SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 21219/13

DATE: 2013-06-24

RE: GARFIELD R. MITCHELL, Plaintiff

AND:

MICHAEL J. ELDER, Defendant

BEFORE: Gray J.

COUNSEL:
Rishi Hargovan, Counsel for the Plaintiff
Paul Robson, Counsel for the Defendant

HEARD: June 20, 2013

ENDORSEMENT

[1] Before me is a motion for judgment by the plaintiff, and a motion by the defendant to transfer this matter to Toronto. They came before Edwards J. on June 12, 2013. He adjourned the matter to today, and ordered that both motions be heard at the same time.

[2] The defendant has filed a motion for leave to appeal to the Divisional Court from the Order of Edwards J.

[3] In the result, I dismiss the defendant’s motion and I grant the plaintiff’s motion.

Background

[4] This action is straightforward. The plaintiff sues on promissory notes executed by the defendant. The notes amount to $8,376,275 in Canadian Dollars, and $290,750 in American Dollars.

[5] In its motion, the plaintiff relies primarily on a Confirmation of Indebtedness dated October 22, 2012, signed by the defendant, and a Consent to Judgment executed by the defendant.

[6] A Certificate of Independent Legal Advice was furnished in connection with both the Confirmation of Indebtedness and the Consent to Judgment. The solicitor who signed the certificate states as follows:

“I explained to Michael the nature and effect of the Documents and advised him as to his liability thereunder. Michael acknowledged same and it appeared to me that he fully understood the nature and effect of the Documents and his liability thereunder. Michael also acknowledged and it appeared to me that he was entering into his said obligations and executing the Documents of his own volition and without fear, threats, compulsion, influence or pressure from the Lender or any other person. Michael then executed the Documents in my presence this 22nd day of October, 2012.”

[7] As part of the Certificate of Independent Legal Advice, there appears the following acknowledgment signed by the defendant:

“I acknowledge that I retained the above-mentioned solicitor to advise me to explain the nature and effect of the above-mentioned documents and my liability thereunder. The said solicitor having so advised and informed me, I acknowledge and declare that I am fully aware of the nature and effect of the documents and my liability thereunder, and I have entered into the said obligations and executed the documents of my own volition and without fear, threats, compulsion, influence or pressure from the Lender or any other person.”

[8] The plaintiff’s motion for judgment was brought before any statement of defence was filed. Ultimately, a statement of defence was filed dated June 14, 2013. The plaintiff’s motion is therefore now a motion for judgment based on the Consent to Judgment, or in the alternative a motion for summary judgment.

[9] As noted earlier, this matter came before Edwards J. on June 12, 2013, and he adjourned both motions to June 20, 2013. The statement of defence was prepared two days after the matter was before Edwards J. On the same day, counsel for the defendant prepared his formal motion to transfer this matter to Toronto.

[10] An affidavit sworn by the defendant on June 14, 2013, was filed with the defendant’s motion. In its entirety, the affidavit reads as follows:

1. I am the defendant in this proceeding and, as such, have knowledge of the matters contained in this affidavit.

2. I make this affidavit in support of a request for:

1. An adjournment of the plaintiff’s summary judgment motion returnable June 20, 2013; and/or

2. A transfer of this motion to Toronto.

3. I believe all of the statements as set out in my statement of defence to be true.

4. Based on the advice and my reliance on my counsel and the motion judge’s June 12, 2013 order in this matter, I have been given less than 36 hours to consider and prepare my defence in the matter.

5. My relationship with the plaintiff extends for a period in excess of 30 years.

6. Pursuant to the order of the motion’s judge on July 112, 2013 and the timeline filing requirement of this Court, I do not believe I am being treated fairly or reasonably. A true copy of the motion judge’s endorsement is attached as Exhibit “A”.

7. Approximately 1000 emails between the plaintiff and I exist, many of which I believe will support my position as set out in my defence in the matter. I required sufficient time to review and prepare a fuller defence, to properly instruct counsel, and to examine the plaintiff.

[11] The statement of defence includes a counterclaim. While not as brief as the affidavit it is nevertheless quite short. Rather than paraphrase, I will simply reproduce it. It reads as follows:

1. The defendant admits the allegations contained in paragraphs 2,3 and 4 of the statement of claim.

2. The defendant denies all other allegations contained in the statement of claim.

BACKGROUND

3. The parties are and have been long standing friends over a period of time in excess of 30 years. The defendant is in the business of developing a patented paperless technology tablet system for the world market.

TERMS OF INVESTMENT

4. In or about late 2010 the plaintiff agreed to advance funds to the defendant for the purpose of such a development. A fundamental term of their agreement was that the plaintiff would provide all required funding to the defendant to the point of commercialisation of the tablet system i.e. commencement of sales of the tablet system, or alternative investment found. In consideration for same, the defendant agreed to give the plaintiff and did give him in excess of 4 million shares of the defendant’s corporation, or approximately 15%, of the share of the defendant’s corporation, WorkOnce World Mobile Limited which owns the patents of the (“Corporation”).

5. The plaintiff is in breach of the said agreement as a result of a cessation of funding, which cessation took place in the summer of 2012.

NO CONSIDERATION FOR NOTES

6. In addition, the defendant pleads that the amount claimed by the plaintiff is excessive in that for numerous notes no consideration was provided, i.e. many of the said notes are phantom notes, with no consideration for same having been provided by the defendant.

7. The defendant executed said phantom notes at the request of the plaintiff solely for the purpose of assisting the plaintiff with his bankers.

CONSENT TO JUDGMENT INVALID

8. The subject consent to judgment is invalid. It was signed by the defendant at the request of the plaintiff solely to again assist the plaintiff with his bankers and for no other purpose.

9. Further, the defendant executed same only on the condition that the plaintiff was advance a further minimum 750k to 1 million in accordance with the principal agreement between the parties.

10. Further still, the said consent is void by virtue of being undated and the fact that there was an explicit understanding between the parties that it was for the plaintiff’s bankers only and would never be acted on.

PLAINTIFF’S CONSPIRACY WITH OTHER SHAREHOLDERS TO INJURE DEFENDANT

11. In addition, the defendant states that the plaintiff is and continues to conspire to injure the defendant and the corporation by acting in bad faith in the breach of his agreement with the defendant and otherwise by working with certain other disgruntled shareholders of the corporation with a view to gain control of the corporation and its assets. Full particulars are forthcoming.

COUNTERCLAIM

12. The defendant (plaintiff-by-counterclaim) repeats the above affidavit and claim the following from the plaintiff (defendant-by-counterclaim) for breach of contract, conspiracy and interference with economic relations;

a. General damages in the amount of FIFTY MILLION DOLLARS ($50,000,000.00);

b. Punitive damages in the amount of FIVE MILLION DOLLARS ($5,000,000.00);

c. Pre-and post-judgment interest;

d. His cost of this action on a full indemnity basis; and

e. Such further and other relief as this Honourable Court deems fair and just.

13. The defendant, requests that the counterclaim be heard at the same time as the main action.

SUBMISSIONS

[12] The plaintiff submits that he is entitled to judgment based on the Acknowledgment of Indebtedness and the Consent to Judgment. In the alternative, he submits that he is entitled to summary judgment because it is clear that there is no defence to the action.

[13] While the defendant purports to assert, in the statement of defence, that the promissory notes are not what they appear to be, and that he signed the Acknowledgment of Indebtedness and the Consent to Judgment simply to accommodate the plaintiff in dealings with his bankers, there is nothing in the material to suggest that the documents are not exactly what they appear to be. Indeed, the plaintiff points out that in an email dated March 26, 2013, the defendant did not raise any issue about the validity of the notes, the Acknowledgment of Indebtedness, or the Consent to Judgment. In that email, the defendant concludes by stating “If you can’t see any value in that-do your worst.”

[14] Counsel for the defendant submits that this matter should be transferred to Toronto. He submits that the subject matter of the action has no connection with Milton, and it is inconvenient for counsel to drive to Milton. It would be much more convenient that the matter be heard in Toronto.

[15] Counsel for the defendant submits that the defendant has raised issues that will require a trial to resolve, and that this case does not meet the criteria for summary judgment. He also submits that any deficiencies in the defendant’s material should be assessed as against the very short time the defendant had to respond. If necessary, he requests an adjournment so that deficiencies in the material can be corrected.

Analysis

[16] At this point, it is unnecessary to consider transferring the action to Toronto. If the plaintiff’s motion is granted, there is no need to transfer the matter to Toronto. If the plaintiff’s motion is dismissed, either by me or ultimately by an appellant court, the issue of transferring the matter to Toronto can be considered afresh once it becomes clearer as to where the balance of convenience lies.

[17] I do not accept the defendant’s position that he has been unfairly treated or that he has not had an adequate opportunity to file material. The statement of claim was served on April 26, 2013, and the plaintiff’s motion was served on May 31, 2013. The defendant has had counsel throughout.

[18] The defendant elected to appear before Edwards J. on June 12, 2013, without having filed a statement of defence or any material. In my view, the defendant has had plenty of time to gather together sufficient materials to respond to the statement of claim and the motion. His statement of defence is perfunctory at best. In his affidavit, he simply states “I believe all of the statements as set out in my statement of defence to be true.”

[19] In my view, there is no real defence raised. The Acknowledgment of Indebtedness and Consent to Judgment are crystal clear. The bare pleading in the statement of defence that the documents are not what they appear to be is nothing more than a bald allegation, supported by nothing.

[20] I understand that pursuant to Combined Air Mechanical Services Inc. v. Flesch (2011), 2011 ONCA 764, 108 O.R. (3d) 1 (C.A.), I must not grant summary judgment unless I am persuaded that I can do so with a full appreciation of the issues and the evidence without the advantage of a trial. In this case, I can do so.

[21] There is no defence to the plaintiff’s claim. The plaintiff’s motion is granted.

Disposition

[22] For the foregoing reasons, the plaintiff’s motion is granted. Judgment shall issue in accordance with the statement of claim. The counterclaim is dismissed.

[23] The defendant’s motion is dismissed.

[24] I will entertain brief written submissions with respect to costs, not to exceed three pages, together with a costs outline. Mr. Hargovan shall have five days to file submissions, and Mr. Robson shall have five additional days to respond. Mr. Hargovan shall have three days to reply.

Gray J.

Date: June 24, 2013