Court File and Parties

CITATION: National Leasing v. Spencer, 2015 ONSC 6165

COURT FILE NO.: CV-12-464835

DATE: 20151006

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: National Leasing Group Inc., Plaintiff

AND:

Mavis Spencer, Defendant

BEFORE: Carole J. Brown, J.

COUNSEL: David J. Downs, for the Plaintiff

Rolf M. Piehler, for the Defendant

HEARD: August 13, 2015

ENDORSEMENT

[1] The plaintiff, National Leasing Group Inc. (the "plaintiff") moves for summary judgment against the defendant, Mavis Spencer (the "defendant") in the amount of $67,408.88 on two equipment leases. It is the position of the plaintiff that this is a simple lease default matter, the remedy for which is clearly set forth in the lease agreement and that, in the circumstances of this case, summary judgment is appropriate.

[2] The leases were entered into with the defendant, a 66-year-old registered nurse who is now retired. The defendant takes the position that there are genuine issues requiring a trial and that, in the complex circumstances of this matter, a fair and just determination of the issues cannot be reached without a full hearing on all of the evidence, including an assessment of viva voce evidence.

[3] Through its leasing broker, Equifax, the plaintiff entered into two equipment leases with the defendant, the first for two coffee vending machines dated January 1, 2012 and the second for a snack/pop vending machine dated February 1, 2012.

[4] The lease for the coffee vending machines dated January 1, 2012 was for 30 months. It required an initial payment of $4,935.84 with monthly payments of $894.91 and contained a buyout option after 27 months of $2,184. The lease for the snack/pop machine was for 30 months and required monthly payments of $542.17. It contained a buyout option after 27 months of $1,066. Both leases were non-cancellable and acknowledged that: i) the equipment and the equipment supplier were selected by the defendant; ii) the equipment was purchased by the plaintiff at the defendant's request, iii) the plaintiff was not responsible for the equipment supplier's acts; iv) there were no warranties; v) the lessor agreed to maintain insurance against all risk of loss in amounts and on terms acceptable to the plaintiff and with the plaintiff listed as "loss payee"; vi) late charges and administration fees would apply for any late payments; and vii) in the event of default on the lease, all rent and other payments to the end of term would become due and payable on demand, along with costs of collection, repossession of the equipment and the enforcement of the plaintiff's rights including legal costs on a solicitor-client basis. The lease further contained an "entire agreement" clause.

[5] It is the position of the plaintiff that the leasing of the equipment was brokered by a representative of Equilease approved by the plaintiff that goes under various names, including Startek, Javamax and Iphoto. The plaintiff states that Startek applied to the plaintiff in July of 2006 to be an approved vendor and was approved on July 19, 2006.

[6] The lease documents, including the lease applications, credit application, net worth statement, a void cheque and a copy of the defendant's driver's license, were forwarded to the plaintiff for review and approval. The plaintiff approved the leases.

[7] The evidence indicates that neither the Equilease representative nor the plaintiff had contact with the defendant other than through the lease activation calls made by the plaintiff to the defendant on January 5, 2012 and February 2, 2012 to ensure that the equipment had been received. In evidence were two invoices from Startek to the plaintiff for two gourmet coffee machines in the amount of $24,579.20 dated December 19, 2011 and for a snack/pop machine in the amount of $12,034.50 dated January 30, 2012.

[8] Default on the monthly payments commenced May 1, 2012 and continued thereafter. The leased machines were repossessed by a bailiff and sold through a liquidator. The plaintiff maintains this is its normal practice.

[9] The plaintiff submits that in mid-April 2012, it discovered that allegations of misrepresentation relating to Startek were raised by another lessee, and that it was aware of one previous vendor complaint raised by another lessor in December of 2011, but did not investigate. Following the alleged misrepresentations raised by the other lessee in April of 2012, it terminated the approved vendor status of Startek and placed the names of the equipment vendors on a watchlist. This was, of course, after the defendant entered into the subject leases.

[10] It is the position of the plaintiff that there is no genuine issue requiring a trial, that the issues raised by the defendant, as set forth below, are unsupported by evidence and that the relevant caselaw as regards these issues is clear and clearly in its favour. It maintains that, as between the plaintiff and the defendant, the leases had been signed, default on those leases had occurred and the plaintiff is entitled to the amount sought pursuant to the terms of the leases, which it has calculated to be $67,408.88 to the date of the hearing.

[11] It is the position of the defendant that there are genuine issues requiring a trial. The defendant concedes that this is a difficult action that has been made more difficult by the third party action brought against the approved vendors of the plaintiff in which it is alleged they were involved in a scam preying upon innocent victims. It is the plaintiff's position that the issue is, as between two innocent victims (the parties involved), who should bear the loss as a result of this scam.

[12] The defendant's evidence indicates that, after seeing a road sign advertising a business opportunity, the defendant called the telephone number indicated on the sign and spoke with someone. As a result, the defendant attended a meeting with the third party vendor on December 9, 2011. At that meeting, the presentation indicated that she could lease vending machines placed in high-traffic areas from which she would make a profit. It was her evidence that, as a result of the meeting, she signed the lease for the coffee vending machines and paid a deposit of $5,830.75 on December 19, 2011. The defendant was also asked to sign a blank financial net worth statement and credit application. She was not advised that she could or should obtain independent legal advice and did not do so. She stated that the credit application and net worth statement in evidence on this motion were not completed by her and, indeed, misrepresented her financial status by indicating that she owned two homes and had rental property when, in actuality, she had neither.

[13] As regards the second lease for the snack/pop machine, she states that she was pressured into signing the lease. Her evidence is that the person with whom she met regarding the coffee machines told her that a snack/pop machine had been ordered for her and that she was required to take it and sign an agreement for it. When she advised the person that she was not interested in another machine, she was told that she needed to take it if she intended to retrieve her deposit.

[14] She further took the position in her affidavit that the signature on this second lease was not hers. The plaintiff, in this regard, submitted that on examination for discovery, the defendant did admit to having signed the second lease. The defendant states that during examination for discovery, she was represented by someone from Law Help, an organization that is no longer in existence. She alleges that she was not prepared by that person for examination for discovery and did not understand or have knowledge of many of the questions asked. As regards the disputed signature, no expert handwriting evidence was filed.

[15] It is the position of the defendant that there are genuine issues requiring a trial, including that the leases are unconscionable in all of the circumstances, that the defendant was incapable of entering into a valid lease agreement due to her medical condition, that she was induced by misrepresentation to enter into the leases, and that the plaintiff failed to exercise due diligence in its review of the applications. The defendant maintains that this action can only be determined following a trial with the evidence of numerous witnesses who will likely be called and be assessed for credibility.

[16] It is the position of the defendant that the leases were unconscionable. She submits that she was unsophisticated, lacked business experience and was unable to assess and understand from a business point of view the contracts into which she entered. The defendant states that, while she was educated as a registered nurse, she did not have any competence in business. She submits further that she did not have independent legal advice and was pressured to enter into the contracts by the third parties to this action. The defendant claims this amounted to an imbalance of bargaining power as between herself and the third parties. She alleges that the leases were entered into as a result of a scam involving the plaintiff, brokers and third parties and, as a result, she was unduly influenced and/or induced by the third parties to enter into the leases. She further alleges that the transaction was unfair and that she was under emotional distress when she signed the leases. It is the position of the defendant that these are all issues that must be determined on a full record with viva voce evidence.

[17] It is further the defendant's position that she was, due to her medical and mental condition, incapable of entering into the leases. As regards her mental condition, she states that she had been suffering from debilitating headaches, blurred vision, memory loss, general malaise, confusion and difficulty concentrating and making rational decisions since 2006. She submits that she was advised in 2011 that the symptoms were related to the growth of a brain tumor. She states that she also suffered from a number of medical conditions including type II diabetes and neck, shoulder and back issues. She stated that between 2007 and 2009, her husband suffered three strokes, her son was diagnosed with stage IV prostate cancer and she was involved in a high-profile workplace incident relating to the death of a patient that, despite being due to circumstances unrelated to herself, nevertheless caused her great stress and anxiety such that she eventually left work on long-term disability.

[18] Further, the defendant maintains that the plaintiff did not undertake due diligence as regards approval of the lease applications. It is the position of the defendant that, had the plaintiff actually reviewed the application, it would have ascertained that the financial statements indicating that she owned two homes and a rental property were not correct and thus would not have approved her as a lessor. She further maintains that the vending machines were overvalued (based on the amount that the equipment was sold for by the liquidators shortly after it was purchased new). The plaintiff contests this and argues that there is no evidence before the Court as regards the actual fair market value of the leased equipment.

[19] The plaintiff contests all of the foregoing. It is the plaintiff's position that the defendant has not provided evidence to support her contention that she did not have the mental capacity to enter into the leases. The plaintiff argues that there was nothing unconscionable about entering into the leases since the defendant admitted that she understood English and could read but did not read the leases before she entered into them, except to read the deposit and monthly payment terms.

The Law

Rule 20 and Summary Judgment

[20] Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides for summary judgment where there is no genuine issue requiring a trial with respect to a claim or defence.

[21] In Hyrniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 and Bruno Appliances and Furniture Inc. v. Hyrniak, 2014 SCC 8, [2014] 1 S.C.R. 126, the Supreme Court of Canada reinterpreted Rule 20 taking into account the recognized need for access to justice for the majority of Canadians. The Supreme Court held that summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims. It found that the Court of Appeal, in Combined Air Mechanical Services Inc. et al v. Flesch et al, 2011 ONCA 764, 108 O.R. (3d)1, placed too high a premium on the "full appreciation" of evidence that can be gained in a conventional trial, given that such a trial is not a realistic alternative for most litigants. It held that a trial is not required if a summary judgment motion can achieve a fair and just adjudication, provide a process that allows the judge to make the necessary findings of fact, apply the law to those facts and is a proportionate, more expeditious and less expensive means to achieve a just result.

[22] On a motion for summary judgment, the judge must first determine if there is a genuine issue requiring trial based only on the evidence before the judge without using the judge's new fact-finding powers.

[23] There will be no genuine issue requiring a trial if the summary judgment process provides the motion judge with the evidence required to fairly and justly adjudicate the dispute on the merits within the meaning of Rule 20.04(2)(a) and is a proportionate, more expeditious and less expensive means to achieve a just result. Where a summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceedings at trial would generally not be proportionate, timely or cost-effective. However, a process that does not give the judge confidence in conclusions to be drawn can never be the proportionate way to resolve the dispute.

[24] Madam Justice Karakatsanis, writing for the Court in Bruno Appliances, observed as follows at paragraph 22:

The motion judge should ask whether the matter can be resolved in a fair and just manner on a summary judgment motion. 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 the proportionate, more expeditious and less expensive means to achieve a just result. If there appears to be a genuine issue requiring a trial, based only on the record before her, the judge should then ask if the need for a trial can be avoided by using the new powers provided under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice.

[25] To grant summary judgment, the motions judge, on a review of the record, must be of the view that sufficient evidence has been presented on all relevant points to allow him/her to draw the inferences necessary to make dispositive findings under Rule 20.

[26] The Supreme Court recognized that concerns about credibility or clarification of evidence can often be addressed by calling oral evidence on the motion itself by using the powers given to the court pursuant to Rule 20.04(2.1). However, it also recognized that there may be cases where, given the nature of the issues and the evidence required, the judge cannot make the necessary findings of fact or apply the legal principles to reach a just and fair determination.

[27] The enhanced fact-finding powers granted to motion judges in Rule 20.04(1.1) may be employed on a motion for summary judgment unless it is in the "interest of justice" for them to be exercised only at trial. The Supreme Court observed that inquiry into the interest of justice to be served by summary judgment must be assessed in relation to the full trial and the relative efficiencies of proceeding by way of summary judgment as opposed to trial, including the cost and speed of both procedures, the evidence available at trial versus that on the motion, as well as the opportunity to fairly evaluate such evidence.

[28] The Supreme Court further commented that the interest of justice inquiry goes further and also considers the consequences of the motion in the context of the litigation as a whole. In cases where some claims against the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and, therefore, the use of the powers may not be in the interest of justice.

[29] The parties must each "put their best foot forward." A party is not entitled to sit back and rely on the possibility that more favorable facts may develop at trial. The court is entitled to assume that all of the evidence on which the parties intend to rely at trial is before the court.

Analysis

[30] Based on the submissions of counsel, all of the evidence before me, and having reviewed the caselaw relied on by each party, I am of the view that this is not an appropriate case for summary judgment. There are complex issues involved. These include: whether the transaction was unconscionable; whether the defendant had the mental capacity to enter into the leases, taking into account her medical condition and the effects thereof; whether the defendant was able to understand and assess the contracts into which she was entering; whether the plaintiff had an obligation to conduct due diligence as regards the lease and approval of the application and financial documentation; and whether, based on the plaintiff's own evidence, it had an obligation to conduct due diligence with respect to the complaints regarding its approved vendor earlier than it did. The parties both recognize that this is essentially a contest between two innocent parties. As to which party should be responsible for the loss, the plaintiff argued that pursuant to Marvco Colour Research Ltd. v. Harris, 1982 CanLII 63 (SCC), [1982] 2 S.C.R. 774, 141 D.L.R. (3d) 577 (S.C.C.), the careless party – in this case, the defendant - ought to be held responsible. According to the plaintiff, the defendant was careless when she signed the credit application in blank, did not investigate the business opportunity and signed the leases without reading them. The plaintiff further argued that sometimes such cases produce harsh results, in this case, as regards the defendant.

[31] The above-mentioned issues are, of course, all contingent upon a finding of her mental condition and capacity to enter into the leases.

[32] In my view, and taking into account the issues involved, the submissions of counsel as well as the relevant caselaw, a full hearing with viva voce evidence on a complete record is required. I am of the view that a full hearing must be conducted in order to arrive at a fair and just determination. I do not find the summary judgment process will, in the circumstances of this case, allow me to make the necessary findings of fact and apply the law to those facts. A just determination in all of the circumstances raised will require, in my view, consideration of the evidence of the various witnesses who will be called and an assessment of their credibility. I am unable to determine on the record before me whether the issues raised by the defendant may render the contract void or voidable, whether there is an innocent party, or whether one innocent party was careless and should bear the loss over another, as urged by the plaintiff.

[33] I am not satisfied that I am able to make the necessary findings of fact, which would allow me to apply the law to the facts, on a summary judgment motion. Nor am I able to determine the issues by resorting to the powers provided to me under Rules 20.04 (2.1) and (2.2). I am satisfied that in the interest of justice and in order to render a just and fair determination, this matter must proceed to trial.

[34] Based on the foregoing, I dismiss this summary judgment motion and order that the matter proceed expeditiously to a trial of the issues.

The Defendant’s Motion on the Third party Action

[35] In anticipation of the possibility that this Court might render judgment on this summary judgment motion, the defendant had brought a summary judgment motion as regards the third party action. The defendant sought judgment as against all third parties noted in default in the amount awarded to the plaintiff. The third party defendants, noted in default, included all named third parties except for Indcom Leasing Inc., against which the action was discontinued and Marcel Gelineault (also known as Marcel Gelineaux) who defended the action and was examined for discovery.

[36] Given my decision regarding the main action, I do not make a finding as regards the defendant's motion on the third party action.

Costs

[37] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages including the costs outline. The submissions may be forwarded to my attention through Judges’ Administration at 361 University Avenue within thirty days of the release of this Endorsement.

Carole J. Brown, J.

Date: October 6, 2015