Court of Appeal for Ontario

Date: 2019-04-09 Docket: C65894, C65893

Judges: Lauwers, Pardu and Nordheimer JJ.A.

Parties

First Action

Between

Royal Bank of Canada Plaintiff (Respondent)

and

Everest Group Inc., Yousaf Jamell Khan, Zarmina S. Khan and Shahid Saleem Khawaja Defendants (Appellants)

Second Action

And Between

Royal Bank of Canada Plaintiff (Respondent)

and

Versatile Holdings Inc., Sardar Samiuddin Khan, Nida Shahid and Shaid Saleem Khawaja Defendants (Appellants)

Counsel

Daniel Hamson, for the appellants

Rachel Moses, for the respondent

Hearing and Appeal

Heard and released orally: April 8, 2019

On appeal from: The judgments of Justice Paul Perell of the Superior Court of Justice, dated August 23, 2018 with reasons reported at 2018 ONSC 4973 and at 2018 ONSC 4971

Reasons for Decision

[1] The defendants appeal from the summary judgments granted by the motion judge.

[2] The corporate appellants entered into franchise agreements to operate two restaurants. The respondent provided financing for these ventures. The individual appellants guaranteed the financing provided by the respondent.

[3] Difficulties arose in the operation of the restaurants with the result that the corporate appellants sought to rescind their franchise agreements. They alleged that the franchisor had failed to provide proper disclosure documents. The corporate appellants demanded that the franchisor pay them the monies that they had lost in connection with purchasing and operating the franchises. In response to the rescission, the franchisor took over the operation of the restaurants.

[4] The corporate appellants advised the respondent of these events. In response, the respondent demanded repayment of the amounts outstanding under the financing arrangements. The respondent alleged a number of events of default including that the corporate appellants had ceased to carry on business. The corporate appellants did not repay the amounts due.

[5] The respondent commenced an action to recover the amounts due. The summary judgment motions followed. The motion judge granted summary judgment on the basis that there were events of default under the financing arrangements and that, consequently, the monies advanced had to be repaid.

[6] The appellants submit that the motion judge erred in concluding that the corporate appellants had ceased to carry on business. They contend that the business of the corporate appellants had merely changed from operating the restaurants to the business of recovering their investments in the franchises. The motion judge rejected this contention as do we. We agree with the motion judge that the appellant's position does not accord with business reality or with common sense. It was reasonable for the motion judge to conclude that the respondents ceased to carry on business when they returned the restaurant operations to the franchisor. It was also open to the motion judge to conclude that this conduct amounted to a material adverse change in the appellants' operations.

[7] Further, we see no merit in the submission that the respondent failed to exercise its discretion properly in demanding repayment of the loans.

[8] Finally, we see no error in the motion judge's refusal to grant the adjournment of the summary judgment motion. That decision falls entirely within the discretion of the motion judge.

[9] In the end result, it is our view that the motion judge was correct in his conclusions.

Conclusion

[10] The appeals are dismissed with costs to the respondent fixed in the amount of $17,000.00 payable by the Everest defendants and $16,000.00 payable by the Versatile defendants, both inclusive of disbursements and HST.

"P. Lauwers J.A." "G. Pardu J.A." "I.V.B. Nordheimer J.A."