Callidus Capital Corporation v. Pagotto, 2011 ONCA 777
CITATION: Callidus Capital Corporation v. Pagotto, 2011 ONCA 777
DATE: 20111212
DOCKET: C54039 & C54040
COURT OF APPEAL FOR ONTARIO
Blair, Epstein JJ.A. and Pardu J. (ad hoc)
DOCKET: C54039
BETWEEN
Callidus Capital Corporation
Plaintiff
and
John Pagotto, Philip Woodard and Paul Walker
Defendants
AND BETWEEN
John Pagotto, Philip Woodard and Paul Walker
Plaintiffs by Counterclaim (Appellants)
and
Asset Engineering LP, Carpe Diem Real Estate Development Inc. c.o.b. as Carpe Diem Growth Capital, Callidus Capital Corporation, Sher-Wood Hockey Inc. and Dean Topolinski
Defendant by Counterclaim (Respondent)
DOCKET: C54040
BETWEEN
Callidus Capital Corporation
Plaintiff (Respondent)
and
John Pagotto, Philip Woodard and Paul Walker
Defendants (Appellants)
AND BETWEEN
John Pagotto, Philip Woodard and Paul Walker
Plaintiffs by Counterclaim (Appellants)
and
Asset Engineering LP, Carpe Diem Real Estate Development Inc. c.o.b. as Carpe Diem Growth Capital, Callidus Capital Corporation, Sher-Wood Hockey Inc. and Dean Topolinski
Defendant by Counterclaim (Respondent)
Sandra L. McNeely, for the appellants
C. Staples, for the respondent Asset Engineering LP
Sanj Sood, for the respondent Callidus Capital Corporation
Heard & released orally: December 05, 2011
On appeal from the judgment of Justice Sandra Chapnik of the Superior Court of Justice dated June 17, 2011.
ENDORSEMENT
[1] The appellants are guarantors of the indebtedness of TPS Sports Group Corporation, which became insolvent. The appellants were shareholders and directors of TPS. Their guarantee was limited to the principal amount of $500,000.
[2] The debt guaranteed by the appellants was assigned, along with the guarantee, by the first lender to the respondent, Callidus Capital Corporation. Following default and a call on the loan and guarantee, Callidus assigned the debt and guarantee again to the plaintiff Asset Engineering LP in the heat of restructuring efforts by TPS. Eventually, the TPS assets were sold in proceedings under the Bankruptcy and Insolvency Act (“B.I.A.”), and the sale was approved by the court. Asset has sued the appellants on their guarantee for the shortfall, which exceeds the $500,000 limit.
[3] The appellants defended on the basis that the guarantee could not be assigned without their consent (which was not obtained) and that the assignment to Asset constituted a material change in the terms of their guarantee particularly, in relation to their exposure to risk. They also counterclaimed against Asset and a group of companies controlled by Dean Topolinski that were the eventual purchasers of the TPS assets.
[4] On a motion for summary judgment, Chapnik J. granted judgment against the appellants on the guarantee and dismissed the counterclaims against Asset (based on conspiracy) and Callidus (based on assignment without consent).
[5] We see no reason to interfere with the judgment below.
[6] The motion judge was correct in holding that the guarantee, interpreted as a whole, clearly gave the lender holding the guarantee the right to assign it without the appellants’ consent. In addition, we do not accept – the conspiracy argument aside – that the assignment to Asset constituted a material change in the terms of the guarantee.
[7] There were no other defences raised. The judgment on the guarantee must therefore stand as must the dismissal of the counterclaim against Callidus.
[8] It is difficult to ascertain exactly what the conspiracy alleged is. The pleading is woefully inadequate in terms of particulars (it consists of a very general one-line allegation). As we understand the submission on the evidence, however, the suggestion is that the Topolinski Group improperly conveyed confidential TPS financial information – obtained in the course of negotiations as a potential purchaser in a proposed CCAA restructuring – to Asset. The alleged result is that this enabled Asset to purchase the Callidus debt and orchestrate the sale of the TPS assets to the Topolinski Group at less than fair market value in Bankruptcy and Insolvency Act proceedings. The argument is that this deprived TPS and its principals of a favourable opportunity to put together a CCAA restructuring which they say would have produced a better sale price and protected them from liability on the guarantee.
[9] The difficulty with this argument, even if it may give rise to a triable issue as to what transpired, is that there is simply no credible evidence on the record to suggest that the TPS assets were sold at a less than fair market value price in the insolvency proceedings. Hopeful exploratory discussions in a proposed CCAA restructuring proceeding that do not survive robust negotiations, do not attest to that. Moreover, as the motion judge noted, the appellants participated in and were represented by counsel throughout the sale process and not only was this issue not raised at the time, but the appellants specifically agreed that the terms of sale were reasonable. If there were no sale below fair market value, there are no damages because the appellants would be liable on the guarantee for the shortfall in any event. As well, as noted above, the sale was approved by the court.
[10] Finally, we would not give effect to the argument that the summary judgment proceedings were premature because the Topolinski defendants had not pleaded or delivered their affidavits of documents.
[11] While there may be circumstances where it would be wise to postpone a summary judgment hearing because the record in the file needs to evolve to a certain point in the ordinary course, this is not one of those circumstances, in our view. The appellants could have required the Topolinski defendants to plead and deliver their affidavits of documents, or they could have examined the Topolinski personnel under Rule 39, which provides for an examination of “any person” on a motion. The appellants had ample opportunity to take these steps, but did not. Here, the appellants filed their own affidavits setting out their version of the alleged facts – which they were able to do because they were involved in the negotiations in the Topolinksi Group themselves. In the result, their “best foot” was well put forward notwithstanding the absence of Topolinski evidence or documents to the contrary.
[12] For the foregoing reasons, the appeal is dismissed. Costs of the appeal to Asset fixed in the amount of $10,000 all inclusive, and to Callidus in the amount of $7500 all inclusive.
“R.A. Blair J.A.”
G.J. Epstein J.A.”
“G. Pardu J. (ad hoc)