COURT FILE NO.: CV-12-462314 and CV-13-487549
DATE: 20150928
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Norton McMullen Consulting Inc. and Paul Simpson
Plaintiffs
– and –
Paul Boreham, 401 Energy Ltd., MFOP Wind Power Ltd. and Last Chance Wind Power Corp.
Defendants
Michael Shell and Karen Phung, for the Plaintiffs
Rocco Galati, for the Defendants
– and –
Attorney General of Ontario
Intervener
AND BETWEEN:
Paul Boreham, 401 Energy Ltd., MFOP Wind Power Ltd. and Gateway Wind Farms Development Inc.
Plaintiffs
– and –
Norton McMullen & Co. LLP, Paul Simpson and Rob Gilroy
Defendants
Padraic Ryan, for the Intervener
Rocco Galati, for the Plaintiffs
Lisa Munro, for the Defendants
HEARD: July 6-9, 2015
E.M. MORGAN J.:
I. The motions
[1] These combined motions, heard over the course of four days, involve two related actions: Court File No. CV-12-462314 (the “NM Consulting Action”) and Court File No. CV-13-487549 (the “NM Accounting Action”).
[2] The Plaintiffs in the NM Consulting Action seek summary judgment under Rule 20.04, on the basis that there is no genuine issue requiring a trial.
[3] The claim in the NM Consulting Action is for payment of two amounts alleged to be owing under two different agreements:
(a) $1,173,842.31 claimed by Norton McMullen Consulting Inc. (“NM Consulting”) against 401 Energy Ltd. (“401”), MFOP Wind Power Ltd. (“MFOP”), Gateway Wind Farms Developments Inc. (“Gateway”) and Paul Boreham (“Boreham”) under a consulting agreement dated March 8, 2010 (the “Consulting Agreement”); and
(b) $1,251,866 claimed by Paul Simpson (“Simpson”) against Boreham and Last Chance Wind Power Corp. (“Last Chance”) under a letter of credit agreement dated March 12, 2010 (the “LC Agreement”).
[4] The Defendants resist summary judgment, and contend that this is not a proper case to be decided on the basis of a paper record alone. The Defendants argue that proper adjudication of the within dispute requires the court to draw inferences and assess credibility, which they contend should not form the basis of a summary judgment.
[5] The Defendants go on to submit that those portions of Rule 20 that allow the Court to make findings and draw inferences of credibility from affidavit evidence given on “information and belief”, particularly where that evidence is in breach of the principled exception to the hearsay rule, infringe the right to a fair trial and the requirement of an independent judiciary. The Defendants submit that the Rule is unconstitutional and of no force and effect to the extent that it infringes those rights, and must be read down to avoid such a conclusion.
[6] The Plaintiffs in the NM Accounting Action (who are the same or aligned in interest with the Defendants in the NM Consulting Action) seek to have the two actions consolidated. Of course, this can only occur if summary judgment is not granted in the NM Consulting Action and both actions remain alive.
[7] The Defendants in the NM Accounting Action (who are the same or aligned in interest with the Plaintiffs in the NM Consulting Action) object to the request for consolidation regardless of the outcome of the NM Consulting Action. They argue that the two actions are at different stages of the respective proceedings.
II. The Melancthon Project
[8] The Feed-in-Tariff (“FIT”) Program is an Ontario government program in which electricity is purchased from green power projects. The program provides guaranteed pricing for twenty years for projects awarded a FIT contract.
[9] The Melancthon Project involved some forty 2.5 megawatt turbines installed on farm properties located in the Township of Melancthon, Ontario. These turbines were designed to generate a total of 199 megawatts of electricity per hour. The project was owned by a trustee corporation, Farm Owned Power (Melancthon) Ltd. (“FOPML”), which was in turn owned by ten different project companies. The shares of each of the project companies were divided between local Melancthon investors/farmers, who held 51% of the shares, and Boreham (either through 410 or MFOP), who held 49% of the shares.
[10] Boreham is by all accounts an experienced and sophisticated businessman. He refers to himself as the “creator” of FOPML and the Melancthon Project. At all material times the agent and manager of FOPML was 401, a company controlled solely by Boreham. Boreham and his long-time ‘right hand man’, Mark Binnington, were the directors of FOPML. It was FOPML that was formally awarded the FIT contract for the Melancthon Project.
[11] The funds to purchase 51% of the shares of each of the ten project companies were paid by the local investors to 401. Through his interest in 401, Boreham received approximately $4.3 million from the sale of these shares in the project companies, which was to have been invested in the development of the Melancthon Project. A dispute ultimately arose between Boreham and the local investors over the use of these invested funds, which resulted in a settlement implemented upon the ultimate sale of the Melancthon Project. Under the Settlement Agreement, the local investors recovered their initial investment from the proceeds of sale prior to the 51-49 split with Boreham and his entities.
[12] The corporate and shareholding structure of the Melancthon Project was designed to take advantage of what the FIT program called the “Community Price Adder”. This would have entitled the project to a bonus of up to one cent per kilowatt hour produced. It was Boreham’s initial understanding that the maximum bonus, or maximum Community Price Adder, would be available to the Melancthon Project if the majority of the shares of the ten project companies were held by local investors.
[13] As it turned out, the FIT rules provided for a two-part test to qualify for the Community Price Adder. In the first place, more than 50% of the shares had to be owned by individuals residing in Ontario. Secondly, the Community Price Adder was calculated in accordance with the real economic interest of the local investors – i.e. their entitlement to a return and the risk to which they were exposed for the development costs. To be entitled to the maximum amount of bonus, the local investors had to fund the majority of the development costs.
[14] The development cost of the Melancthon Project was estimated to be in the range of $200 to $250 million. The local investors contributed a total of $4.3 million, and so the Community Price Adder was not available to the project.
[15] When it became clear that the Melancthon Project did not qualify for the Community Price Adder, the local investors sought to sell their interest. Accordingly, although Boreham had at first approached NM Consulting to work on a sale of his own 49% interest, the transaction that eventually ensued was the sale of the entire Malancthon Project – including Boreham’s 49% and the local investors’ 51%.
III. The Consulting Agreement
[16] Simpson, an accountant by profession and a partner at NM Accounting, was introduced to Boreham by Robert Gilroy and David Norton, the accountants at NM Accounting who had done Boreham’s personal, family, and corporate tax returns since 2007. Simpson was not involved in Boreham’s accounting matters, but rather worked through NM Accounting’s sister firm, NM Consulting, providing consulting services and assisting clients with financing and asset or equity sales of their businesses.
[17] Simpson was initially asked by Boreham to assist in putting together a business plan and in finding funding for a different energy project on the Henvey Inlet First Nations Reserve. That project, however, never proceeded; as Boreham described it, the Henvey project “slipped below the waves”.
[18] In December 2009, Boreham asked Simpson to represent him, 401, and the project companies in seeking out investors to finance the development of the Melancthon Project or to purchase Boreham’s 49% interest. At the time, Boreham was under the impression that the Melancthon Project could benefit from the maximum Community Price Adder if the local investors maintained their majority share. As indicated above, it later became clear that the local investors did not meet the economic interest criteria required to qualify for this bonus return.
[19] As consultant, Simpson was responsible for the business plans, financial projections, and the confidential information memoranda prepared for prospective investors/purchasers. He also prepared term sheets, provided technical data and other information for distribution to potentially interested parties.
[20] Overall, Simpson was responsible for representing Boreham and his corporate holdings in dealing with the potential investors, and was also tasked with sourcing and approaching his own contacts and leads with respect to potential purchasers. The documentation, including the confidential information memoranda prepared by Simpson on Boreham’s instructions and behalf, reflect the fact that it was Simpson in his NM Consulting capacity that was the designated contact. Boreham himself reviewed and approved this material.
[21] At the outset of their arrangement in December 2009, Simpson and Boreham discussed the fact that NM Consulting would be charging an hourly fee for time spent on the Melancthon Project. Several months later, in February 2010, NM Consulting rendered its first account for the services provided by Simpson. Boreham did not pay this account, but rather advised Simpson that he was experiencing cash flow problems. Simpson then proposed deferring the hourly fees if a success fee were added to the arrangement whereby NM Consulting would be paid a bonus if Boreham managed to sell his 49% interest. Boreham was agreeable to this arrangement, and conceded in his examination for discovery that these discussions took place.
[22] The proposal was reduced to writing in an email dated February 22, 2010, in which Simpson wrote to Boreham expressly proposing the payment of a consulting fee for time expended plus a success fee. A discussion of terms ensued, and it was agreed that Simpson would prepare a draft agreement.
[23] On March 1, 2010, Simpson sent to Boreham a first draft of the Consulting Agreement. It specifically provided that NM Consulting would be compensated for its work and services based on its standard hourly rates and that, in addition, it would receive a success fee calculated as a percentage of the total value of the proceeds of sale. MFOP, Gatweay, FOPML, 401, and Boreham were all named as parties to the Consulting Agreement, as Simpson wanted to be sure that NM Consulting represented all the parties whose interests in the Melancthon project he was trying to sell.
[24] Boreham advised that he was happy with the draft agreement, and forwarded it to his solicitor, Les Mason of Shibley Righton LLP, to review. Boreham has admitted in cross-examination that he read the documents provided to him and that he sought and received legal advice in reviewing and agreeing to them. Indeed, Mason provided a number of specific comments and suggested changes to the draft, including a change from a fixed percentage to a sliding scale success fee.
[25] On March 4, 2010, Simpson provided Boreham with a revised copy of the Consulting Agreement incorporating the various changes that had been discussed. Although in his examination for discovery Boreham denied consulting Mason in respect of this revised draft, in his cross-examination leading up to the present motion, Boreham indicated that he in fact sent this revised draft to Mason, who reviewed it and who advised him to sign it. One series of questions posed to Boreham is conclusive in this regard:
Q: Do you remember signing a consulting agreement?
A: After my lawyer told me to sign it, yes… I recall handing it to Les Mason and having him tell me to sign it.
Q: And Mr. Mason advised you to sign it?
A: He did.
Q: Did you read the document, yes or no?
A: Yes, I did.
[26] Boreham also has confirmed that he was personally aware of the terms of the revised Consulting Agreement before signing it, including its specific changes from the previous draft. Indeed, Boreham conceded that he sent the new draft to Mason because it did not explicitly stipulate that Simpson was required to “play a critical role in finding a purchaser…”, and that he thought that words to that effect had been included in the previous draft.
[27] At no time – up until the moment that payment was sought by NM Consulting – did Boreham ever suggest that he did not understand or that he was somehow confused by the terms of the Consulting Agreement. He was at every stage in command of the negotiations and was continuously advised by legal counsel. In any event, after receiving Mason’s advice, Boreham signed the Consulting Agreement and sent the executed copy back to Simpson on March 8, 2010.
[28] It should be noted that the Consulting Agreement provides in its opening paragraph:
This agreement sets out the terms and conditions between 401 Energy Ltd., MFOP Wind Power Ltd., Gateway Wind Farms Development Inc., Farm Owned Power (Melancthon) Limited, Paul Boreham and any other farm project on behalf of Paul Boreham (“401” or the “Company”) and Norton McMullen Consulting Inc. (“NM”).
[29] Notwithstanding that Boreham, MFOP, Gatweay, and FOPML, are named as parties at the top of the document along with 401 and NM Consulting, the bottom of the document contains only two signing lines – one for 401 (where Boreham has signed as CEO) and one for NM Consulting (where Simpson has signed on the firm’s behalf). Boreham’s position is that he is therefore not a party to the Consulting Agreement in his personal capacity.
[30] As I read it, the Consulting Agreement was drafted and signed in this way because Boreham, MFOP, Gateway, and FOPML were all subsumed by definition under the rubric of 401. I consider that Boreham agreed to be a party to the Consulting Agreement in his personal as well as his various corporate guises, as specified in the opening paragraph. In signing for 401, Boreham signed for all of the entities, including himself, that were included up front in the definition of 401.
IV. Sale of the Melancthon Project
[31] In March 2011, following a year of start-and-stop negotiations, the Melancthon Project – including both Boreham’s 49% and the local investors’ 51% – was sold for $30 million to an affiliate of China Longyuan Power Group (“China Longyuan”), a Chinese corporation involved in international green energy and wind farm projects.
[32] The sale came on the heels of an extensive lobbying campaign to have the Ontario government change the FIT rules so that the Malancthon Project could benefit from the Community Price Adder. That campaign was ultimately unsuccessful. The failure of the Malancthon Project to qualify for the Community Price Adder was the driving force behind the decision by Boreham and the local investors to sell.
[33] China Longyuan was represented in the purchase-and-sale negotiations by Envision Energy Limited (“Envision”), a Chinese manufacturer of wind turbines which had an ongoing business relationship with China Longyuan. The lead negotiator for the purchaser group was Jeff Hammond (“Hammond”), the director of Envision’s Wind Energy Division. Hammond deposed that he first met Boreham in May 2010, but that at Boreham’s specific instruction he dealt for the most part with Simpson in negotiating the transaction.
[34] In attempting to put a deal together, Simpson went back and forth with Hammond for a number of months. The parties entered a non-disclosure agreement, and Simpson provided Hammond with confidential information memos, projections, technical data, and other information necessary to assess the viability of the Melancthon Project. In mid-July 2010, Simpson secured a letter of interest from Envision on behalf of China Longyuan. All of this activity is well documented in email and document exchanges between Simpson and Hammond.
[35] For business reasons of its own, China Longyuan broke off the negotiations in August 2010, but re-started them again in November 2010 when Hammond was contacted by Simpson with a new proposal. Simpson arranged for Hammond to speak directly with Boreham, and the negotiations resumed. Simpson took the lead in negotiating for the sellers, and held discussions with Hammond until December 2010. The email exchanges between them demonstrate that Boreham was kept in the loop during all of this time.
[36] On December 21 and 22, 2010, Simpson and Boreham’s lawyer, Mason, attended a meeting in Chicago with representatives of Envision and China Longyuan. Boreham maintained telephone contact with Simpson and Mason during this visit in order to provide them with his guidance. A summary of the Chicago meetings was prepared by Hammond, which set out the issues to be resolved before an agreement could be entered, and identified a purchase price of between $25 and $35 million.
[37] This was followed up in January and February 2011 with meetings and negotiations between Boreham, Hammond, and representatives of China Longyuan who came to Canada on Boreham’s invitation. Simpson and Boreham met with these representatives, including the C.E.O. of China Longyuan, Wu Hao. On March 9, 2011, Boreham wrote to Hammond indicating his availability to meet and discuss the Melancthon Project at any time.
[38] While Simpson did the detailed negotiating on behalf of the sellers, the documentation shows Boreham to have been involved in instructing Simpson and approving or rejecting various proposals at every step. In mid-February 2011, Hammond sent a draft asset agreement to Mason for review on Boreham’s behalf. Boreham then sent a letter, which was ghost-written by Simpson but reviewed and signed by Boreham, back to China Longyuan setting out his response to the draft agreement. Boreham’s letter proposed a $35 million sale price, but after some further negotiation the parties settled on a $30 million price.
[39] The agreement with China Longyuan was finalized and signed on March 9, 2011, and the sale closed on June 28, 2011. In emails immediately following the sale, Boreham exchanged congratulatory remarks with Hammond. Boreham also went out of his way to offer to the purchasers of the project his assistance and that of Gateway, his service company.
[40] Following the sale, NM Consulting rendered an account for the time expended under the Consulting Agreement and for the success fee as stipulated in that agreement. The total account is for $1,271,504.25, plus HST. The hours spent on the project have been produced to Boreham in detail, and the hourly fee portion of the account is based on the standard rates charged by NM Consulting of $425 to $475 per hour. The success fee portion of the account is based on 3% of the $30 million sale price for the Melancthon Project, as provided in the Consulting Agreement.
[41] There is no sense in the correspondence in and around the finalizing and closing of the sale transaction that Boreham was coerced into the sale or that he was anything but pleased with the outcome of the negotiations engaged in by Simpson on his behalf. There is equally no sense that Boreham was somehow uninformed about the agreement with China Longyuan or that he did not have substantial input or legal advice. The correspondence among the parties, and Boreham’s own admissions about his continuous updating and presence in and around the negotiations, bears this out.
[42] As with the Consulting Agreement that preceded it, Mason played a central role in reviewing the agreement on Boreham’s behalf. It is obvious from the documentary record, which includes among other things much email correspondence, that Boreham, a sophisticated negotiator in his own right, was apprised of the terms of the agreement at all relevant times.
[43] Nevertheless, for a number of reasons outlined in Part VI below, the Defendants have refused to pay NM Consulting the fees that it has charged pursuant to the Consulting Agreement. Those fees include $254,504.25 for services rendered calculated on an hourly basis and $1,017,000 for the success fee, less $97,661.94 that NM Consulting has received from and credited to the Defendants, for a total of $1,173,842.31 inclusive of HST.
V. The Letter of Credit Agreement
[44] When FOPML was awarded its FIT Contract on April 30, 2010, the award triggered a ten day period in which FOPML had to post performance security in the amount of $500,000. Boreham deposed that the investor who had initially advanced funds to act as security at the application stage of the FIT Contract was unwilling to continue his loan and roll the application security over to stand as performance security. Under some time pressure to obtain the performance security, Boreham asked Simpson to find a party to put up the necessary funds. Failure to lodge performance security would have meant the loss of the FIT Contract and the aborting of the Melancthon Project.
[45] Simpson offered to personally post a letter of credit to serve as performance security. The funds were advanced by Simpson for an investment in the project, not a loan, and were specifically documented as such. Boreham confirmed this in an email to Simpson dated May 6, 2010, which states:
…for the purposes of this deal, you are going to be paid a 40% return on the money you invested in our shares and we can take that as the $500,000 security deposit which by the way is refundable to you by OPA after the project is commissioned.
[46] That same week, Simpson prepared a draft LC Agreement reflecting the terms he and Boreham had discussed. He provided copies of that draft to Boreham and to Mason. In a follow-up email, on May 12, 2010, Simpson wrote to Boreham to confirm that he would be receiving the 40% rate of return on his investment even if the Community Price Adder was unavailable.
[47] Simpson met with Boreham and Mason on May 12, 2010 to review and discuss the draft LC Agreement. They reviewed the document paragraph by paragraph, and at the end of the meeting Mason gave Simpson a marked-up copy. Based on these discussions and the Mason revisions, Simpson delivered to Boreham and Mason a revised draft of the LC Agreement later that same day.
[48] Boreham signed the LC Agreement as provided by Simpson, and Mason faxed the signed copy back to Simpson. Boreham acknowledged on cross-examination that he did indeed sign the document and that Mason, his legal counsel, had reviewed it. The executed LC Agreement provides, inter alia, that:
a) Boreham was to provide Simpson with sufficient shares of one of the project companies, Last Chance, to produce an annual dividend of $200,000, less corporate income tax on that amount;
b) the affairs of the Melancthon Project would be such that the share of annual pre-tax profit paid to Simpson during the first twenty years following commencement of operations would be equal to 40% of the $500,000 performance security;
c) in the event the project could not pay the promised return, Simpson was to receive, on the closing of the sale of the interests held by Boreham and 401 in the Melancthon Project, the present value of the profit amount, less a 15% discount;
d) the LC Agreement is the “entire agreement” between the parties, and there are “no representations, warranties, conditions, other agreements or acknowledgements, whether direct or collateral, express or implied, that form part of the LC Agreement.”
[49] The letter of credit was issued by the Bank of Nova Scotia. It was lodged with the OPA, as required under the FIT Rules, and was charged against Simpson’s personal line of credit and secured against his personal assets. Simpson paid the bank an annual fee of 1% of the face amount of the letter of credit, which fee was not passed on by him to Boreham or 401.
[50] Simpson never received the shares of Last Chance to which he was entitled under the LC Agreement. Those shares were sold by Boreham as part of his 49% ownership of the operating companies.
[51] On examination for discovery, Boreham explained that the return that Simpson had been promised would have been satisfied by 36% of the shares in Last Chance. Boreham further deposed that had Simpson received these shares, as a 36% shareholder of Last Chance he would have realized $1,080,000 – i.e. 36% of the $3 million allocated to each of the ten project companies (of which Last Chance was one).
[52] In August 2010, Simpson learned that there were not enough shares of Last Chance available to satisfy the obligation owed to him under the LC Agreement. Simpson emailed Boreham on August 6, 2010 reiterating that under the LC Agreement he was entitled, in the absence of Last Chance shares, to the discounted present value of the income stream. In a reply email that same day, Boreham acknowledged Simpson’s right to this discounted present value.
[53] The LC Agreement is drafted as an investment agreement, and not a loan agreement. It specifies that Simpson was to receive shares of Last Chance in return for his funds. The LC Agreement provided for no interest rate, no terms of repayment, nor any other terms generally found in loan agreements. Boreham signed the LC Agreement both personally and on behalf of Last Chance, and received legal advice on doing so; there is no doubt that he understood the terms of the LC Agreement and that there is no ambiguity in its express terms.
[54] The present value of the agreed income stream from the Last Chance shares, discounted by 15% in accordance with the terms of the LC Agreement, comes to $1,251,866, plus HST, for a total of $1,414,608.58.
VI. Are there credibility issues?
[55] The Defendants take the position that there are issues of credibility at stake, and that this is not an appropriate motion under Rule 20.
[56] It is by now well established that, “[u]nder the amended summary judgment rule, the court on a motion can weigh evidence and evaluate the credibility of deponents”: TD Bank v Island Heat Tanning, 2014 ONSC 4333, at para 19. Accordingly, the existence of credibility issues would not preclude this case being determined under Rule 20. The first question, however, is whether the case raises any genuine credibility issues at all.
[57] It is the Defendants’ view that Simpson did little or nothing to earn his fees under the Consulting Agreement, and that he has no equity interest arising as a result of the LC Agreement. Boreham’s position in the litigation can be condensed as follows:
a) Simpson was only engaged to find financing for the Melancthon Project, not to find purchasers;
b) Simpson should only have arranged for the sale of Boreham’s 49% of the Melancthon Project, and not for the local investors’ 51%;
b) it was a condition of the Consulting Agreement that Simpson would play a critical role and be instrumental in introducing the purchaser;
c) the sale of the Malancthon Project was orchestrated against Boreham’s wishes by Simpson and Mason who were acting in their own self-interest;
d) the funds put up by Simpson under the LC Agreement were to be a loan, not an equity investment with a promised rate of return;
e) Boreham only signed the LC Agreement under duress and Simpson breached a fiduciary obligation in placing him in this position; and,
f) there was confusion between NM Consulting and NM Accounting, and that the wrongs alleged by Boreham against the accounting firm in the NM Accounting Action must be held against NM Consulting and militate against the payment of fees under the Consulting Agreement.
[58] With all due respect, I find the Defendants’ arguments to be contrived. Each of the positions taken by Boreham with respect to the Consulting Agreement and the LC Agreement seem to reflect a litigation strategy rather than a bona fide understanding (or misunderstanding) of those agreements.
[59] Boreham’s position with respect to Simpson’s overall role in the transactions is also countered by objectively discernable facts. For example, Simpson obviously spent substantial effort in negotiating and putting together the deal with China Longyuan; the email correspondence documents this fact and Hammond, the chief negotiator for the purchaser’s agent, Envision, who has no reason to prefer either Simpson or Boreham, swore to that effect. Boreham’s bald assertions to the contrary do not change the facts.
[60] Similarly, Boreham’s position with respect to NM Consulting and NM Accounting is contrary to the documented record. Boreham and the corporate entities he controlled entered into the Consulting Agreement with NM Consulting, not with NM Accounting. There is nothing in the documents to suggest any confusion in this regard.
[61] Counsel for the Defendants made much at the hearing of the fact that the two firms shared a receptionist and telephone number, and that they used stationary with similar letterhead; but he was unable to elaborate on the legal significance of any of that. Sister companies do not merge in legal identity because they work out of the same corporate headquarters or have similarly designed letterhead. Boreham’s subjective perceptions, even if they are believed, bear no relevance to the clearly documented contractual relationship. If this is Boreham’s “best foot forward”, his case is stopped in its tracks: Nine-North Logistics Inc. v Atkinson, 2014 ONSC 7243, at para 41; Mitchell v Cole Engineering, 2014 ONSC 1738.
[62] The Defendants’ case seems to be entirely premised on Boreham’s strenuous assertions that reality is other than it seems – even other than it has seemed to himself in the past when he was not strategizing his case. Another example of this is his argument that he was kept out of the loop on the lobbying and negotiating that preceded the signing of the sale to China Longyuan. In making this point, Boreham contends that the financial plans for the Melancthon Project were undermined not by Ontario government policy as expressed in the FIT rules and the way in which those rules qualified the Community Price Adder, but rather by Mason and Simpson who together did something to foster the FIT rules and to thereby undermine the project.
[63] There is an utter lack of evidence to support this bald assertion of a conspiracy between Simpson and Mason. In fact, the entire notion that such a conspiracy existed runs contrary to Boreham’s own correspondence at the relevant time. On March 7, 2011, Boreham wrote to Mason following the efforts made by Mason and Simpson to lobby the government for an amendment of the FIT rules governing the financing of community projects. In his correspondence, Boreham stated:
Les, I received the news…that you have been in communication with the lawyers (Tory’s) who represent the parties who wish to buy the assets of Farm Owned Power (Melancthon) Ltd, and that you have been officially informed that if our Farm Partners don’t sign the agreement on Monday, the ‘deal’, that you and Paul Simpson have negotiated, ‘will blow up’. I wouldn’t want our Farming partners placed in this position should they not sign…
…I also recognize that you are tired of the negotiation process and that this was the best deal that you and Paul Simpson could negotiate, given the Minister of Energy’s lack of response to our requests to amend the now infamous 9.1(i) section in the FIT rules governing financing for Community Projects. The fact that the Minister’s office has offered me an opportunity to address this situation directly this week, is a hopeful sign but not a guarantee of action.
[64] Boreham’s current litigation-driven position that he was kept in the dark, or that his own lawyer and Simpson acted in some way contrary to his interests, is countered by his own words in writing at the relevant time. The record is replete with examples of Boreham changing his view as his strategy developed during the course of this dispute. While counsel for the Defendants now characterizes these self-contradictory positions taken by Boreham as issues of “credibility”, they are not. They are simply unsupported assertions that are countered by the hard, written evidence.
[65] One can say the same of Boreham’s attempts to now misread, or re-read, both the Consulting Agreement and the LC Agreement with Simpson. He says the Consulting Agreement required Simpson to introduce the purchaser and not just work a large number of hours to put together the sale once the purchaser was already introduced and referred to him by Boreham. The Consulting Agreement says nothing of the kind, and specifically permits Simpson to charge fees for time spent on the project. It also specifically authorizes a fee based on a percentage of the sale price for successful completion of the sale.
[66] In the same fashion, Boreham says that the LC Agreement reflected a loan by Simpson, not an equity investment, and that Simpson would have had to subsequently buy into the project in order to have an equity interest. The LC Agreement itself says nothing of the kind. It documents, in plain, comprehensible English, an equity investment with a guaranteed rate of return, all based on Simpson’s putting up the performance security. As with the Consulting Agreement, Boreham understood it and had legal advice when he signed it, and his strategic re-imagination of the agreement runs contrary to evidence on paper.
[67] Boreham’s position that Simpson’s investment was really a loan, and that when it was repaid Simpson could then buy into the Melancthon Project, is belied by the LC Agreement itself. It contains no provision for Simpson’s purchase of the shares. As counsel for Simpson put it at the hearing of the motion, “That was a fanciful wish of Mr Boreham’s after the fact.”
[68] All of this misinterpretation comes on a background of Boreham stating that he was under a form of duress when he signed the LC Agreement with Simpson. His argument appears to be that the time pressure for obtaining the necessary performance security was somehow imposed on him by Simpson and not by the FIT rules. Boreham further argues that given Simpson’s advisory relationship with him, Simpson owed him a special duty care.
[69] It is obvious, however, that the duress felt by Boreham was a result of the regulatory environment in which the Melancthon Project was approved. Far from taking advantage of the situation, Simpson salvaged the project by posting the necessary letter of credit. He did not cause the economic pressure on FOPML (and indirectly on Boreham), nor is there any evidence outside of Boreham’s imaginative pleadings that suggests he took undue advantage of it. The elements of contractual duress are simply not present: see Universe Tankships Inc of Monrovia v International Transport Workers Federation (The Universe Sentinel) [1981] UKHL 9 (HL).
[70] Moreover, the test for fiduciary obligations generally entails discretionary power combined with a peculiar vulnerability to that discretionary power. Typically, these duties serve to shield the vulnerable party from liability or contractual obligation where “…one party has relinquished its own personal interest”: Hodgkinson v Simms, 1994 CanLII 70 (SCC), [1994] 3 SCR 377, at para 31, 33.
[71] No such circumstance exists here. Simpson is an investor and Boreham is a principal of the project in which Simpson placed his money. If anything, the vulnerabilities are the reverse of the way that Boreham poses it. As 49% owner and manager of the Melancthon Project, Boreham took the benefit of Simpson’s funding; to use Lord Denning’s famous metaphor, he cannot in these circumstances use duress, unconscionability, or any other equitable defense as a sword instead of a shield in order to deny his investor the promised return on investment: Combe v Combe [1951] 2 KB 215 (CA).
[72] While one can in one sense admire the creative advocacy engaged in by the Defendants, their positions cannot be accepted. Boreham’s imaginative positions on the Consulting Agreement and the LC Agreement do not raise issues of credibility and do not require the court to draw inferences from hearsay evidence contained in affidavits; they simply run contrary to documented reality. Where a contract explicitly says X, it does not raise an issue of credibility for a party to baldly say that it means Y. No contractual relationship would be safe from that kind of attack.
[73] The Defendants’ positions seem to be designed with Rule 20 in mind. That is, they represent an attempt to circumvent summary judgment, or to force the court to adjourn for a mini-trial in order to hear viva voce evidence under Rule 20.04(2.1) and (2.2), by formulating issues of “credibility” where there are none. However, before the court’s enhanced fact-finding powers under this Rule are required, a party must set out specific and coherent evidence to show that there is a genuine issue of credibility that needs to be determined.
[74] I note that in his affidavit, Boreham indicates that he has some 35 witnesses that he would propose calling at trial. Counsel for the Plaintiffs counters that this contention is not a sign of the complexity of the issues but rather is a deflection from the issues. The Defendants have provided no list of witnesses, no willsay statements or other summaries of what those many witnesses might say. There is no indication from Boreham as to what part of the overall story is missing, and what details those 35 witnesses might fill in, given the already voluminous and seemingly comprehensive record on this motion.
[75] It is by now trite law that on a summary judgment motion the Defendants were required to “lead trump or risk losing”: 1061590 Ontario Ltd. v Ontario Jockey Club (1995), 1995 CanLII 1686 (ON CA), 21 OR (3d) 547, at 557 (Ont CA). If they had important evidence or witnesses it was their obligation to produce them. “It is not the case and it has never been the case that the proper administration of justice requires that all relevant and reliable information be available for the judicial fact-finding process”: CIBC v Deloitte, 2014 ONSC 3513, at para 139 (SCJ) [emphasis added]. A party cannot just state that there are witnesses to be heard and matters of credibility in issue. Specific facts must be adduced: Bank of Montreal v Durham Foods Ltd., 2014 ONSC 3608, at para 46.
[76] This is a document-driven case. The parties dealt with each other through email and other correspondence, and carefully documented all of their agreements and transactions. These agreements were reviewed by lawyers. While the parties also spoke and met with each other, they consistently reduced their agreements and dealings to writing. It is certainly the kind of case where a motion judge is in a position to make findings of fact.
[77] Rule 20 provides a timely, affordable and proportionate procedure for making the determination that a trial is not required: Hryniak v Mauldin, 2014 SCC 7, [2014] 1 SCR 87, at para 66. Nowhere is this more appropriate than in a well-documented case like this one, involving the enforcement of carefully negotiated, thoroughly lawyered, and unambiguously drafted contracts: Gulf Helicopters Ltd. v Bell Helicopter Textron Canada Ltd., 2005 CanLII 10542, at para 29 (SCJ). No extrinsic evidence would be admissible, and none is required, to interpret the clear terms of a set of contracts such as those in the case at bar: Forest Hill Real Estate Inc. v Harvey Kalles Real Estate, 2010 ONCA 844, at para 10 (Ont CA).
[78] As Iacobucci J. observed in Eli Lilly & Co. v Novopharm Ltd., 1998 CanLII 791 (SCC), [1998] 2 SCR 129, at paras. 54-56, where the words used in the contract are clear and unambiguous, it is presumed that the parties intended the legal consequences of their words. Boreham’s version of reality, even if it were taken to reflect his genuine beliefs about his dealings with Simpson rather than a late-in-the-day approach to this litigation, cannot override the words of the applicable agreements. Boreham’s positions amount to an attempt to create a new reality that is different than the one to which the parties set their mind and which they documented: Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53, [2014] 2 SCR 633, at paras 57-58.
[79] The Defendants contend that the Consulting Agreement is ambiguous because the standard hourly rate referenced in it is not specified, and because it is unclear whether the success fee applies to the sale of Boreham’s 49% alone or to the sale of the entire Melancthon Project. The latter argument is difficult to take seriously given the explicit wording of the Consulting Agreement, which states that the success fee is to be based on “the total value of the proceeds from the sale of the project”. This argument represents nothing more than a “bald assertion of fact” which is not supported by the documentary evidence, and which must therefore be rejected by a motion court considering summary judgment: Rozin v Ilitchev (2003), 2003 CanLII 21313 (ON CA), 66 OR (3d) 410, at para 9 (Ont CA).
[80] The former argument, while it points to a silence in the contract and so does not simply assert the opposite of the written words of the contract as does the latter argument, must equally be rejected on ordinary principles of contract interpretation. “In a case like this where a client has agreed to pay for a professional person’s services, but the precise rate at which those services are being billed at is not specified, the law allows the professional person to charge a reasonable rate for his services”: H.Y. Engineering Ltd. v Siemens, 2014 CarswellBC 497, at paras 17, 20. There is evidence in the record demonstrating that NM Consulting’s rates conform to reasonable industry standards, and that evidence is uncontroverted by anything presented by the Defendants.
[81] The Defendants assert, through Boreham’s affidavits: a) that Simpson pressured Boreham in order to sell the Melancthon Project and to obtain benefits through the LC Agreement, b) that he did not work to earn his fees, c) that he acted without Boreham’s knowledge and authority, and d) that he conspired with Boreham’s own lawyer to fix government policy. There is not a shred of evidence in the record to support any of this, and there is a fully documented evidentiary record, which fills several bankers’ boxes, demonstrating that none of it is true. One can only conclude that it is all a product of Boreham’s strategic imagination.
VII. Constitutionality of Rule 20
[82] The Defendants submit that those parts of Rule 20 that permit a motion judge to make findings of credibility or draw inferences of credibility from a paper record, without a full trial of the issue, are unconstitutional. Given my findings that there are no issues of credibility to determine, it is not necessary to address the constitutional question. Indeed, there is no factual basis on which to do so. The Supreme Court of Canada has consistently held that constitutional challenges should not be decided in the absence of a sufficient factual foundation: Danson v Ontario, 1990 CanLII 93 (SCC), [1990] 2 SCR 1086, at 1099.
[83] That said, it is difficult to fathom the circumstances in which the Rule 20 could be said to operate in an unconstitutional fashion. Counsel for the Defendants spent some time in his factum arguing on the basis of Wilson J.’s judgment in Singh v Minister of Employment and Immigration, 1985 CanLII 65 (SCC), [1985] 1 SCR 177 that section 7 of the Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (UK), 1982, c 11 (the “Charter”), requires issues of personal credibility to be determined by way of viva voce evidence, even where the context is civil rather than criminal litigation. He contends that the right of a person to be heard in open court is a matter of fundamental justice.
[84] In response, counsel for the Attorney General of Ontario, appearing as intervener, cites Irwin Toy Ltd. v Quebec (Attorney General), 1989 CanLII 87 (SCC), [1989] 1 SCR 927, at 995-6 for the proposition that that section 7 of the Charter by its very terms protects three interests: life, liberty, and security of the person. He then points out that the dispute at bar is over money and nothing more, and that money – i.e. property – is not a protected interest.
[85] The Intervener is correct that section 7 simply does not operate here. While it is true that, “[o]ur Court should be alive to the need to safeguard a degree of flexibility in the interpretation and evolution of s. 7 of the Charter, Blencoe v British Columbia (Human Rights Commission), 2000 SCC 44, [2000] 2 SCR 307, at para 188, it is equally true that deprivations of property, without more, are not covered by section 7. As the Supreme Court noted in Siemens v Manitoba (Attorney General), 2003 SCC 3, [2003] 1 SCR 6, at para 46, “[t]he right to life, liberty and security of the person encompasses fundamental life choices, not pure economic interests.”
[86] This argument apparently moved the Defendants to focus attention on the unwritten Constitution rather than on the Charter. As Defendants’ counsel puts it, the rights set out in section 7 of the Charter “mirror” the right to a fair and independent judiciary inherited from the unwritten English constitution by virtue of the Preamble to the Constitution Act, 1867, 30 & 31 Vict, c 3. In addition, Defendants’ counsel relies on the inherited right against forfeiture without judgment, as first articulated in the English Bill of Rights (1689), I Will & Mary, session 2, c 2.
[87] The Defendants provide no authority for the proposition that the right against forfeiture without judgment prohibits use of a summary procedure whenever a person is being deprived of money. The Attorney General submits that since the framers of the Charter intentionally omitted property protection from the scope of the fundamental justice section, there is no constitutional protection against forfeiture regardless of where the Defendants purport to find it.
[88] To that can be added the self-evident fact that the Plaintiffs are not seeking to have the Defendants forfeit their funds without judgment; they are seeking a judgment against the Defendants, albeit one that uses a summary rather than a full trial procedure. If the English Bill of Rights were to apply to any and all damage awards, no summary procedure or, for that matter, administrative process with a monetary remedy, would be constitutionally authorized at all.
[89] In other words, the Defendants have put their point so high that all claims, regardless of the context or the size, would have to be adjudicated with full trial process. Such a doctrine would in effect render unconstitutional the modern administrative state: see R v Goebel, 2015 ONCA 411, at paras 23-24.
[90] In this regard, the Defendants’ argument is similar to that raised in British Columbia v Imperial Tobacco Canada Ltd., 2005 SCC 49, [2005] 2 SCR 473, where the province had enacted a statute that authorized and procedurally facilitated an action by the provincial government against a manufacturer of tobacco products for the recovery of health care expenditures. The corporate defendant there contended that those parts of the legislation that reversed the onus of proof and that modified its procedural rights violated the rule of law and the unwritten constitutional principles ensuring a fair trial. The Supreme Court unanimously rejected the constitutional challenge.
[91] At para 65 of B.C. v Imperial Tobacco, the Court described this broad invocation of unwritten principles as an attempt to import rights that are not embraced by the Constitution:
…the Appellants’ proposed fair trial requirement is essentially a broader version of s. 11(d) of the Charter, which provides that ‘any person charged with an offence has the right…to…a fair and public hearing.’ But the framers of the Charter enshrined that fair trial right only for those ‘charged with an offence’. If the rule of law constitutionally required that all legislation provide for a fair trial, s. 11(d) and its relatively limited scope (not to mention its qualification by s. 1) would be largely irrelevant because everyone would have the unwritten, but constitutional right to a ‘fair hearing’.
[92] The Defendants submit that there is an inconsistency between the availability of summary judgment and the principle of judicial independence. The test for independence consists in asking “whether a reasonable person who is fully informed of all the circumstances would consider that a particular court enjoyed the necessary independent status”: Mackin v New Brunswick (Minister of Finance), 2002 SCC 13, [2002] 1 SCR 405, at para 38. I am not persuaded that the Rules of Civil Procedure, in conferring authority on judges to render monetary judgment via a summary procedure, with sworn evidence in affidavit form and cross-examinations in a court reporter’s office, would cause a reasonable person to question judicial independence.
[93] As a fundamental legal concept, “independence is designed to prevent any undue interference in the judicial decision-making process”: Mackin, at para 39. The Supreme Court has observed on multiple occasions that independence ensures “that the executive and legislative branches of government not ‘impinge on the essential ‘authority and function’…of the court’”: B.C. v Imperial Tobacco, at para 45, quoting MacKeigan v Hickman, 1989 CanLII 40 (SCC), [1989] 2 SCR 796, at 828.
[94] Nothing in Rule 20 permits extra-judicial interference with the adjudicative process. The Supreme Court of Canada has declared that the hallmarks of an independent judiciary are financial security, security of tenure, and administrative independence: Valente v The Queen, 1985 CanLII 25 (SCC), [1985] 2 SCR 673; Reference re Remuneration of Judges of the Provincial Court (PEI), 1997 CanLII 317 (SCC), [1997] 3 SCR 3. The summary judgment procedure, so recently interpreted and approved by the Supreme Court in Hryniak, supra, does not tread on these fundamental attributes of an independent judiciary.
[95] Rule 20 is not directed toward, nor does it interfere with, any individual case; it is a rule of general application. There is no argument that it somehow predisposes a judge to decide any particular case, or issue, in any particular way. This includes the issue of whether summary judgment is appropriate under the circumstances, as the text of Rule 20.04 and the interpretation given to it by the Supreme Court make clear that summary judgment should only be granted where a judge is satisfied there is no genuine issue requiring a trial: Hryniak, at paras 47-51.
[96] Overall, the constitutional challenge posed by the Defendants amounts to an assertion that all civil disputes require a full trial. This is directly contrary to many years of civil litigation practice as well as to recent guidance by the Supreme Court of Canada:
Increasingly, there is recognition that a culture shift is required in order to create an environment promoting timely and affordable access to the civil justice system. This shift entails simplifying pre-trial procedures and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case. The balance between procedure and access struck by our justice system must come to reflect modern reality and recognize that new models of adjudication can be fair and just.
Hyrniak, at para 2.
[97] Rule 20 does not violate the guarantee of judicial independence or any other unwritten or written provision of the Canadian Constitution.
VIII. The motion for consolidation
[98] As indicated at the outset, the Plaintiffs in the NM Accounting Action seek to consolidate their action with the NM Consulting Action. Given that I consider this to be an appropriate case for summary judgment in favour of the Plaintiffs in the NM Consulting Action, that claim is now at an end. The NM Accounting Action will continue on its path, but there is nothing to consolidate.
IX. Disposition
[99] There shall be a final judgment in the NM Consulting Action, as follows:
a) 401, MFOP, and Boreham, shall pay NM Consulting a total of $1,173,842.31, inclusive of HST, plus pre-judgment interest pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, from June 28, 2011; and
b) Boreham, 401, and Last Chance shall pay Simpson a total of $1,414,608.58, inclusive of HST, plus pre-judgment interest pursuant to the Courts of Justice Act, from June 28, 2011.
[100] The consolidation motion in the NM Accounting Action is dismissed.
[101] The parties may address me in writing regarding costs. I would ask that the Plaintiffs in the NM Consulting Action and the Defendants in the NM Accounting Action provide me with their bills of costs and brief submissions of no more than three pages within two weeks of the date of these reasons for judgment. I would ask that the Defendants in the NM Consulting Action and the Plaintiffs in the NM Accounting Action provide me with their brief responding submissions of no more than three pages within two weeks thereafter. I understand that the Intervener is not seeking costs of its appearance in this motion.
Morgan J.
Released: September 28, 2015
COURT FILE NO.: CV-12-462314 and CV-13-487549
DATE: 20150928
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Norton McMullen Consulting Inc. and Paul Simpson
Plaintiffs
– and –
Paul Boreham, 401 Energy Ltd., MFOP Wind Power Ltd. and Last Chance Wind Power Corp.
Defendants
Attorney General of Ontario
Intervener
AND BETWEEN:
Paul Boreham, 401 Energy Ltd., MFOP Wind Power Ltd. and Gateway Wind Farms Development Inc.
Plaintiffs
– and –
Norton McMullen & Co. LLP, Paul Simpson and Rob Gilroy
Defendants
AMENDED REASONS FOR JUDGMENT
E.M. Morgan J.
Released: September 28, 2015