Court File and Parties

COURT FILE NO.: CV-09-00374692

DATE: 20140609

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: First Internet Financial Services Ltd. also known as First Internet Financial, 1586361 Ontario Ltd., and Andy Persaud, Plaintiffs

– AND –

Robert Lewis, Wendy Lewis, Global Learning Group Inc. also known as GLGI, Global Land Consortium Inc., and Colonial Chevrolet Ltd., Defendants

BEFORE: Justice E.M. Morgan

COUNSEL: Christopher Goldson, for the Plaintiffs

Rahul Shastri, for the Defendants

Christopher Wirth, for the Garnishees, Peter Karl Youngren and 4 Life Foundation

HEARD: May 14, 2014

ENDORSEMENT

[1] The Defendants move to vacate the judgment of Conway J. dated September 25, 2009 as varied by her judgment of May 27, 2010, and to vacate Writs of Seizure and Sale filed pursuant to those judgments. The Defendants also seek to set aside a Notice of Garnishment dated January 16, 2014, issued by the Plaintiffs in respect of the judgment. They submit that the matter has been settled and the terms of the settlement fulfilled.

[2] The Plaintiffs cross-move to amend the Statement of Claim to add the Garnishees as new defendants, alleging that the failure of the Garnishees to pay the Plaintiffs pursuant to the Notice of Garnishment constitutes a fraudulent preference. The Plaintiffs seek to amend the title of proceedings so that the Garnishees become debtors pursuant to the judgment of Conway J.

[3] The Garnishees have defended against the cross-motion and concur with the Defendants that the Notice of Garnishment served on them must be vacated. They submit that there is no evidence that they owe money to the Defendants and so there are no funds available to garnish.

[4] On April 30, 2009, the parties entered into Minutes of Settlement of the underlying action. According to those Minutes, the Defendants agreed to pay the Plaintiffs $1,000,000, to transfer certain land interests to the Plaintiff, and to enter into a new business relationship under which ongoing commission payments would be paid to the Plaintiff by the Defendant. The action was dismissed on May 5, 2009, as called for by the settlement.

[5] The Defendants defaulted on their payment obligations under the Minutes of Settlement. As a consequence, the Plaintiff moved for judgment. On September 25, 2009, Conway J. granted judgment to the Plaintiffs in accordance with the Minutes.

[6] On February 19, 2010, the lands referenced in the Minutes were directed by the Plaintiff, Andy Persaud (“Persaud”), to be transferred to Persaud’s son, and were so transferred by the Defendants.

[7] On March 26, 2010, the Plaintiffs attended at the Court office in order to issue a Notice of Garnishment and Writ of Seizure and Sale on the basis of the September 25, 2009 judgment. The registrar reviewed the judgment and refused to issue the Notice of Garnishment on the grounds that the judgment contained some uncertain calculations of the amounts owing.

[8] On May 27, 2010, seeking to make the debt more certain, the Plaintiffs moved to vary the judgment of September 25, 2009 and again appeared before Conway J. On consent of the parties, Justice Conway varied her previous judgment and this time granted judgment against the Defendants in the amount of $399,857.75 plus interest owed pursuant to the Minutes of Settlement. Conway J. also ordered a reference to the Master to determine whether a further sum of $135,142.45, or any of it, had been paid by the Defendants pursuant to the Minutes.

[9] The judgment of May 27, 2010 contained no further terms. It did not contain any reference to the conveyance of lands that had been specified in the September 25, 2009 judgment, as that aspect of the previous judgment had been resolved by the parties and did not form part of the consent presented to the court. Likewise, the May 27, 2010 judgment did not contain any reference to the further business arrangement and ongoing commissions to be paid to Persaud, as specified in the September 25, 2009 judgment, as that aspect of the previous judgment similarly did not form part of the consent presented to the court.

[10] The Plaintiffs never scheduled the reference to the Master envisioned by the May 27, 2010 judgment. Instead, the parties met on November 13, 2010 and negotiated a resolution of all outstanding issues. The Settlement Agreement, drafted by Persaud, and presented by him to the Defendants who ultimately agreed to the terms and signed Persaud’s draft, provided that monies owed to the Plaintiffs would be satisfied by the Defendants making the following payments:

a) $225,000 by the end of January 2013, which would be moved up to December 23, 2010 if Persaud generated sales for the Defendants of $5,000,000 by December 23, 2010;

b) a further $25,000 if Persaud generated sales for the Defendants of $5,000,000 between November 12, 2010 and December 31, 2010;

c) a 12% commission override on sales for the Defendants procured by the Debt Solutions Corporation during the rest of 2010;

d) a 3% commission override on sales for the Defendants procured by [Persaud-affiliated salespeople] Brandon Nandalal, Zafar Khawaja, and Danasar Moorlee Ali; and

e) a 5% commission override on sales for the Defendants procured by [Persaud-affiliated salesperson] Zaman Ali.

[11] Under cross-examination, Persaud acknowledged drafting and signing the Settlement Agreement of November 13, 2010. Moreover, the Defendants have paid, and Persaud concedes that he received, $225,000. At first, Persaud took the position that he was paid that amount for reimbursement of certain expenses he incurred making a promotional video for the Defendants; however, the Defendants have put in the record additional cheques in the total amount of $10,000 which specifically are earmarked for video expenses, and which Persaud also concedes that he received.

[12] Moreover, the Defendants have deposed, and Persaud has conceded, that the Plaintiffs received payments totaling an additional $138,850 from the Defendants. According to the evidence produced by the Defendants and not controverted by the Plaintiffs, these funds break down as:

a) $10,000 to reimburse video expenses, as noted above;

b) $10,000 toward the balance outstanding under the judgment of Conway J. prior to the Settlement Agreement being reached;

c) $43,000 commission overrides relating to the sales people named in the Settlement Agreement;

d) $15,000 as a loan to a company owned by or related to the Plaintiffs;

e) $60,000 as an advance on future commissions if Persaud were to continue making sales for the Defendants.

[13] The Plaintiffs make a number of arguments in an effort to undermine the Settlement Agreement and the fact that the payments thereunder have been made. None of their arguments are convincing.

[14] At first Persaud contended that the Plaintiffs did not receive the settlement funds. However, when confronted with the cancelled cheques from the Defendants that have been produced in the record, Persaud conceded that he received “around the $225,000 mark give or take a few bucks.” In fact, the evidence in the record establishes that the Plaintiffs received more than the requisite $250,000, since Persaud also received a substantial advance on future commissions which he never earned.

[15] After conceding that he did in fact receive the funds, Persaud changed his argument to contend that since the Plaintiffs did not receive the entirety of the $225,000 by the end of January 2013, the terms of the Settlement Agreement were not fulfilled and the settlement itself is void. However, the Plaintiffs continued to accept cheques from the Defendants after January 31, 2013 without protest, until the $225,000 was paid in full. Each of the Defendants’ cheques was clearly and undisputedly marked “settlement”. Some of the funds were specifically directed by Persaud to be paid elsewhere, and the directions refer explicitly to “settlement funds”.

[16] Moreover, there was no “time is of the essence” clause in the Settlement Agreement. The Supreme Court of Canada has instructed that if there is no time is of the essence clause then time is not of the essence: Sail Labrador Ltd. v Challenge One, 1999 CanLII 708 (SCC), [1999] 1 SCR 265, at para 53. The late payments did not undermine the enforceability of the Settlement Agreement, and the money paid by the Defendants and accepted by the Plaintiffs certainly count as payments toward that settlement.

[17] Further, the Plaintiffs have argued that the Settlement Agreement of November 13, 2010 was not a settlement in that it did not reduce the amount of the judgment, but merely represented a payment schedule for satisfying Conway J.’s judgment of May 27, 2010. The problem with this argument is that it is patently contradictory to the written agreement itself.

[18] The agreement does not make a payment schedule for the $399,857.75 due under Justice Conway’s judgment; rather it states a new global figure owing of $225,000. Moreover, the Settlement Agreement begins with the words, written in Persaud’s own handwriting: “Andy Persaud agrees to settle his account for $250,000.” The record is clear that the settlement Agreement was a settlement for $250,000 and that the $250,000 has been paid.

[19] The Plaintiffs also argue that the person who signed the Settlement Agreement on behalf of the Defendants had no authority to sign it. With due respect, this argument is so weak that it has an air of desperation about it.

[20] The person who signed for the Defendants has deposed that he had the authority to do so, and the person that Persaud thought should have signed has likewise deposed that the person who signed had the authority to do so. In any case, it is elementary that persons dealing with a corporate contractor“need not inquire into the regularity of the internal proceedings—what Lord Hatherley called ‘the indoor management:’” JH McKnight Construction Co v Vansickler (1915), 1915 CanLII 605 (SCC), 51 SCR 374, at para 38. Simply put, this argument is not for the Plaintiffs to make.

[21] Finally, the Plaintiffs assert that the written Settlement Agreement was altered by the Defendants by inserting extra sentences after Persaud had already signed it on behalf of the Plaintiffs. Actually, Persaud in his testimony makes two different arguments: either the Defendants made changes after the Settlement Agreement was concluded (by inserting certain words which in any case appear meaningless and do not affect the substance of the settlement), or Persaud signed the Settlement Agreement expecting to get it back from the Defendants typed up and signed but instead he got it back still handwritten and with some inserts.

[22] Neither of the Plaintiffs’ complaints undermines the fact that Persaud agreed to the terms of the settlement as set out in paragraph 10 above. There is no indication that the Plaintiffs rejected it, and there is every indication that their conduct after receiving the signed Settlement Agreement – depositing the cheques marked “settlement” until the entire amount was paid in full – is consistent with there being a meeting of the minds and an enforceable Settlement Agreement.

[23] The Notice of Garnishment at issue here was issued on January 16, 2014. On its face it says that $435,546.91 is outstanding. This figure takes no account whatsoever of the Settlement Agreement or of the funds that the Defendants have paid toward satisfying the judgment. Even if the Plaintiffs contend that the Settlement Agreement has been breached, the remedy would be enforcement of that agreement, not a return to the underlying judgment: Paradiso v Adams, [1978] OJ no 539, at para 8 (Ont CA).

[24] On January 30, 2014, the Plaintiffs’ counsel sent a letter to the Garnishee, 4 Life Foundation, accusing it of aiding and abetting avoidance of the garnishment, and making reference to Justice Conway’s original judgment of September 25, 2009 without even mentioning her revised judgment of May 27, 2010. The Notice of Garnishment is certainly erroneous in stating the amount that is due, and the letter accusing the Garnishee of aiding and abetting avoidance is even more wrong.

[25] It gives me great concern that the Notice of Garnishment contains what appears to be an inflated figure as the debt owing to the Plaintiffs. Even if they dispute the enforceability of the Settlement Agreement, the Notice takes no account of amounts clearly paid by the Defendants as evidenced by a series of cancelled cheques. It is axiomatic that full and fair disclosure of the state of the debt and the source of the deponent’s information is a precondition to the relief of having a garnishee order issue: Noble China Inc. v Cheong, [1999] OJ No 5030, at para 15 (SCJ).

[26] In this case, however, I do not have to decide whether the Notice of Garnishment is void for lack of disclosure. The fact is that it is moot as the Defendants’ debt to the Plaintiffs has been paid in full.

[27] The judgment dated September 25, 2009, as varied by the judgment dated May 27, 2010, is satisfied. Both judgments are ordered vacated, and any Writ of Seizure and Sale issued pursuant to those judgments is likewise vacated. The Notice of Garnishment dated January 16, 2014 is set aside.

[28] The cross-motion by the Plaintiffs is dismissed.

[29] The parties may make written submissions on costs, composed of a Costs Outline and no more than 3 pages of submissions, which should be sent directly to me. Counsel for the Defendants and for the Garnishee should send me their submissions within two weeks of today, and counsel for the Plaintiff within two weeks thereafter.

Morgan J.

Date: June 9, 2014