CITATION: Chung v. H & E Copy Services, 2016 ONSC 3880

COURT FILE NO.: CV-14-505796

DATE: 20160629

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Teck Min Chung

Plaintiff

– and –

H & E Copy Services Inc.

Defendant

Heidi Suter for the Plaintiff

Matthew J. Garrett for the Defendant

HEARD: June 10 and 13, 2016

Summary judgment motion

Justice Belobaba:

[1] This is an unusual business dispute between a 91 year-old father and his 60 year- old son. Unusual because it stems from an oral agreement that was allegedly made between them almost 25 years ago, has little in the way of supporting documentation and has only recently become the subject of litigation.

[2] The plaintiff, Teck Min Chung, says he helped his eldest son, Herald, purchase the defendant printing business in 1991 on the oral understanding that they would be equal partners and share the profits.

[3] Herald denies any such agreement and moves for summary judgment dismissing the action. He agrees that his father contributed some money but says that the plaintiff did so as a father and not as a business partner, and that this law suit, commenced in 2014, shortly after Herald fired his brother, Philip Chung, is nothing more than a misguided attempt by his father to force the defendant to rehire the brother.

[4] On this motion for summary judgment, both sides filed several affidavits and related cross-examination transcripts. I reviewed the record and concluded that I needed more information on a number of points relating to the 1991 purchase of the defendant printing business. I directed a mini-trial under Rule 20.04(2.2). I further directed that the affidavit material filed to date constitute the evidence-in-chief and that counsel conduct time-limited cross-examinations at the mini-trial. Three individuals gave evidence at the mini-trial: the de facto defendant Herald Chung, the plaintiff Teck Min Chung, and Herald’s brother, Philip Chung.

Decision

[5] After conducting the mini-trial and hearing final submissions, I find that I am still unable to fairly and confidently resolve this matter. Because of a significant discrepancy in Herald’s evidence, a discrepancy that was pointed out by the plaintiff’s counsel during the closing arguments and not satisfactorily explained by counsel for the defendant, I have decided that more clarification is needed and that the interests of justice require that the matter proceed to trial.

[6] The defendant’s motion for summary judgment is therefore dismissed. However, I will remain seized to conduct the trial.

Analysis

[7] With the benefit of the mini-trial I was able to decide one of the two key issues. I was able to determine the reason for the purchase of the printing franchise but I was not able to determine whether the plaintiff’s financial contribution was an investment or a gift. I will explain each of these points in turn.

(1) The purchase of the printing franchise

[8] Based on the filed affidavit material and the evidence presented at the mini-trial, I have no difficulty finding as a fact that Herald purchased a KP Copy Centre franchise in 1991 (which became H & E Copy Services) in order to help his brother Philip with his immigration problems.

[9] Herald and his father had learned that Phillip, living illegally in New Jersey on an expired student visa, was unable to renew his Malaysian passport and was in danger of becoming a “stateless” person. Their hope was that by hiring him as the manager of the printing franchise, Phillip could obtain a Canadian work permit and live and work safely in Toronto.

[10] The plaintiff denies that this was the reason for the purchase of KP Copy but all of the documentary evidence supports the defendant. Herald’s application for the KP franchise on July 24, 1991 made clear that that the purchase of the franchise was conditional “upon Philip Chung getting working papers in Canada,” that his brother Philip would manage the business, and was being considered as a “partner”. Herald added at the mini-trial that he initially wanted to name the operating company “H & P Copy Services” to reflect Philip’s intended involvement but decided instead to use “H & E” in honour of his then wife, Emily.

[11] The KP Copy franchisor agreed to help with Philip’s foreign work permit application. In a letter dated November 1, 1991, the franchisor confirmed to Herald that it would provide, for a limited time period:

[S]uch assistance as it deems advisable to Herald Chung in assisting him in obtaining a work permit for his brother Philip Chung under the Foreign Worker request procedures through Employment and Immigration Canada in order to provide Herald Chung with a store manager at a reasonable salary.

[12] No work permit was obtained by the designated deadline. Herald nonetheless decided to complete the purchase of the KP Copy franchise location to demonstrate continuing good faith to the immigration authorities. As it turned out, Phillip came to Toronto in 1993 and began working at the defendant company, but only as a copy-maker and never as a manager. Eventually Philip was granted permanent residency. Herald terminated Philip’s employment in January, 2014. Several months later the plaintiff commenced this application, which shortly thereafter, was converted into an action.

(2) The plaintiff’s financial contribution

[13] It is this second issue that continues to cause difficulty. The plaintiff says he invested $38,000, about one-half of the franchise purchase price, on the understanding that he would become an equal shareholder in the business. He points to two cheques totalling $18,000 issued to KP Copy and says he contributed a further $20,000 by way of a bank draft which cannot be found. Herald agrees that his father contributed $18,000 but that he did so as a father helping his son and not as a business investor. There is no dispute that Herald is registered as the sole shareholder and director of the defendant printing company.

[14] The problem in a nutshell is that neither the plaintiff’s nor Herald’s evidence is reliable. At least not enough to allow me to decide this key issue summarily, even with assistance of the mini-trial.

[15] I will explain

The plaintiff’s evidence

[16] As already noted, the plaintiff is 91 years old. A recent medical letter advises that his memory is failing. He is easily agitated and clearly upset by what he believes happened – that his eldest son cheated him out of his investment in the defendant business and in doing so deprived him of financial security in his old age.

[17] I have no doubt that the plaintiff believes in his version of what transpired. But much of his factual evidence is simply not reliable. For example, in the face of overwhelming documentary evidence that the reason Herald purchased the printing franchise was to help get a work permit for Philip, the plaintiff remains adamant that this was not the reason for buying the franchise. He also denies even knowing that Philip was having passport difficulties – this is hard to believe because at that time this was a very close-knit family.

[18] The plaintiff says the real reason for acquiring the franchise was to provide Herald with a job – that Herald had told him in the summer of 1991 that he did not have a job. But the evidence, including the franchise and related loan documentation, shows that Herald was gainfully employed at the time, earning $60,000 a year.

[19] The plaintiff says that he and Herald searched for a business opportunity for several months and found KP Copy in December 1991; but the documentary evidence shows that Herald had completed the KP Copy franchise application in July 1991.

[20] The plaintiff says that he worked at the franchise initially and was fired on orders from the franchisor because he had failed to deliver some fliers on time; but it is frankly difficult to believe that the franchisor would intervene to remove an owner of one of its franchises for something as trivial as the late delivery of flyers. The plaintiff says he was “kicked out” of the store in 1992 or 1994 and did not return for more than 20 years; but there is credible evidence that the plaintiff came to the store regularly to see his grandson and have a dim sum lunch with Herald.

[21] The plaintiff says that over the years he was often greeted by an employee of the printing business as the “largest shareholder in this company.” But the employee in question denied that he ever said this or that he would even have this information.

[22] The plaintiff denied giving Herald $15,000 as a gift when Herald married his second wife; but as Philip confirmed at the mini-trial, the plaintiff gave each of his four sons (including Herald) a gift of $15,000 at the time in question, from the sale of his house in Malaysia.

[23] There are other examples but this is enough to demonstrate why I find that much of the plaintiff’s evidence is not reliable.

Herald’s evidence

[24] Herald is 60 years old. He presented his evidence in a generally straight-forward fashion and much of his testimony, especially about the reason for acquiring the franchise, was supported by the franchise documentation. The problem with Herald’s evidence arose from his testimony about the money that was contributed by the plaintiff. He provided two very different explanations - the first in his affidavit evidence and the second during the mini-trial - as to why his father agreed to provide the two cheques totalling $18,000.

[25] In his affidavit evidence Herald said this:

The funds of $18,000 were paid by the plaintiff to KP Copy to cover the expenses to be incurred to help Philip in the sponsorship of his application for a work permit to work in Canada. The KP Copy charged $10,000 for this service.

The total costs spent to help Philip to obtain his permanent residence in Canada exceeded $18,000 that [the plaintiff] paid.

[26] When he was cross-examined on these affidavits, his legal counsel again confirmed that “the $18,000 … was to assist Philip in coming to Canada.” And Herald as well confirmed that his father (the plaintiff) “gave me that money to help Philip.”

[27] There were at least two problems with this evidence, even before one considers what was said at the mini-trial. First, the plaintiff issued the two cheques totalling $18,000 to KP Copy, not to Herald or his company. Second, as the letter dated November 1, 1991 clearly shows, KP Copy did not charge $10,000 for their sponsorship services. The $10,000 paid by Herald was a “deposit” on the franchise purchase price and was fully refundable if Herald was “unable to obtain a foreign worker permit for Philip Chung on or before December 1, 1991.” The evidence further shows that KP Copy was not charging for its sponsorship services and was quite prepared to return the franchise deposit if the work permit was not obtained.

[28] At the mini-trial Herald provided a very different explanation for the $18,000 paid by his father. Herald said that his father wrote these cheques directly to KP Copy to help pay for the actual franchise and that his father may have provided a third cheque for $20,000 (“I don’t remember a third cheque”).

[29] During closing argument, counsel for the plaintiff focused on this obvious discrepancy in Herald’s evidence and argued that Herald’s credibility was seriously compromised if not completely undermined. Counsel for the defendant could not explain the discrepancy.

[30] It was at that point that I realized that I would not be able to fairly or confidently adjudicate this matter on the evidence before me and that further clarification was needed. I considered asking counsel if they would consent to my re-opening the mini-trial for this purpose but ultimately decided that the matter should simply proceed to an expedited and focused trial before me.

[31] The reason for a trial, albeit a hybrid trial to avoid duplication, is two-fold:

(i) To help clarify or explain the so-called discrepancy in Herald’s evidence. In addition to recalling Herald, counsel may also wish to adduce fresh evidence from family members (such as the mother) or others that can assist the court in this regard; and,

(ii) To allow the plaintiff the opportunity to claim unjust enrichment, as was discussed during the submissions following the mini-trial.[^1]

[32] If Herald prevails at trial because I find that the monies provided by the plaintiff were intended as a gift and not as an investment, it may nonetheless be arguable that Herald was unjustly enriched to the extent of the plaintiff’s $18,000 (or if proven, $38,000) because the plaintiff’s initial intention or rationale for the payments – to help get Philip a work permit allowing him to manage the printing franchise – did not materialize.

Disposition

[33] The defendant’s motion for summary judgment is dismissed. The matter will proceed to trial.

[34] Counsel should arrange a case conference as soon as convenient so that the appropriate directions can be issued under Rule 20.05 regarding the shape and content of the trial. It is my expectation that the trial can be completed in one day. Whether all or part of the costs incurred by the plaintiff defending this summary judgment motion should be paid now or deferred to the trial can be discussed at the case conference.

Released: June 29, 2016 Belobaba J.

[^1]: The basket clause in the plaintiff’s application, since converted into an action, asks for “such further and other relief as this Honourable Court deems just and proper and as counsel may advise.”