ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-14-512599
DATE: 20151125
BETWEEN:
BUSINESS DEVELOPMENT BANK OF CANADA
Plaintiff
– and –
MARTTI PALOHEIMO and THIRTY THREE ROSEDALE HOLDINGS INC.
Defendants
Maya Poliak, for the Plaintiff
Michael Lesage, for the Defendants
HEARD: November 17, 2015
REASONS FOR JUDGMENT
Hood J.
[1] This is a motion for summary judgment brought by the plaintiff against the two guarantors of a loan made by the plaintiff to Nunavut Property Corporation and 1079 Trust.
[2] The loan went into default in February, 2014. A default letter was sent to the borrowers in April, 2014. When the defaults were not remedied demand letters dated May 26, 2014 were sent to the borrowers and guarantors. As at the date of demand the borrowers owed $1,517,483.47. The guarantors under the terms of the guarantee signed by them on September 23, 2011 were liable for 30% of this amount or $455,245.04. This is the amount claimed by the plaintiff on this motion.
[3] There is no doubt that the loan is in default. On October 10, 2014 Justice Pattillo granted an order appointing a receiver of the assets of the borrowers. The borrowers did not oppose the receivership application. The receiver has attempted to market the major asset of the borrowers, so far without success.
[4] The guarantors have raised a multitude of defences. I find that none of them raise any genuine issue for trial and accordingly grant summary judgment against the defendants.
[5] On a summary judgment motion, the court will find no genuine issue requiring a trial when the court is able to reach a fair and just determination on the merits. In doing so the court should first determine if there is such a genuine issue based only on the evidence before it, without using the new fact finding tools. There will be no such genuine issue if the summary judgment process provides the court with the evidence to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, see: Hryniak v. Mauldin, 2014 SCC 7 at paras. 49 & 66.
[6] Justice D.M. Brown (as he then was) observed at para. 4 of The Bank of Nova Scotia v. Allin, 2014 ONSC 899 that the evidentiary record on a summary judgment motion may not be as extensive as that in a “conventional trial”, nonetheless, in applying the law to the facts, the motions judge must be able to conclude that the plaintiff has established its claim on a balance of probabilities before granting judgment in its favour. On the material before me I so conclude and find that it is in the interest of justice to proceed by summary judgment in this case.
[7] The plaintiff entered into a loan agreement with the borrowers on July 28, 2011. It clearly superseded an existing loan agreement from 2009 of which $1,460,730.00 was then outstanding. As part of the 2011 agreement the plaintiff agreed to advance a further $250,000.00 so that the loan amount became $1,710,730.00. The agreement also provided that as security the defendants were to provide guarantees limited to 30% of the outstanding loan amount. This is all clearly set out in the loan agreement executed by Mr. Paloheimo on behalf of the borrowers, on behalf of Thirty Three Rosedale as a guarantor, and in his personal capacity as a guarantor on August 5, 2011. An agreed written amendment was made on August 8, 2011, again executed by Mr. Paloheimo.
[8] The guarantee was executed on September 23, 2011 by the defendants. The guarantee provides at paragraph 8 that there are no collateral agreements or representations or conditions relied upon by the guarantors that are not set out in the guarantee. At paragraph 9 it provides that any changes to the guarantee must be in writing and executed by the plaintiff. Any future representation by the plaintiff must be in writing and executed by the plaintiff.
[9] At paragraph 4(g) the plaintiff may seek to enforce the guarantee at any time and in any manner and in any order it may choose and is not bound to seek recourse from the borrower prior to enforcing the guarantee.
[10] The defendants have raised a plethora of defences. I find none of them to have merit.
[11] They argue the motion for summary judgment is premature as the plaintiff refused to provide an affidavit of documents and failed to answer questions on a cross-examination. There is no requirement for an affidavit of documents prior to a motion for summary judgment being brought and the defendants did not bring a motion to compel one. They did bring a motion on the refusals from the cross-examination. Master Pope ordered that the questions were irrelevant.
[12] The defendants argue that the plaintiffs’ documents might support the defences raised and a myriad of further defences. They say an adverse inference should be drawn from the refusal to produce documents. This is no answer to a summary judgment motion. Bald assertions as to what might be are not proper responses. The defendants have an obligation to put their best foot forward and have had the opportunity to seek production and compel answers to questions. They have chosen not to do the former and have been unsuccessful on the latter.
[13] The defendants argue that the borrowers were induced to accept a higher loan amount to the detriment of the guarantors. Leaving aside the fact that Mr. Paloheimo is the sole officer and director of one of the borrowing companies and a trustee and authorized signing officer of the other borrowing company there is absolutely no evidence to support this defence. The borrowers executed the 2011 loan agreement, the funds were advanced and used and the guarantors knew they were providing security for this.
[14] The defendants argue that they were induced to sign the guarantee on the promise that it would then be removed following certain payments. This is contrary to the strict wording of the guarantee and specifically paragraphs 8 and 9 and is denied by the plaintiff. The defendants cannot rely upon such representations, even if made, due to the wording of the guarantee, see: Bank of Montreal v. Hawrish, 1969 2 (SCC), [1969] S.C.R. 515 at p. 520.
[15] The defendants complain about the receivership proceedings and the order of Justice Pattillo of October 10, 2014, being abusive and violating the rule of proportionality. They also argue this will allow the plaintiff to double recover on its debt to the prejudice of the guarantors. These are no defences to the enforceability of the guarantee. If the borrowers or defendants have a complaint in relation to the receivership order and proceedings they should raise them within that proceeding. It is not a defence here. Moreover, paragraph 4(g) of the guarantee entitles the plaintiff to enforce the guarantee as it sees fit. Any recovery in the receivership will have to be accounted for here and any recovery on the guarantee will have to be accounted for within the receivership.
[16] The defendants argue that the plaintiff entered into a forbearance agreement and is precluded from enforcing the guarantee. There is no evidence of an executed forbearance agreement. Paragraph 9 provides that any changes to the guarantee must be in writing and executed by the plaintiff. There is no such document.
[17] Moreover, during the discussions between the borrowers and the plaintiff about the forbearance agreement, the borrowers insisted that any such agreement would not include the guarantors. So even if there was evidence of a written agreement executed by the plaintiff, Mr. Paloheimo did not want it to include the guarantors. Further, the receivership order was made with no opposition by Mr. Paloheimo on behalf of the borrowers making any forbearance agreement between the plaintiff and the borrowers moot.
[18] I find that none of the defences raise a genuine issue for trial and grant judgment against the defendants for the sum of $455,245.04 together with interest from May 26, 2014 at the plaintiff’s floating base rate plus 0.5%, as set out in the guarantee.
[19] Presumptively, the plaintiff is entitled to its costs. The guarantee provides that in any enforcement proceedings the plaintiff is entitled to costs on a solicitor and client scale. The parties have exchanged costs outlines. The plaintiff seeks $18,804 inclusive of HST and disbursements on a substantial indemnity scale and $12,231 on a partial indemnity scale. The defendants’ costs on a substantial indemnity basis inclusive of HST and disbursements amount to approximately $11,000. Defendants’ counsel spent substantially more time but at a much lower hourly rate.
[20] While the guarantee provides for costs at a higher scale the costs being sought must still be fair and reasonable for the unsuccessful party to pay. I still have the discretion as to the quantum of the costs under s. 131 of the Courts of Justice Act and in doing so I am to consider the factors set out in Rule 57.01 in awarding what is appropriate. These factors include indemnity for the successful party, the expectations of the unsuccessful party, the amount claimed and recovered and the complexity of the issues. In considering what is fair and reasonable I am to do so with a view to balancing compensation to the successful party with the goal of fostering access to justice. I have done so and I fix the costs at $16,000 inclusive of HST and disbursements to be payable by the defendants to the plaintiff.
Hood, J.
Released: November 25, 2015
COURT FILE NO.: CV-14-512599
DATE: 20151125
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BUSINESS DEVELOPMENT BANK OF CANADA
Plaintiff
– and –
MARTTI PALOHEIMO and THIRTY THREE ROSEDALE HOLDINGS INC.
Defendants
REASONS FOR JUDGMENT
Hood, J.
Released: November 25, 2015