Court of Appeal for Ontario

Date: 20220926 Docket: C69067

Before: Zarnett, Coroza and Favreau JJ.A.

Between: Zizhong Wu and Noreast Foods Ltd., Plaintiffs (Appellant)

And: Bin Chen and Qixiang Chen, Defendants (Respondents)

Counsel: Andrew Ostrom, for the appellant Jonathan Rosenstein, for the respondent

Heard: September 19, 2022

On appeal from the judgment of Justice Cory A. Gilmore of the Superior Court of Justice, dated December 30, 2020, with reasons reported at 2020 ONSC 8135.

Reasons for Decision

[1] After the breakdown of their equal partnership in a business that supplied certain goods to restaurants and grocery stores, the appellant sought recovery from the respondents of debts he claimed were owed to him, as well as damages. The appellant’s damages claims were dismissed, but his claim for the payment of debts largely succeeded.

[2] The appellant raises two grounds of appeal. The first concerns the credit the trial judge allowed in the respondents’ favour, which she deducted from the amounts she otherwise found to be owing to the appellant. The second concerns the manner in which the trial judge dealt with interest on the appellant’s claim.

The Credit Ground of Appeal

[3] The appellant’s debt claim was on a series of promissory notes, some signed by the respondent Qixiang Chen, and some signed by the respondent Bin Chen. At trial, everything about the notes, and the debts they represented, was in issue. The respondents denied the notes were authentic and alleged they were forgeries. They also denied that the appellant had advanced the funds the note indebtedness was said to represent, that is, amounts effectively advanced on the respondents’ behalf because they were beyond the appellant’s fifty percent share of funds required for the business. The respondents claimed to have made their own financial contributions to the business which negated or reduced the appellant’s claimed over-contribution, which the appellant contested.

[4] The trial judge conducted a thorough review of the oral and documentary evidence tendered at trial. She found the appellant to be a credible witness. She found the evidence of the respondent Qixiang Chen to be neither reliable nor credible, and that the evidence of the respondent Bin Chen had to be approached “with caution”. She accepted that the promissory notes were genuine and had been signed by the respondents, represented funds the appellant had advanced, and were valid debts of the respondents.

[5] She also found that although the respondent Bin Chen’s evidence was to be approached with caution, she was satisfied that he made financial contributions to the business that had to be deducted from the appellant’s claim against him.

[6] The trial judge stated, at para. 133 of her reasons, that:

In his favour, Bin has customs and shipping documents as well as invoices. As such, and notwithstanding my concerns about Bin’s credibility, I accept that he made a contribution to the business through his grandmother’s funds of 1,952,841.77 RMB and that this contribution must be offset against the amounts claimed by [the appellant]. Both Parties made significant contributions to [the business] but [the appellant’s] was greater. [The respondents] owe [the appellant] the difference as secured by the Notes.

[7] She further found, at para. 145 of her reasons, that:

While there are problems with Bin’s evidence, I accept that he invested money in [the business] by way of an early inheritance or gift from his grandmother. There are difficulties with both Bin and [the appellant’s] accounting systems and the authenticity of the underlying documents, but in the end, it is clear that a considerable amount of equipment was purchased. The Parties’ contributions to capital should be reconciled.

[8] The appellant argues that these findings were not open to the trial judge; that having accepted the appellant’s evidence and found the notes to be genuine, she ought to have completely rejected the respondents’ evidence including that of contributions.

[9] We did not call on the respondents in oral argument to address this ground of appeal. An appeal is not a retrial. A trial judge’s findings of fact are entitled to deference on appeal. Absent a palpable and overriding error, this court cannot interfere with them: Housen v. Nikolaisen, 2002 SCC 33, [2002] S.C.R. 235, at paras. 7, 10, 18.

[10] As we have noted, the trial judge conducted an assiduous review of the evidence. It was open to her to accept the evidence of any witness in whole or in part. She gave reasons for accepting the evidence of Bin Chen that he had made contributions, noting that it found some support in customs and shipping documents, and invoices. She took into account the difficulties with the respondents’ evidence but also noted that there were difficulties with the appellant’s accounting as well.

[11] The finding of the trial judge that there were contributions by the respondent Bin Chen was open to her, and is entitled to deference from this court.

[12] We therefore reject this ground of appeal.

The Interest Ground of Appeal

[13] The appellant argues that the trial judge erred in failing to award interest on all of the promissory notes at the rate of 18 percent per year from their dates.

[14] Some of the promissory notes provided for interest at 1.5 percent per month. They did not express the interest as an annual rate. The other promissory notes were silent as to interest.

[15] With respect to the notes that provided for interest at a monthly rate, the trial judge held that the Interest Act, R.S.C. 1985, c. I-15, limited the amount payable.

[16] Section 4 of the Interest Act provides that (except for mortgages) whenever interest is made payable by the terms of a written contract, and no statement of the equivalent yearly rate is stated in the contract, no greater rate is payable than 5 percent per year. The word “contract” in s. 4 of the Interest Act includes a promissory note: Elcano Acceptance Ltd. v. Richmond, Richmond, Stambler & Mills (1989), 68 O.R. (2d) 165 (H.C.), at p. 174, aff’d 3 O.R. (3d) 123 (C.A.).

[17] As a result, the trial judge awarded interest on these notes at the rate of 5 percent from their dates to the date that the appellant demanded payment. From that date, she awarded pre-judgment interest at 1.5 percent per month.

[18] The appellant argues that the trial judge erred in awarding interest at 5 percent per year from the date of the notes until demand. He submits that the Interest Act did not apply to these notes because they were preceded by an oral understanding that over-contributions would be equalized with interest, and the Interest Act only applies to written agreements. Counsel for the appellant fairly conceded that he was aware of no authority for the proposition that the Interest Act does not apply to a written agreement if it was preceded by an oral understanding.

[19] In any event, this argument cannot succeed. The appellant sued for payment under the notes. The language of s. 4 of the Interest Act was directly applicable to the foundation of the debt on which the appellant claimed and on which the trial judge awarded judgment, namely, the promissory notes. Arguably, the trial judge should have limited interest after demand on these notes to no more than 5 percent per year, but any error in this regard runs in the appellant’s favour. The respondents have not cross-appealed any aspect of the interest award and there is no basis for us to disturb it.

[20] With respect to the notes which did not specify any interest rate, the trial judge awarded interest on them at 5 percent per year from their dates until demand, and interest after demand at the rate for pre-judgment interest in the Courts of Justice Act.

[21] The appellant argues that the trial judge should have awarded interest on these notes at 18 percent per year, to give effect to the appellant’s evidence that 1.5 percent per month was a customary rate in the region of China from which the parties originate.

[22] We reject this argument. Had the parties expressly incorporated the rate of 1.5 percent per month into these notes, interest on them would have been limited to 5 percent per year by s. 4 of the Interest Act. A term may sometimes be implied into a written agreement by custom, but when that occurs it is still a term of the written agreement. We are not satisfied that the trial judge in fact found the customary rate was an implied term of the notes, but even if it were, it would be given the same effect as if it had been an express term in the written agreement.

Conclusion

[23] For these reasons, the appeal is dismissed.

[24] The respondents are entitled to costs of the appeal fixed in the sum of $5,825, inclusive of disbursements and applicable taxes.

"B. Zarnett J.A."

"S. Coroza J.A."

"L. Favreau J.A."