ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 11-50988
DATE: 2012-03-29
BETWEEN:
ROYAL BANK OF CANADA Plaintiff – and – NTELIPATH INC. (formerly c.o.b. as NtelPath Inc.) BISHER ABAZA and YASER ABAZA Defendants
Andre A. Ducasse, for the Plaintiff
Christopher E. Clermont, for the Defendants
HEARD: 2012-03-22
REASONS FOR JUDGMENT
R.L. Maranger J.
Introduction
[ 1 ] This was a summary judgment motion brought by the Royal Bank of Canada against the defendant Ntelipath Inc. for having defaulted upon various credit facilities that were granted by the bank. The judgment requested is for $156,787.34 with 8% interest per annum as of January 5, 2012. The plaintiff also seeks a judgment against the personal defendants for the sum of $49,497.20 with interest in accordance with the Courts of Justice Act from January 5, 2012.
[ 2 ] There is no dispute that the corporate defendant is in default, nor was there any issue raised respecting the quantum owing. Therefore, there will be a judgment as against the corporate defendant in the amount requested.
[ 3 ] The issue requiring adjudication is whether the two personal defendants, Bisher Abaza and Yaser Abaza, are personally liable to the plaintiff for the sum of $49,497.20 by reason of the provisions of a forbearance agreement said to have been entered into by the bank and the three defendants.
Background
[ 4 ] The basic factual background regarding this motion is as follows:
• The bank and the defendants maintained a standard creditor-debtor relationship whereby credit facilities were extended to the defendants.
• On February 4, 2008, the corporation executed a general security agreement granting a security interest to the bank against all of the company's assets.
• As part of the condition of granting the credit facilities to the company, the two personal defendants guaranteed part of the indebtedness by executing a guarantee and postponement of claim dated May 12, 2009. The guarantee provides that the personal defendants guarantee payment of $50,000 each in default.
• As of January 4, 2010 the company was indebted to the bank in the amount of $224,394. The bank delivered a notice of intention to enforce security. The bank also made formal demands upon each of the personal defendants for payment of the $50,000 guaranteed.
• In May 2010, the parties executed a forbearance agreement acknowledging the quantum of debt and agreeing to a number of provisions.
The forbearance agreement
[ 5 ] The determination of this motion is an exercise in the interpretation of a commercial contract. In Ventas Inc. v. Sunrise Senior Living Real Estate Investment Trust et al, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24 , the Court of Appeal adopted the following principles respecting the interpretation of a contract in a commercial setting, specifically:
That a commercial contract is to be interpreted;
a) as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;
b) by determining the intention of the parties in accordance with the language they have used in the written document and based upon the "cardinal presumption" that they have intended what they have said;
c) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to the subjective intention of the parties; and (to the extent there is any ambiguity in the contract) ,
d) in a fashion that accords with sound commercial principles and good business sense, and that avoid a commercial absurdity. "
[ 6 ] In this particular case, while I have considered the forbearance agreement as a whole, the issue to be decided requires a close analysis of four specific paragraphs, paragraphs 3, 3.2, 3.4 and 3.19:
- In consideration of the bank's forbearance, and the covenants and agreements of the Company and the Guarantors contained herein, the Company and the Guarantors agree, acknowledge and confirm as follows: ...
3.2 to pay to the bank, in addition to all amounts payable under the Credit Facilities and/or the Security, a non-refundable forbearance fee in the amount of $1,000 per month payable on the first day of each month, commencing April 1, 2010 until all amounts owing pursuant to this Agreement are paid in full;
3.4 upon payment of the initial instalment in the amount of $60,000 upon execution of this agreement in accordance with schedule "A" attached hereto, the Guarantors shall be released from any further obligation under the Guarantee referenced in paragraph 1.2 above;
3.19 the company and Bisher and Yaser as the Company's principals shall and hereby assign, convey and transfer to the Bank any and all right title and interest to any and all of the Company's 2008 and 2009 Scientific Research and Experimental Development tax credit claims and accounts in any and all monies due or becoming due to the Company in respect thereof (the SRED tax credits). Without limiting the generality of the foregoing the Company and the Guarantors further agree, acknowledge and confirm as follows: ...
[ 7 ] The fact that the tax credit was never conveyed, or that the monthly fee of $1,000 per month went unpaid for 12 months, are not at issue.
[ 8 ] The matter to be decided is whether the personal defendants are by virtue of this agreement jointly liable for these amounts. The motion really requires a response to two questions:
• Are the personal defendants jointly liable for the monthly fee?
• Are the personal defendants jointly liable for failing to convey the tax credit to the bank?
The monthly fee:
[ 9 ] With respect to the issue of whether or not they are jointly responsible for the monthly fee, the contract, when read as a whole, is clear, it was meant to hold both the company and the two personal defendants jointly responsible for this amount.
[ 10 ] This was not a guarantee it was a forbearance agreement. The release from guarantees referenced in paragraph 3.4 of the forbearance agreement specifically relates back to the original guarantee (under that guarantee each of the defendants guaranteed a certain amount that was owed by the company and the payment of $60,000 which alleviated that obligation is described in paragraph 1.2).
[ 11 ] Paragraph 3 of the agreement clearly anticipates that the guarantors and the company are jointly liable for the $1,000 a month forbearance fee. Both of the guarantors signed the agreement; they were a party to it.
The tax credit:
[ 12 ] I find that the obligation to convey the tax credit was meant to bind the company, and the principals of the company, the two named defendants, who for all intents and purposes were the company. The plain reading of the agreement as a whole, the specific naming of the two party defendants as principals of the company was meant to bind them individually to convey that specific tax credit. Otherwise, specifically naming them would be superfluous and meaningless. It seems to me that the intent had to be that Bisher and Yaser Abaza were jointly responsible for conveying the tax credits to the bank. Consequently, they also breached the agreement, and the bank should be entitled to judgment accordingly.
[ 13 ] Therefore, there will be a judgment in favour of the bank in the following terms:
a) As against Ntelipath Inc. in the amount of $156,787.34 with interest thereon at the rate of 8% per annum from January 5, 2012;
b) As against the defendants Bisher and Yaser Abaza in the amount of $49,497.28 with interest on this amount in accordance with the Courts of Justice Act from January 5, 2012.
[ 14 ] The successful party on this motion is entitled to costs. If the parties cannot agree on the amount I will accept one page written submissions within 10 days of the release of this decision failing which there will be no order as to costs.
Mr. Justice Robert L. Maranger
Released: March 29, 2012
COURT FILE NO.: 11-50988
DATE: 2012-03-29
ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ROYAL BANK OF CANADA Plaintiff – and – NTELIPATH INC. (formerly c.o.b. as NtelPath Inc.) BISHER ABAZA and YASER ABAZA Defendants REASONS FOR JUDGMENT Maranger J.
Released: March 29, 2012