects since 2013. Mr. Marshall provided the financing and Mr. Beach was the project manager.
[7] Negotiations between Mr. Beach and Mr. Marshall culminated in agreements that Mr. Marshall and his spouse would lend money to 1324780 Ontario Inc. (“132”) through Registered Retirement Savings Plans they held with Canadian Western, secured by mortgages on several properties under development pursuant to joint venture agreements. Mr. Beach would provide management services to the Joint Ventures and would be subject to a non‑competition proviso, and 132 would complete the projects.
[8] The Appellants claim they were financially dependent on the Respondents, and, as such, the Respondents owed them a fiduciary duty to act in their best interest.
[9] Cost overruns and delays resulted in financial losses and the mortgages are now in default.
The Decision Below
[10] The Respondents brought motions for summary judgment for payment of monies owing in respect of three mortgages with the Appellants.
[11] The parties agreed that the Respondents had advanced monies secured by mortgages, and that the Appellants had been in default for some time. As noted by the motion judge, there was also no dispute regarding “the arithmetical calculation of principal and accrued interest”.
[12] The Respondents took the position that these were two experienced commercial parties, the Respondents lent the Appellants money secured by mortgages, and the mortgages are in default. Absent redemption of the mortgages, the Respondents are entitled to enforce their rights, which include possession of the mortgaged lands and judgment for the amount due and owing on the loans. Joint Venture Agreements signed in 2014 affirmed those rights.
[13] As set out in the motion judge’s Reasons for Decision at paragraph 33, the Appellants disputed the enforceability of the mortgages on two grounds:
i. Mr. Marshall represented to Mr. Beach before they entered into the JVAs that he would not enforce the mortgages and that the loans would only have to be repaid from the sale of lots once the development was completed. He also subsequently agreed to proceed in this manner after the agreements were executed.
ii. If the mortgages are enforceable, a trial is required in order to determine the amount due and owing under them because there have been 11 lot sales and the proceeds, if allocated in accordance with the JVAs, would significantly reduce the amounts owed on the mortgages.
[14] The motion judge held that:
[T]he debt instruments and the JVAs were negotiated at arm’s length with the benefit of independent legal counsel. Both sides could be described as legally sophisticated....
The defendants did not adduce any evidence in these motions that would cause me to change my opinion. Despite the passage of almost two years, the defendants have still not provided any evidence that there was third party financing available at lower interest rates. ... The lawsuit rests on alleged breaches of fiduciary duty which, as I noted before, is a steep road to climb in this type of commercial dispute and an amorphous bad faith allegation.
There is also no evidence that Mr. Marshall engaged in a “fraudulent scheme” aimed at depriving the defendants of their potential profit from the joint venture. ...
Both parties expected things to work out much better than they did. Unfortunately, as can happen in commercial land development, the project was beset by cost overruns and unexpected delays. The business relationship deteriorated, Mr. Marshall invoked his rights under the debt instruments and the [joint venture agreements] and this litigation ensued. The parties had the good sense to retain lawyers at the outset and negotiate agreements that govern their rights and obligations. There is nothing unfair in holding them to the bargain they made. This is especially the case where, as here, the debtors greatly benefited from the loans when they were made.
[15] The motion judge therefore granted summary judgment in favour of the Respondents in the amounts set out below:
a. on action CV-18-201-000, $1,876.239.68 at the greater of T.D. Bank’s prime rate plus 7% and 10%;
b. on action CV-19-239-000, $501,356.67 at 10% interest; and
c. on action CV-19-240-000, $796,919.60 at 9.99% interest.
[16] He also ordered that there should be no stay on the enforcement of the judgments as he held that lifting the stay would not prevent the Appellants from proceeding with their other litigation between the parties.
The Notices of Appeal
A. The Existing Notice of Appeal
[17] In the Notice of Appeal, the Appellants seek an order that the judgment be stayed pending the determination of other related claims. The order sought in the Notice of Appeal does not refer to the second argument raised before the motion judge: the allegation that representations were made by the Respondents about the timing of enforcement of the mortgages.
[18] The grounds of appeal are framed more broadly. The first paragraphs in the grounds to appeal address the refusal to stay the judgment as summarized below:
There are seven separate proceedings with common parties, facts and issues relating to a common business undertaking between the parties and debt related to that undertaking. The motion for summary judgment comprises only three of the six enforcement actions on mortgages. Enforcement should be stayed pending determination of related claims as they are significantly interrelated.
The motion judge failed to properly apply the test, weigh the evidence, or consider relevant evidence regarding the strength of the Appellants’ other claims and counterclaims in other proceedings when refusing to stay enforcement of the judgment.
[19] However, paragraphs 23 to 25 of the grounds to appeal reproduced below, clearly address the merits of the decision to grant summary judgment:
The Motion Judge erred by considering only one aspect of the [Appellants’] claim in the Joint Venture Action in his analysis of whether the [Appellants’] claims were meritorious and failed to consider other claims made by the [Appellants] that are meritorious and were supported by ample evidence on the summary judgment motions most of which was uncontested by the [Respondents];
The Motion Judge erred in finding that the [Appellants] did not present any new evidence in the Summary Judgment Motions … when in fact there was a considerable amount of new evidence filed... ;
The Motion Judge erred by discounting the [Appellants’] evidence on the valuation of the underlying lands beside despite the fact that no evidence was filed by the [Respondents] in opposition to this evidence and the fact that the [Respondents] chose not to cross examine the [Appellants] on this evidence. [Emphasis added.]
[20] Under the heading “The Basis of the Appellate Court’s Jurisdiction” the Appellants include the following provision:
Alternatively the Appellants seek leave to appeal any portion of the Motion Judge’s decision if it is so required.
B. The Supplementary Notice of Motion
[21] In the proposed Supplementary Notice of Appeal, the Appellants “appeal the judgments of Mr. Justice Hurley in toto , including that the order granting summary judgments be reversed and the relief sought by the Appellants in the Motion before Justice Hurley be awarded and substituted in their stead”.
[22] The grounds for appeal articulated are that the motion judge “erred on the evidence and the weight of the evidence; erred in law and the application of the law; erred on the facts and the weight of the facts; and…orders granting summary judgment and the payment of money are final orders and are subject to an automatic stay pending the hearing of this appeal.”
Analysis and Conclusion
A. The First Issue: Granting an Extension To File a Notice of Appeal
[23] Rule 61.04(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 requires that an appeal to this court be commenced “ within 30 days after the making of the order appealed from ” . The court may, however, exercise its discretion pursuant to r. 3.02(1) to extend the time for service of a Notice of Appeal that was not served within the time stipulated by r. 61.04(1) .
[24] The test for granting an extension of time to file a Notice of Appeal is well-settled. The factors to be considered are the following:
a. whether the appellant formed an intention to appeal within the relevant period;
b. the length of the delay and explanation for the delay;
c. prejudice to the respondent;
d. the merits of the appeal; and
e. whether “the justice of the case” requires it: Rizzi v. Mavros, 2007 ONCA 350, 85 O.R. (3d) 401, at para. 16.
[25] As this court held in Bratti v. Wabco Standard Trane Inc., at p. 3: “While appellate courts have considered a number of different factors in determining whether to grant leave to extend the time to appeal, the governing principle is simply whether the “justice of the case” requires that an extension be given.” See also Chandra v. Canadian Broadcasting Corporation, 2016 ONCA 448 26.
[26] The two issues raised by the Appellants on the summary judgment motion were that:
notwithstanding the terms in the written Joint Venture Agreements, Mr. Marshall represented to Mr. Beach both before and after signing the Agreements that he would not enforce the mortgages until the development was completed and the lots sold; and
judgment should be stayed pending final determination of related litigation.
[27] The question is whether the Appellants intended appeal both issues or only the second.
[28] First, in email exchanges with counsel before the Notice of Appeal was filed, there is evidence that Mr. Beach intended to appeal the “summary judgment decision”, not just the refusal of a stay of enforcement pending the outcome of companion litigation.
[29] On February 18, 2020, Mr. Beach asked his counsel,
We assume the Summary Judgement Motion Decision, including 3 Judgements in the amount of ~ $3million, will be Stayed by appeal.…
Appeal of the SJM Motion. We think there are a couple of significant arguments that are quite powerful regarding the appeal – don’t know if any substance goes into the Notice of Appeal – or only into the Appeal materials itself….?
[30] On March 1, 2020, in an email to his counsel, Mr. Beach said that,
Both Martha & I feel there is one, possibly two omissions in the appeal…but do think - as is - it provides a pretty compelling argument to justify the appeal….. 1) something keeps nagging on me that we should also appeal the Summary Judgement Decision itself as well? - this outcome was also a sought in your Affidavit/Factum and oral arguments at the Hearing…? - it's almost gut - that between JH 2 decisions - there is ample data that can be provided under appeal to justify this also as part of the appeal? [Emphasis added.]
[31] On March 2, 2020, Mr. Beach again asked his counsel:
Do you feel this Notice is more than adequate? Does the real detail go into the actual appeal materials? Just wanting to know how to spend my time now or later on additional points?
[32] In response, the Appellants’ counsel advised that,
Hi Gary, I’ll respond to your emails in due course but we need to get the notice of appeal served today. Aside from your comments below, let me if there is any other issues you have with the Notice.
[33] Second, paragraphs 23-25 of the Notice of Appeal demonstrate that the motion judge’s treatment of both issues raised by the Appellants on the motion for summary judgment are being challenged. In particular, the Appellants claim that:
The Motion Judge erred by considering only one aspect of the [Appellants’] claim in the Joint Venture Action in his analysis of whether the [Appellants’] claims were meritorious and failed to consider other claims made by the [Appellants] that are meritorious and were supported by ample evidence …;
The Motion Judge erred in finding that the [Appellants] did not present any new evidence in the Summary Judgment Motions … when in fact there was a considerable amount of new evidence filed...;
The Motion Judge erred by discounting the [Appellants’] evidence on the valuation of the underlying lands beside despite the fact that no evidence was filed by the [Respondents] in opposition to this evidence and the fact that the [Respondents] chose not to cross examine the [Appellants] on this evidence.
[34] The “new” evidence at paragraph 24 of the grounds for appeal above, refers to the alleged representations by the Respondents that differ from the written provisions in the Joint Venture Agreement and mortgage terms as that was the only “new” evidence that had not been adduced before the motion judge on the prior attendance before him.
[35] As such, these grounds of appeal relate to the first issue not the second issue raised by the Appellants on the motion and confirm an intention to address both grounds raised by the Appellants before the motion judge both of which were rejected by him.
[36] Third, shortly after receiving a letter from the Senior Legal Officer of this court in July 2020, advising that the aspect of judgment under appeal “may” be interlocutory, the Appellants sought to file a Supplementary Notice of Appeal, which states that “[t]he Appellants appeal the judgments of Mr. Justice Hurley in toto , including that the order granting summary judgments be reversed and the relief sought by the Appellants in the Motion before Justice Hurley be awarded and substituted in their stead”.
[37] While the Supplementary Notice of Appeal is overly broad and does not clearly articulate the supplementary grounds, when looking at the evidence as a whole and bearing in mind that it is the Appellants’ intention and the interest of justice that matters, I accept that the Appellants intended to challenge both:
the motion judge’s refusal to accept that the Respondents made representations that the loans would not have to be repaid before development of the properties was completed, and
the motion judge’s refusal to stay the judgment pending appeal
and it is in the interest of justice to permit them to do so. Any resulting prejudice may be compensated in costs.
[38] I do not accept the Respondents’ concern that the Supplementary Notice of Appeal would allow the Appellants to appeal the monetary amounts. The motion judge noted that there were only two grounds raised by the Appellants on the motion and that there was no dispute regarding the “arithmetical calculation of principal and accrued interest” pursuant to the mortgages that were in default.
[39] I also reject the Respondents claim that even if the Appellants intended to appeal both issues, the interests of justice favour dismissal of this motion to include the second issue, as this case has no precedential value, and is of interest only to the parties: Enbridge Gas Distribution Inc. v. Froese, 2013 ONCA 131, 114 O.R. (3d) 636, at para. 24.
[40] Given my finding that there was an intention to appeal the motion for summary judgment on both grounds raised by the Appellants on the motion and that the motion for leave to appeal would proceed in any event, whether or not the appeal as a whole has merit is something that should be left to the panel hearing the application for leave to appeal.
[41] For these reasons, the Supplementary Notice of Appeal may be filed to confirm that the judgment is appealed on both issues raised by the Appellants on the motion.
B. The Second Issue: The Request to File Fresh Evidence
[42] The Appellants seek to adduce “fresh evidence” on appeal. In his affidavit, Mr. Beach claims that the Appellants signed the Joint Venture Agreements under duress and without the benefit of legal advice. They claim that as a result, the Appellants purchased a share in the property of the joint ventures and were unable to meet the payments due. The Appellants seek to adduce “fresh” evidence that they had no legal representation and therefore did not know the disadvantages of signing the agreement and that they were under duress then they signed the Agreement as Mr. Beach had no other source of income. The Appellants say the Respondents breached their fiduciary duty to the Appellants.
[43] The Appellants knew whether they did or did not have legal representation at the time they signed the agreement. There is nothing “fresh” about this evidence. The communications they seek to adduce were all available at the time of the hearing before the motion judge. They could and should have been adduced before the motion judge.
[44] Moreover, there is no issue that both before and after December 2013, the Appellants were represented by the same counsel and there is no evidence that the retainer had been terminated. This issue was squarely before the motion judge and he found as fact that “the JVA’s were negotiated at arm’s length with the benefit of independent legal counsel”.
[45] There is therefore no basis for allowing fresh evidence that could and should have been adduced before the motion judge.
[46] As such, the request to adduce fresh evidence is dismissed.
[47] If the parties are unable to agree on costs, each of the two parties is to provide a bill of costs and cost submissions of no more than three pages within 15 days of this order.
“J.A. Thorburn J.A.”