COURT OF APPEAL FOR ONTARIO

CITATION: 1871335 Ontario Limited v. Acce International Ltd., 2016 ONCA 41

DATE: 20160115

DOCKET: C60923

Pepall, Pardu and Roberts JJ.A.

BETWEEN

1871335 Ontario Limited

Applicant/Respondent in Appeal

and

Acce International Ltd. and Raymond Berta

Respondents/Appellants

Peter M. Callahan, for the appellants

Stephen M. Turk, for the respondent

Heard and released orally: January 7, 2016

On appeal from the judgment of Justice Mario D. Faieta of the Superior Court of Justice, dated July 23, 2015.

ENDORSEMENT

[1] The appellants submit that the application judge erred in concluding that an acceleration clause in a vendor take back promissory note had been triggered, and giving judgment for the balance of the quarterly payments due under the note.

[2] Joan Berta sold her shares in Applied Consumer & Clinical Evaluations Inc. to the appellant ACCE, which was controlled by her ex-husband, Raymond Berta. Part of the purchase price was paid by a Vendor Take Back Note (“VTB”) for $1.85 million payable to the respondent, 1831335 Ontario Ltd. Raymond Berta guaranteed the VTB.

[3] After some initial payments payable in May and July 2012, the appellants were required to make 16 quarterly payments in the amount of $100,000 each, commencing on October 1, 2012, and then a final payment of $50,000 on October 1, 2016.

[4] The VTB contains the following acceleration clause:

Upon default in the making of any payment due hereunder such that 2 quarterly instalments are then due and outstanding, and such default continuing for 30 days following receipt of written notice by the undersigned from the Payee, the entire balance then outstanding under this note shall fall due for payment.

[5] On January 16, 2015, counsel for the respondent sent a letter to the appellants, informing them that they were in default. At that time, the payment due October 1, 2014 had not been paid in full (though part of it had been paid) and the January 1, 2015 payment was also outstanding.

[6] By February 16, 2015 (i.e. 30 days after the notice letter was sent), the appellants had paid the October 1, 2014 installment in full but not the January 1, 2015 installment.

(1) Reasons for judgment

[7] As there were no facts in dispute, this case was resolved via an application pursuant to rule 14.05(3)(d) of the Rules of Civil Procedure.

[8] First, the application judge decided that the appellants were in default. They had argued that the quarterly instalments of $100,000 were due on a quarterly basis but that not all the monies were due on the first day of the quarter. The application judge rejected that and held that the payments were due on the first day of the quarter.

[9] Second, the application judge concluded that written notice had been provided. The appellants argued that the letter of January 16, 2015 was not notice under the VTB because it referenced the default provisions found in an associated share pledge agreement rather than the VTB. The letter of January 15 communicated that ACCE was in default on two quarterly instalments and that notice was being provided. Moreover, the application judge noted that the appellants had notice as their counsel responded to the letter acknowledging “default which has triggered the acceleration clause under the VTB.”

[10] Third, the application judge concluded that the default had continued for 30 days after the receipt of the letter. He acknowledged that ACCE made a further payment of $25,000 on February 6, 2015 that satisfied the $100,000 quarterly payment that was due on October 1, 2014. However, that did not remedy the entire default that had existed at the time of the January 16 letter, as the payment due January 1, 2015 remained outstanding, and therefore the appellants were still in default on February 16, 2015.

(2) Was there a failure to give notice of default?

[11] The application judge’s interpretation of the promissory note in this specific factual context is entitled to deference. His conclusion that failure to make the full payment due October 1, 2014 and the payment due January 1, 2015 amounted to default in making two quarterly installments was reasonable.

[12] Secondly, although part payment was made after notice was given, the full default which triggered the notice was not cured and it was reasonable for the application judge to conclude that this entitled the respondent to enforce the acceleration clause.

[13] Finally, the appellants argue that notice of default was not properly given.

[14] The VTB note does not require any particular form of notice, other than that it be in writing.

[15] As observed by the application judge, the letter of January 16, 2015 sent by counsel for the respondent to the appellants and their counsel provided:

According to the default terms of the Share Purchase Agreement dated April 3, 2012, Part 3, Event of Default, Point 3.01, this agreement is in default of the payment terms agreement. The October 1, 2014 payment has not been received in full and the January 1, 2015 payment has not been received. This notice is in accordance with the terms of the Agreement.

[16] On February 6, 2015, counsel for the appellants sent the following acknowledgment to counsel for the applicant:

Thank you for your correspondence of February 5, 2015. As a courtesy to you, I believe that you mean that there is currently $125,000 still owing (i.e. $25,000 re the October 1 payment, and the $100,000 January 1 payment), and not $100,000 as stated.

In any event, I understand that my client will very soon be forwarding funds to your client in order to rectify the default which has triggered the acceleration clause under the VTB Note.

[17] The appellants have not identified any error by the application judge in concluding that written notice of default had been given. This conclusion was reasonable on the evidence before him.

[18] The application judge’s conclusions were all reasonable on the evidence before him. No basis has been shown to grant leave to appeal the costs order.

[19] Accordingly, for these reasons, leave to appeal costs is refused, and the appeal is dismissed.

“S.E. Pepall J.A.”

“G. Pardu J.A.”

“L.B. Roberts J.A.”