Canadian Broadcasting Corporation v. iSport Media and Management Ltd. et al.

[Indexed as: Canadian Broadcasting Corp. v. iSport Mediaand Management Ltd.]

Ontario Reports

Ontario Superior Court of Justice,

Chiappetta J.

March 31, 2014

119 O.R. (3d) 211 | 2014 ONSC 1905

Case Summary

Bills of exchange — Set-off — Principle that equitable set-off does not apply to dishonoured cheques under Bills of Exchange Act not restricted to cases involving international commerce — Principle applying equally to post-dated cheques for services rendered and post-dated cheques for services to be rendered in future — Plaintiff granted partial summary judgment on dishonoured cheques — Stay of judgment pending determination of defendant's counterclaim granted on condition that defendant pay amount of partial summary judgment into court — Bills of Exchange Act, R.S.C. 1985, c. B-4.

The plaintiff sued the defendant to enforce payment of dishonoured post-dated cheques and to recover additional amounts it alleged the defendant owed under an agreement between the parties. The defendant counterclaimed for damages for breach of contract and intentional interference with economic and contractual relations. The plaintiff brought a motion for partial summary judgment on the dishonoured cheques. The defendant opposed the motion, arguing that the principle that equitable set-off does not apply to dishonoured cheques under the Bills of Exchange Act, did not apply in the circumstances of this case. [page212]

Held, the motion should be granted.

The principle that equitable set-off does not apply to dishonoured cheques is not restricted to cases involving international commerce. The principle applies to post-dated cheques for services to be rendered in the future as well as to post-dated cheques for services rendered. The plaintiff was entitled to partial summary judgment in the amount of the dishonoured cheques. As the defendant's counterclaim raised a triable issue, a stay of the partial summary judgment was granted on condition that the defendant pay the amount of the judgment into court.

Comtract Air Compressors Inc. v. A.W. Service Industries Inc., 2000 22763 (ON SC), [2000] O.J. No. 1867, [2000] O.T.C. 387, 6 B.L.R. (3d) 136, 97 A.C.W.S. (3d) 332 (S.C.J.); Edcal Industrial Agents Ltd. v. Redl and Zimmer, 1966 413 (AB CA), [1966] A.J. No. 88, 60 D.L.R. (2d) 289 (S.C. (A.D.)); Iraco Ltd. v. Staiman Steel Ltd. (1987), 1987 4072 (ON CA), 62 O.R. (2d) 129, [1987] O.J. No. 233, 45 D.L.R. (4th) 158, 8 A.C.W.S. (3d) 136 (C.A.), affg (1986), 1986 2739 (ON SC), 54 O.R. (2d) 488, [1986] O.J. No. 242 (H.C.J.); Ro-Am Holdings Ltd. v. Cianfarani, [2008] O.J. No. 5409, 2008 69503, 173 A.C.W.S. (3d) 454 (S.C.J.); Sioufi v. Yogeswaran, [2011] O.J. No. 3762, 2011 ONSC 4953 (S.C.J.), consd

Other cases referred to

772592 Ontario Inc. v. Affordable Cottages Inc., [2002] O.J. No. 1178 (C.A.) [Leave to appeal to S.C.C. refused [2002] S.C.C.A. No. 186]; Freedom International Brokerage Co. v. Anastakis, 2006 31911 (ON SC), [2006] O.J. No. 3664, 21 B.L.R. (4th) 246, 151 A.C.W.S. (3d) 234 (S.C.J.); Great Atlantic & Pacific Co. of Canada v. 1167970 Ontario Ltd., [2002] O.J. No. 3717, [2002] O.T.C. 711, 37 C.B.R. (4th) 277, 2002 12215, 116 A.C.W.S. (3d) 807 (S.C.J.); Hryniak v. Mauldin, [2014] S.C.J. No. 7, 2014 SCC 7, 314 O.A.C. 1, 453 N.R. 51, 2014EXP-319, J.E. 2014-162, EYB 2014-231951, 27 C.L.R. (4th) 1, 46 C.P.C. (7th) 217, 37 R.P.R. (5th) 1, 366 D.L.R. (4th) 641; Parmalat Canada Inc. v. 703558 Ontario Ltd., [2008] O.J. No. 3923, 2008 51775, 169 A.C.W.S. (3d) 1143 (S.C.J.)

Statutes referred to

Bills of Exchange Act, R.S.C. 1985, c. B-4 [as am.], ss. 16(1), 57(2), 94, (2)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 20.01(1), 20.04(2.1), (2.2), 20.08

MOTION by the plaintiff for partial summary judgment.

M. Philip Tunley and Andrea Gonsalves, for plaintiff.

Warren Rappoport, for defendants.

[1] CHIAPPETTA J.: — This motion raises a narrow issue: does equitable set-off apply to dishonoured cheques under the Bills of Exchange Act, R.S.C. 1985, c. B-4 ("BEA") in the circumstances of this case?

[2] The plaintiff, Canadian Broadcasting Corporation ("CBC"), argues that it does not. Case law from the Ontario Court of Appeal, it submits, conclusively establishes that equitable set-off does not apply to dishonoured cheques under [page213] the BEA. The plaintiff therefore brings this motion for partial summary judgment seeking to enforce two cheques that were issued by the defendant iSport Media and Management Ltd. ("iSport") and subsequently dishonoured. The cheques total $302,728.69.

[3] The defendant opposes the motion (the parties have agreed that the action will be discontinued against the defendant Kevin Albrecht). The defendant argues that the present case is distinguishable from the case law from the Court of Appeal, which indicates that equitable set-off does not apply to dishonoured cheques under the BEA. This rule, it is submitted, only applies to cases involving international commerce. The purpose of the rule is to allow for certainty in international trade where post-dated cheques are meant to be in the nature of cash and are therefore treated differently from a simple breach of contract.

[4] The defendant argues that this case does not concern international trade nor were the post-dated cheques meant to be in the nature of cash. Rather, the post-dated cheques were provided gratuitously, the defendant argues, for services that CBC would provide thereafter. When issues arose with CBC's performance of these services, iSport alleges, the post-dated cheques were left to go NSF by iSport.

[5] The flaw in the defendant's argument is that the BEA does not distinguish by intention or circumstance. Section 94 of the BEA provides that "when a bill is dishonoured by non-payment, an immediate right of recourse against the drawer, acceptor and endorsers accrues to the holder". This right is not rebuttable by context or circumstance unless the holder's actions are tainted by certain illegal conducts: see s. 57(2) of the BEA. There is no allegation or evidence of illegal conduct on the part of CBC. The presumption is that CBC as the holder of a bill in due course has an immediate right to recourse as against iSport for payment of the NSF cheques.

Background

[6] In or around September 2006, CBC entered into a contract with Insight (the "telecast agreement") under which CBC would produce and acquire the exclusive right to broadcast the World Curling Players' Association Grand Slam of Curling events (the "events").

[7] The events were to take place over a period of eight years starting on September 1, 2006 through to August 31, 2014, i.e., from the start of the 2006/2007 season to the end of the 2013/2014 season. [page214]

[8] Under the telecast agreement, in return for a fee referred to as a "production subsidy", CBC agreed to produce and broadcast the events, and Insight acquired all revenue-generating assets arising from CBC's broadcasts, including all advertising spots and broadcast sponsorship opportunities. Insight could then sell all of these assets and retain the revenue.

[9] The production subsidy was initially set at $140,000 per event for all events taking place in Toronto, Winnipeg, Calgary, Edmonton, or Vancouver and $165,000 per event for all events taking place at any other location in Canada. The production subsidy increased by 2 per cent each year of the term of the telecast agreement. It was agreed that CBC would send an invoice to Insight following the production of an event and Insight would remit the full payment required within 45 calendar days of receiving the invoice.

[10] In or around April 2009, Insight assigned its rights and obligations under the telecast agreement to iSport.

[11] Four events were scheduled for the 2010/2011 season. In August 2010, iSport provided to CBC four post-dated cheques of $201,819.13 each, which represented the production subsidy for each of the 2010/2011 events.

[12] During the 2010/2011 season, CBC broadcast the Grand Slam of Curling events that took place in Windsor, Vernon, Oshawa and Grand Prairie. CBC invoiced a total of $807,267.52 in production subsidies to iSport for these broadcasts.

[13] In or around November 2010, iSport delivered to CBC by courier three post-dated cheques for the full production subsidy ($201,819.13) for the first three events of the 2010/ 2011 season, and a fourth cheque in the amount of $100,909.56, for half the production subsidy of the fourth event. CBC is the named payee and iSport is the issuer of all four cheques. The cheques are signed by Kevin Albrecht ("Albrecht") and drawn on iSport's bank account.

[14] The cheque for the first event bounced. When CBC raised the issue with iSport, iSport promptly made the payment by wire transfer. CBC deposited the cheque for the second event without issue.

[15] The cheque for the third event of the 2010/2011 season, dated February 22, 2011, was in the amount of $201,819.13. CBC presented the cheque for payment. In early March 2011, the Royal Bank of Canada ("RBC") notified CBC's Credit and Collections Department that the cheque was returned due to non-sufficient funds (the "February NSF cheque"). To date, CBC has not received any payment from iSport for the amount of the [page215] February NSF cheque or the production subsidy ($201,819.13) owing for the third event.

[16] The cheque for the fourth event of the 2010/2011 season, dated May 17, 2011, was in the amount of $100,909.56, being half of the production subsidy owing for that event. CBC presented that cheque for payment. Again, RBC notified CBC's Credit and Collections Department that the cheque had been returned due to non-sufficient funds (the "May NSF cheque"). To date, CBC has not received any payment from iSport for the amount of the May NSF cheque ($100,909.56) or the other half of the production subsidy ($100,909.56) owing for the fourth event.

[17] CBC terminated the telecast agreement in January 2012.

[18] CBC subsequently started an action against iSport to enforce payment of the NSF cheques and to recover additional amounts it alleges iSport owes under the telecast agreement. CBC's total claim is approximately $850,000, including its claims in respect of the February NSF cheque and the May NSF cheque.

[19] iSport counterclaimed for $3 million in damages for breach of contract and intentional interference with economic and contractual relations.

Whether Equitable Set-Off Applies to Dishonoured Cheques in this Case

[20] The plaintiff brings this motion under rule 20.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for partial summary judgment. To this end, I must follow the new test for summary judgment motions set out by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, at paras. 49, 66 (released on January 23, 2014).

[21] A judge hearing a summary judgment motion must now first determine whether there is a genuine issue requiring trial based only on the evidence before her without using the fact-finding powers in rule 20.04(2.1) and (2.2). There will be no genuine issue requiring a trial if evidence permits the motions judge to make a fair and just determination on the merits. This will be the case when the process (1) allows the judge to make the necessary findings of fact; (2) allows the judge to apply the law to the facts; and (3) is a proportionate, less expensive and a more timely means to achieve a just result.

[22] The issue is whether equitable set-off provides iSport with a valid defence to this motion. Only if iSport has a valid claim of equitable set-off does there remain a genuine issue requiring a trial with respect to CBC's right to sue on the [page216] NSF cheques. Otherwise, it is appropriate to grant CBC partial summary judgment in this case.

[23] iSport concedes the following points:

(1) iSport provided the two NSF cheques to CBC;

(2) CBC tried to negotiate them on or after the date payable;

(3) the cheques were returned for non-sufficient funds;

(4) a post-dated cheque that is ultimately dishonoured whether due to insufficient funds in the drawer's bank account or because the drawer stops payment on the cheque is a bill of exchange as defined in s. 16(1) of the BEA: see Comtract Air Compressors Inc. v. A.W. Service Industries Inc., 2000 22763 (ON SC), at para. 22; and

(5) the Ontario Court of Appeal has held that equitable set-off does not apply to bills of exchange, including cheques: see Iraco Ltd. v. Staiman Steel Ltd. (1986), 1986 2739 (ON SC), affd (1987), 1987 4072 (ON CA).

[24] iSport submits, however, that the circumstances of this case are distinguishable from Iraco to the extent that the rationale therein does not apply. Specifically, iSport makes the following submissions:

(1) the NSF cheques were provided in the context of a non-international dispute;

(2) the NSF cheques were not provided pursuant to a contractual obligation, and therefore, there was a lack of consideration;

(3) the NSF cheques were given gratuitously in relation to services that had not yet been provided. CBC was therefore not entitled to treat the NSF cheques as cash payments for production services at the time the NSF cheques were provided. Payment for these services was not due until 45 days after the services were provided; and

(4) the NSF cheques were provided where it was later found that triable issues arose as to whether the payee had properly performed the services it agreed to provide the payor in consideration of the NSF cheques.

[25] The BEA does not carve out exceptions, however, as to when equitable set-off may apply. [page217]

[26] iSport agrees that the NSF cheques at issue are bills of exchange and that the cheques were dishonoured by non-payment. Section 94(2) of the BEA is clear and unconditional:

94(2) Subject to this Act, when a bill is dishonoured by non-payment, an immediate right of recourse against the drawer, accepter and endorsers accrues to the holder.

There is no basis in the BEA to draw the distinctions iSport asks of the court. iSport does not have a valid claim of equitable set-off. There is therefore no genuine issue requiring a trial with respect to CBC's right to collect on the NSF cheques.

1. Non-international dispute

[27] iSport submits that the law that equitable set-off does not apply to dishonoured cheques under the BEA should not apply herein as the cheques were provided in the context of a non-international dispute. Section 94(2) of the BEA, however, does not make that distinction. Moreover, there are numerous jurisprudential examples of the application of the rule outside of international trade: see, e.g., Comtract Air; Parmalat Canada Inc. v. 703558 Ontario Ltd., 2008 51775 (S.C.J.); Ro-Am Holdings Ltd. v. Cianfarani, 2008 69503 (S.C.J.); and Great Atlantic & Pacific Co. of Canada v. 1167970 Ontario Ltd., 2002 12215 (S.C.J.).

[28] Iraco is a 1986 decision of the Ontario High Court, affirmed by the Ontario Court of Appeal. Iraco holds that an equitable set-off cannot be used as a defence to a claim concerning a bill of exchange. In the High Court's decision, Justice Holland considers an international dispute, reviews the law in England and the law of Canada, and roots his decision in international trade. He held as follows, at p. 493 O.R.:

In order to help provide certainty in matters of international trade, it appears to me that, if possible, the law of Canada should be the same as the law of England on this point and, in the circumstances, I have come to the conclusion that the defence of equitable set-off is not available on the facts of this case.

[29] In my view, however, it would not be appropriate to read Iraco so narrowly as to render incorrect the subsequent decisions of the Ontario Superior Court of Justice in Comtract Air, Parmalat and Ro-Am Holdings. Nor would it be appropriate to accept iSport's submission that there is law in Canada supporting the proposition that equitable set-off can apply to bills of exchange. In this regard, iSport cites the 1966 Alberta Supreme Court case of Edcal Industrial Agents Ltd. v. Redl and Zimmer, 1966 413 (AB CA). Not only is Edcal contrary to the weight of authority in Ontario on the issue, but Justice Holland considered the case in Iraco and chose not to follow it. The Ontario Court of Appeal agreed with the reasons of Justice Holland.

2. Lack of consideration

[30] iSport argues that since the telecast agreement does not mandate the provision of post-dated cheques, the cheques were provided without consideration. To this end, equitable set-off should apply to the bills of exchange in this case. iSport relies on Sioufi v. Yogeswaran, 2011 ONSC 4953, at paras. 22‑24.

[31] In Sioufi, the court refused to grant partial summary judgment on bills of exchange. The defendant had dishonoured a cheque payable to the plaintiff, which was to be consideration for the plaintiff's rental agreement for a certain amount of rent. The plaintiff signed a rental agreement for a different amount from that agreed upon with the defendant and the defendant therefore cancelled the cheque. The plaintiff sought partial summary judgment.

[32] Justice McDermot in Sioufi distinguished the rule that the defence of equitable set-off does not apply to claims based on a bill of exchange as follows, at para. 23:

The within case is distinguishable, as the defence being relied upon in the present case goes further than a mere right to set off. Although there is a potential claim for set off, the defence which is in issue in this matter also alleges a total failure of consideration for which the cheque and note were provided...

[33] In this case, iSport makes no such allegation. There is no dispute that iSport received consideration in return for payment contemplated by the NSF cheques.

[34] I agree with the CBC that there need not be consideration for the form of payment, that is, the NSF cheques, but only for the obligation to pay. iSport received the services for which the NSF cheques were intended to compensate.

3. Services had not yet been provided

[35] iSport submits that another distinction to be made between the present case and the line of authorities applying Iraco is the distinction between post-dated cheques for services rendered versus post-dated cheques for services to be rendered in the future.

[36] The limitation advanced by iSport is novel and unsupported by case law.

[37] iSport argues that because it provided the post-dated cheques before receiving production services from CBC, CBC was not entitled to treat the post-dated cheques as cash payments for production services at the time those cheques were provided.

[38] The parties disagree as to why the post-dated cheques were provided.

[39] For the purposes of assessing the BEA, the reason why the post-dated cheques were provided is not relevant. It matters only that they were provided.

[40] The post-dated cheques provided by iSport to CBC are therefore meant to be in the nature of cash.

4. Discovery of performance issues after the NSF cheques provided

[41] iSport argues that had it not given CBC post-dated cheques and paid only after the services were provided, it could have withheld the cash payments due to deficiencies in the services provided by CBC.

[42] For these foregoing reasons, I conclude that the present case is not distinguishable from the body of case law establishing that equitable set-off does not apply to dishonoured bills of exchange. Partial summary judgment in the amount of $302,728.69 for the dishonoured bills provided by iSport is granted.

Stay of Execution on Judgment

[43] iSport submits, in the alternative, that if CBC is entitled to judgment on the NSF cheques, such judgment should be stayed pending the determination of iSport's counterclaim.

[44] In Freedom International, after granting the plaintiff partial summary judgment on a claim arising from a bill of exchange, Justice Belobaba granted a stay of the judgment noting that the law is clear that a stay of execution should be granted unless the counterclaim is without merit.

[45] Justice Molloy in Comtract Air described the test for whether to grant a stay as an exercise of discretion taking into account the nature of the defendant's claims and the equities between the parties.

[46] The Ontario Court of Appeal described the test in 772592 Ontario Inc. v. Affordable Cottages Inc., noting that special grounds are required.

[47] The special circumstances articulated by the Court of Appeal do not exist here.

[48] The counterclaim, however, relates directly to the CBC's claim for the NSF cheques.

[49] iSport counterclaims against the CBC for damages for breach of contract and intentional interference in contractual relations.

[50] But for one exception, there is no evidence on the record before me that CBC breached a term of the telecast agreement.

[51] iSport also alleges that CBC terminated the telecast agreement contrary to its terms by failing to provide the required notice to do so.

[52] The evidence presented also raises a triable issue regarding iSport's claim for damages for interference with contractual relations.

[53] CBC denies this and offers contrary evidence.

[54] This is not the forum to resolve the conflicting statements.

[55] iSport has failed to present any evidence to quantify its counterclaim.

[56] Given the equities of the parties, granting a stay balances the interests of CBC with the interests of iSport.

[57] The stay, however, should not be granted without the condition that iSport pay the partial summary judgment granted into court with prejudgment interest.

[58] The discretion vested in the court to grant a stay in the context of a judgment on a bill of exchange should not be used as a substitute for equitable set-off.

[59] I agree with Justice Molloy in Comtract Air that any stay order made should respect the principle under the rule.

[60] Granting a stay without conditions would in effect deny CBC its rights under the BEA and convert their action on the NSF cheques to a claim for breach of contract.

Disposition

[61] For reasons set out above, partial summary judgment is granted to the plaintiff on the dishonoured bills of exchange (the NSF cheques) in the amount of $302,728.59. Prejudgment interest of 1.3 per cent is awarded in respect of both the February NSF cheque and the May NSF cheque. A stay of the judgment is granted on the condition that iSport pay into court to the credit of this action, the sum of $314,049.91 within 45 days of the release of these amended reasons.

Costs

[62] The parties have agreed that costs should be fixed in the amount of $19,500 and made payable by the unsuccessful party to the successful party. I am of the view that the plaintiff is the successful party to the motion, independent of the conditional stay granted.

Motion granted.

End of Document