COURT FILE NO.: CV-10-101854-00
DATE: May 14, 2012
CORRIGENDA: May 28, 2012
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Baneet Bhakhri, Plaintiff
AND:
Eulalia Valentim and Maria Dias, Defendants
BEFORE: The Honourable Madam Justice J.E. Ferguson
COUNSEL: Glenn E. Cohen, for the Plaintiff
Romesh Hettiarachchi, for the Defendants
Tim Gleason, for the Defendant to the Counterclaim Terry Walman
HEARD: May 1, 2012
REVISED ENDORSEMENT
[1] This motion is for summary judgment against the defendant Eulalia Valentim (“Valentim”) to establish a debt obligation that she must repay to Baneet Bhakhri (“Bhakhir”) pursuant to a promissory note.
The Law
[2] The test for summary judgment remains whether there is a genuine issue requiring a trial. However, since the 2010 amendments to the Rules of Civil Procedure, the motions judge can weigh the evidence, evaluate the credibility of a deponent and draw reasonable inferences to aid in coming to the determination of whether a trial is necessary.
Rules 20.01 & 20.04 of the Rules of Civil Procedure
[3] The Ontario Court of Appeal has recently pronounced definitively and comprehensively on Rule 20 in Combined Air Mechanical Services Inc. v. Flesch. This decision "marks a new departure and a fresh approach to the interpretation and application of the amended Rule 20."
Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764 at paragraph 35
[4] Combined Air Mechanical Services Inc. overrules in no uncertain terms the pre-2010 Rule 20 authorities precluding a judge on a summary judgment motion from weighing evidence, assessing credibility, or drawing inferences of fact:
The 2010 amendments to Rule 20 [...] specifically authoriz[e] judges to use these powers on a motion for summary judgment unless the judge is of the view that it is in the interest of justice for such powers to be exercised only at a trial.
the amended rule permits the motion judge to decide the action where he or she is satisfied that by exercising the powers that are now available on a motion for summary judgment, there is no factual or legal issue raised by the parties that requires a trial for its fair and just resolution.
Combined Air Mechanical Services Inc. v. Flesch, supra at paragraphs 3, 37
[5] Judges deciding whether to use the new powers set out in Rule 20.04 (2.1)to weigh evidence, assess credibility, or draw inferences of fact now must follow the full appreciation test:
"Can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial?"
Combined Air Mechanical Services Inc. v. Flesch, supra at paragraph 50
[6] The court elaborated on the full appreciation test:
We think this “full appreciation test” provides a useful benchmark for deciding whether or not a trial is required in the interest of justice. In cases that call for multiple findings of fact on the basis of conflicting evidence emanating from a number of witnesses and found in a voluminous record, a summary judgment motion cannot serve as an adequate substitute for the trial process. Generally speaking, in those cases, the motion judge simply cannot achieve the full appreciation of the evidence and issues that is required to make dispositive findings. Accordingly, the full appreciation test is not met and the “interest of justice” requires a trial.
In contrast, in document-driven cases with limited testimonial evidence, a motion judge would be able to achieve the full appreciation of the evidence and issues that required to make dispositive findings. Similarly, the full appreciation test may be met cases with limited contentious factual issues. The full appreciation test may also be met in cases where the record can be supplemented to the requisite degree at the motion judge’s direction by hearing oral evidence on discrete issues.
We wish to emphasize the very important distinction between “full appreciation” in the sense we intend here, and achieving familiarity with the total body of evidence the motion record. Simply being knowledgeable about the entire content of the motion record is not the same as fully appreciating the evidence and issues in a way that permits a fair and just adjudication of the dispute. The full appreciation test requires motion judges to do more than simply assess if they are capable of reading and interpreting all the evidence that has been put before them.
The point we are making is that a motion judge is required to assess whether the attributes of the trial process are necessary to enable him or her to fully appreciate the evidence and the issues posed by the case. In making this determination, the motion judge is to consider, for example, whether he or she can accurately weigh and draw inferences from the evidence without the benefit of the trial narrative, without the ability to hear the witnesses speak in their own words, and without the assistance of counsel as the judge examines the record in chambers.
Thus, in deciding whether to use the powers in rule 20.04(2.1), the motion judge must consider if this is a case where meeting the full appreciation test requires an opportunity to hear and observe witnesses, to have the evidence presented by way of trial narrative, and to experience the fact-finding process first-hand. Unless full appreciation of the evidence and issues that is required to make dispositive findings is attainable on the motion record – as may be supplemented by the presentation of oral evidence under rule 20.04(2.2) – the judge cannot be “satisfied” that the issues are appropriately resolved on a motion for summary judgment.
The important element of the analysis under the amended Rule 20 is that, before using the powers in rule 20.04(2.1) to weigh evidence, evaluate credibility, and draw reasonable inferences, the motion judge must apply the full appreciation test in order to be satisfied that the interest of justice does not require that these powers be exercised only at a trial. Combined Air Mechanical Services Inc. v. Flesch, supra at paragraph 51-55, 75
[7] The established evidentiary obligations remain. The moving party bears the evidentiary burden of showing there is no genuine issue requiring a trial. After the moving party has discharged the evidentiary burden, the burden shifts to the responding party to prove that its claim or defence has a real chance of success. In response to affidavit material or other evidence supporting a motion for summary judgment, a responding party may not rest solely on the allegations or denials in the party's pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial. In accordance with the existing jurisprudence, each side must put its best foot forward with respect to the existence or non-existence of material issues to be tried and cannot sit back and rely on the possibility that more favourable facts or better evidence may be presented at trial. The court is entitled to assume that the record contains all the evidence which the parties would present at trial.
Reference: Rule 20.02(2) and 20.04 of the Rules of Civil Procedure
Combined Air Mechanical Services Inc. v. Flesch, supra at paragraph 56
Lawless v. Anderson, 2010 ONSC 2723 at par. 17
TD v. Cuthbert, 2010 ONSC 830 at par.12-13
Guarantee Co. of North American v. Gordon Capital Corp., 1999 CanLII 664 (SCC), 1999 CarswellOnt 3171 (S.C.C.) at para 27
1061590 Ontario Ltd. v. Ontario Jockey Club, 1995 CanLII 1686 (ON CA), 1995 CarswellOnt 63 (C.A.) at paras 35-36
[8] The court is entitled to draw inferences from the evidence on a common-sense basis, and may look to the overall credibility of a party’s case. Merely raising an issue of credibility will not be an answer. The issue of credibility must be genuine and not spurious.
Reference: Rogers Cable TV Limited v. 373041 Ontario Limited, at paras 4-7
Background
[9] This matter involves financing and the parties involved work in the financing industry. Valentim is a mortgage broker. Sam Joshi (“Joshi) is an offer of Xpert Credit Control Inc. He used to work with Don Hodgson. Joshi’s brother-in-law is the plaintiff who funded the loans. Certain funds were advanced to Valentim. The facts are convoluted as to who gave notes to whom; who owed money to whom; who provided financing; and who signed that financing. All of this does not matter. The bottom line is that Valentim signed the promissory note on November 20, 2009. She acknowledges that she signed it. She acknowledges a debt to Bhakhir.
[10] The promissory note is in the amount of $107,113.00 stemming from the potential sale of her property at 31 Daleview Court in Kleinberg. She also executed a mortgage commitment on the same day which she does not recall signing but admits that it looks like her signature on the document. She asserts that she always inserts a date which was done here. This commitment allowed for a second, third or fourth mortgage on the said property with an a rate of 6.99% should there be a shortfall from the proceeds (note that the originals of these two documents were produced and examined by me at this motion).
[11] Nothing has been paid by Valentim pursuant to the promissory note or mortgage commitment.
Evidence from the Cross-Examinations
[12] Both Valentim and Hodgson repeatedly stated on cross examination that the funds advanced through Joshi were to be paid out of the sale and refinancing of Daleview, and that if the transaction did not close Valentim was obligated to pay back the funds.
[12]
Ref: Valentim Transcript Q 376 to 382, 390 to 396, 418 to 420, 449 to 466, 489 to 498
Ref: Hodgson Transcript Q 129 to 131, 234 to 245, 249 to 254
[13] Valentim admits that she signed the November 20, 2009 promissory note. She described being in her office with Hodgson and Joshi and “a couple of other gentlemen”. She says “I was forced to sign the note…they hovered over me and said sign the document”. When asked what would happen to her if she did not, she said “I don’t know. Mr. Sam Joshi was quite irate”. She was not threatened, only “they were irate”. She had a door to leave from if she wanted to. She did not call the police then or thereafter. When asked if she complained, she said “I did, yes, to Mr. Don Hodgson and everybody that was in the room, and they did not agree on how the note was signed…They did not agree that I should be in that state, that I didn’t get a copy of it. Everyone in the room agreed that it was not handled in a proper manner”…“After you signed the promissory note did you demand that it be returned or cancelled?” “I demanded that I get a copy and we sit down and try and come up with terms and agreement.”
Ref: Valentim Transcript Q112 to 126, 137 to 146, 461
[14] Valentim claimed that she signed only the promissory note that day, and that she did not sign either or both pages of a document entitled Mortgage Commitment. When the original was shown to her, with original ink, signatures and dates on both pages, she would only say “it could be my signature”. She then admits that when she signs documents, she dates them, that the dating is her handwriting; yet she continues to deny the date. She is an admitted mortgage broker, familiar with lending transactions and documents. Her evidence is not credible.
Ref: Valentim Transcript Q. 150 to 178
[15] Valentim acknowledges an obligation to pay $82,500 plus interest, on the funds advanced. According to her, even 10% interest would be “reasonable”.
Ref: Valentim transcript Q 489 to 492
[16] Duress was not pleaded by Valentim in her statement of defence. The only defence pleaded by Valentim to the promissory note of November 20, 2009 is a denial of having executed a promissory note, and “puts the plaintiff to the strict proof”. The counterclaim claims that “the promissory notes pursuant to which the plaintiff claims” are “false and/or fraudulent documents”. It does not suggest duress.
[17] In her affidavit in response to the motion, Valentim states “Although I initially refused, I signed those documents [“some documents regarding the loan”] on the condition that Joshi provide a copy of these documents to me”. There is no mention of being “forced to sign” or “duress”. It was only on her cross-examination that Valentim claimed that she was forced to sign. Moreover, the allegation is not one of economic duress; (her counsel confirmed that as well at the motion). She only claims that she was physically under duress. What she said about duress is set out above at paragraph 13.
[18] The law is clear as to what must be shown to establish operative duress, to avoid a contract.
“Duress, whatever form it takes, is a coercion of the will so as to vitiate consent…in a contractual situation commercial pressure is not enough. There must be present some factor which could in law be regarded as coercion of his will so as to vitiate his consent…it is material to enquire whether the person alleged to have been coerced did or did not protest; whether…he did nor did not have an alternative course open to him such as an adequate legal remedy; whether he was independently advised; and whether after entering the contract he took steps to avoid it”.
Ro-Am Holdings Limited v Cianfarani 2008 Can LII 69503 (Ont SC), citing Pao On v Lau Yiu [1973] 3 All ER 65 (PC) and Gordon v Roebuck 1992 CanLII 7443 (ON CA), [1992] OJ No. 1499, 9 OR (3d) 1(CA)
[19] The evidence from Valentim does not support “coercion of will” or “pressure exerted that was not legitimate”. The note was signed in her office, with at least 3 “gentlemen” other than Joshi present; she could have walked out the door; she was not threatened or intimidated. They were irate, and when asked if afterwards she demanded of Joshi that it be returned or cancelled, she said only “I demanded that I get a copy and we sit down and try and come up with terms and agreement”. Her evidence does not support duress.
[20] Thus the only pleaded defence has no chance of success with respect to the November 20, 2009 promissory note, given the admissions on cross-examination.
[21] Valentim’s counsel submitted that this is not a matter for summary judgment for the following reasons:
(1) He submits that the November 20, 2009 promissory note is not a promissory note. Rather, he submits that it is a memorandum of agreement acknowledging an earlier promissory note. This makes no sense on a plain and clear reading of the note. This is a promissory note.
(2) He submits that section 55(2) of the Bills of Exchange Act, R.S.C. 1985 cB-4 (B.E.A.) applies and allows her to avoid liability on the note. With all due respect, this section has no applicability. This section is codification of the defences granted to the maker of a note to avoid liability when the note has been endorsed to a third party (holder in due course) who can sue on the note as long as value has been given. In that case the original maker of the note may have had defences which may not be applicable to the holder in due course. This note was not endorsed, therefore, the section is not applicable. Valentim is being sued by the holder of the note - Bhakhri. In any event, even if the section was applicable, Valentim acknowledges the note - the debt to Bhakhri, and there is no evidence from her supporting any of the defences in section 55(2) of the B.E.A.
(3) He submits that there has been a material alteration of the note and as a result section 144 of the B.E.A. applies. Valentim does not acknowledge signing an earlier promissory note. As a result, there is only one promissory note in question (the November 20, 2009 note) which she acknowledges signing. There has therefore been no material alteration as there is only one note.
(4) He submits that the note is not valid as there has been no presentment pursuant to Section 184 of the B.E.A. Again this section is not applicable as it applies to notes which have been endorsed. This promissory note was not endorsed.
[22] Valentim admittedly signed the promissory note and made repeated acknowledgments of indebtedness of at least $82,500 plus interest. The interests of justice do not require that there be a trial to establish that Valentim is liable to Bhakhri under the promissory note. The note dated Novemver 20, 2009, is prima facie valid and enforceable in accordance with its terms.
[23] Summary judgment is granted against Valentim in the amount of $82,500.00 together with interest at 6.99% pursuant to the mortgage commitment without prejudice to the right to proceed further to establish indebtedness based on the promissory note terms.
[24] If the parties cannot agree on costs, they can provide brief written submissions on costs within 30 days.
The Honourable Madam Justice J.E. Ferguson
Date: May 28, 2012