Court File and Parties
Court File No.: CV-16-555317 Date: 20170516 Ontario Superior Court of Justice
Between:
CASHBLOOM CANADA, ULC Plaintiff
- and - RIDGEWAY DESIGN CENTRE INC. a.k.a. NEW CONCEPT COATING INC. and JENNIFER MILLAR GIUDICE and CARMELO GIUDICE Defendants
Counsel: Assunta Mazzotta for the Plaintiff Olanyi Parsons for the Defendants
Heard: May 11, 2017
Perell, J.
Reasons for Decision
[1] Cashbloom Canada, ULC, formerly Advantage Capital Funds Canada, is a corporation that provides capital funding to businesses by purchasing future receivables.
[2] Pursuant to what, in practical effect, is a loan agreement dated August 11, 2015, Cashbloom lent Ridgeway Design Centre Inc. (a.k.a. New Concept Coating Inc.) $215,000 in exchange for account receivables of $287,885, which were to be paid by Ridgeway Design submitting, through an electronic payment processor, 17% of its daily sales. There is no time period for repayment of the $287,885 and repayment is based on the electronically processed receivables being remitted to Cashbloom on a daily, ongoing basis.
[3] The loan agreement was the fourth in a series of such agreements, with each agreement, in effect, superseding and replacing the predecessor as the amount of the lending increased. The principals of Ridgeway Design, Jennifer and Carmelo Giudice, signed a guarantee that was part of the agreements.
[4] The agreement went into default, and Cashbloom moves for a summary judgment for $119,200.44 plus prejudgment interest from the date of the default as against Ridgeway Design and Mrs. Giudice. The action is, on consent, dismissed against Mr. Giudice, who is an undischarged bankrupt.
[5] Ridgeway Design and Mrs. Giudice resist the summary judgment motion, and they submit that there are three genuine issues requiring a trial; namely: (1) the agreement was obtained in a manner that was misleading and dishonest nullifying its validity; (2) the loan contravened the Unconscionable Transactions Relief Act, R.S.O. 1990, c. U. 2 and (3) the loan was illegal because the Defendants were charged a criminal rate of interest.
[6] The second and third defences were not pleaded by the Defendants, and it is a fundamental principle that a party cannot have a judgment for a claim or defence that is not pleaded. It is inappropriate for a case to be decided on an issue not identified by the parties in the pleadings, and a judgment cannot be based on a claim or a defence not pleaded: Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74 (C.A.); Garfin v. Mirkopoulos, 2009 ONCA 421; Mercer v. Gray, [1941] O.R. 127 (C.A.). The court, however, will not take an overly technical approach to determining whether a claim or defence has been adequately pleaded: Leslie v. Mississauga (City) (2006), 81 O.R. (3d) 415 (Div. Ct.).
[7] There can be and there are no genuine issues requiring a trial for the unpleaded defences and I, therefore, say nothing more about these defences, save to say that they do not impede Cashbloom’s request for a summary judgment.
[8] Ridgeway Design’s and Mrs. Giudice’s first defence was also not pleaded, and insofar as the Defendant Ridgeway Design is concerned, there was no evidence that the agreements were obtained in a manner that was misleading and dishonest. Once again, there is no genuine issue requiring a trial.
[9] Rather, the evidence proves that Ridgeway Design has received funding from Cashbloom since October 2014, and that there were four successive agreements that were signed in: October 2014, January 2015, April 2015, and August 11, 2015. The funds were advanced under each agreement and each successive loan agreement was used to repay the balance outstanding under the prior loan and to advance additional funds. The evidence establishes that the August 2015 agreement was breached. Ridgeway Design breached the agreement by: (a) failing to provide its banking records within five days of request as required by the agreement, (b) changing its electronic payment processor without Cashbloom’s knowledge or consent; and (c) by failing to remit 17% of its daily sales to repay the loan. The evidence established that as of March 25, 2016, $119,200.44 was outstanding and this sum remains owing. Therefore, both because the first defence was not pleaded and because there is no substance to it, there are no genuine issues requiring a trial about Cashbloom’s claim against Ridgeway Design. Cashbloom has proven its claim against Ridgeway Design and should have judgment as requested.
[10] The situation of Mrs. Giudice is, however, different. Although not contained in her Statement of Defence, in her affidavit in response to the summary judgment motion, she testified that:
At the time of executing the Agreement, I was not informed by Advantage that I was executing the Agreement in my personal capacity as a guarantor for the advance amount. Had I known that I was a signing as a guarantor, I would not have signed the Agreement.
[11] Mrs. Giudice was extensively cross-examined on her affidavit, and it emerged from her cross-examination that she knew or ought to have known that she was signing a guarantee, and I find this to be a fact. Nevertheless, it also emerged from the cross-examination that there was a basis for her argument that she was misled into signing that guarantee and that had she been properly informed, she would not have signed the guarantee.
[12] In particular, it emerged that Mrs. Giudice may have been induced to sign the guarantee because of Cashbloom’s representations of the nature and effect of the guarantee. Before entering into the first of the loan agreements, on July 3, 2014, the Giudices received the following email message (emphasis in the original):
It was a pleasure speaking with you earlier today. I have sent you several attachments for your review. Please complete the application and fax it back. Together with the required paperwork outlined on the checklist. I will provide you with pre-approval numbers immediately. Thank you for allowing me this opportunity. Funding available within 7 business days. Our formula for this program is as follows: We purchase your future credit card sales today at a discounted rate. The beautiful part of our program is the repayment: We take a small percentage of your daily batch until the advance is settled in full. Benefits to this program. NO FIXED MONTHLY PAYMENT, NO IMPACT ON YOUR PERSONAL CREDIT and best of all NO TIME FRAME ON REPAYMENT. [We design the best program to fit your needs.]
[13] Because it is not clear how signing a guarantee could have no impact on a person’s personal credit, in my opinion, there are genuine issues requiring a trial about: (a) whether Mrs. Giudice may rescind the guarantee on the grounds of an innocent or negligent misrepresentation; and (b) whether Cashbloom is exculpated from the misrepresentation, if any, by the entire agreement clause in the loan agreements. See: Singh v. Trump, 2016 ONCA 747.
[14] Where there are genuine issues for trial and the lower court concludes that employing the enhanced forensic tools of the summary judgment procedure would not lead to a fair and just determination of the merits, the court should not decide the matter summarily: Mitusev v. General Motors Corp., 2014 ONSC 2342 at para. 79; Gon (Litigation Guardian of) v. Bianco, 2014 ONSC 65 at paras. 41-47; Yusuf v. Cooley, 2014 ONSC 6501; Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 at para. 44.
[15] To grant a summary judgment, the motions judge must do all of: (1) determine whether there are genuine issues requiring a trial; (2) determine whether he or she can decide the genuine issues using the fact-finding resources of the summary judgment rule; (3) employ the fact-finding resources to decide the genuine issues; (4) identify and explain the specific findings that support the conclusion that a trial is not required; and, finally, (5) provide meaningful reasons capable of appellate review explaining the decision and providing some insight into how the legal conclusion was reached and what facts were relied upon in reaching that conclusion. Which is all to say that to grant a summary judgment, a judge must not only decide the matter summarily but also justify and explain to the losing party in some detail why it was appropriate to decide the factual and credibility issues summarily: Eastwood Square Kitchener Inc. v. Value Village Stores, Inc., 2017 ONSC 832 at para. 7.
[16] In my opinion, there is a genuine issue for trial about Mrs. Giudice’s defence and it would not be just to decide the matter summarily. The action should proceed to a trial on the single issue of whether there is any merit to Mrs. Giudice’s defence based on an innocent or negligent misrepresentation.
[17] I shall remain seized of the matter for the purposes of the trial.
[18] If a summary judgment motion is refused and the action is ordered to proceed to trial, the court has the authority: to schedule; to give directions; and to impose terms. Rule 20.05(2) states:
20.05(2) If an action is ordered to proceed to trial under subrule (1), the court may give such directions or impose such terms as are just, including an order,
(a) that each party deliver, within a specified time, an affidavit of documents in accordance with the court’s directions;
(b) that any motions be brought within a specified time;
(c) that a statement setting out what material facts are not in dispute be filed within a specified time;
(d) that examinations for discovery be conducted in accordance with a discovery plan established by the court, which may set a schedule for examinations and impose such limits on the right of discovery as are just, including a limit on the scope of discovery to matters not covered by the affidavits or any other evidence filed on the motion and any cross-examinations on them;
(e) that a discovery plan agreed to by the parties under Rule 29.1 (discovery plan) be amended;
(f) that the affidavits or any other evidence filed on the motion and any cross-examinations on them may be used at trial in the same manner as an examination for discovery;
(g) that any examination of a person under Rule 36 (taking evidence before trial) be subject to a time limit;
(h) that a party deliver, within a specified time, a written summary of the anticipated evidence of a witness;
(i) that any oral examination of a witness at trial be subject to a time limit;
(j) that the evidence of a witness be given in whole or in part by affidavit;
(k) that any experts engaged by or on behalf of the parties in relation to the action meet on a without prejudice basis in order to identify the issues on which the experts agree and the issues on which they do not agree, to attempt to clarify and resolve any issues that are the subject of disagreement and to prepare a joint statement setting out the areas of agreement and any areas of disagreement and the reasons for it if, in the opinion of the court, the cost or time savings or other benefits that may be achieved from the meeting are proportionate to the amounts at stake or the importance of the issues involved in the case and,
(i) there is a reasonable prospect for agreement on some or all of the issues, or
(ii) the rationale for opposing expert opinions is unknown and clarification on areas of disagreement would assist the parties or the court;
(l) that each of the parties deliver a concise summary of his or her opening statement;
(m) that the parties appear before the court by a specified date, at which appearance the court may make any order that may be made under this subrule;
(n) that the action be set down for trial on a particular date or on a particular trial list, subject to the direction of the regional senior judge;
(o) for payment into court of all or part of the claim; and
(p) for security for costs.
[19] I intend to exercise my discretion under rule 20.05. I direct that the parties shall have 20 days to either settle this action or to arrange a case conference to settle the terms of an order under rule 20.05. Either party may contact my assistant to arrange a time for the case conference.
[20] Accordingly, I grant Cashbloom a judgment against Ridgeway Design of $119,200.44, plus prejudgment interest from the last day that Ridgeway Design made a payment on account of the agreement plus costs on a partial indemnity basis of $10,000, all inclusive of fees, disbursements, and taxes. I order the costs of the action against Mrs. Giudice to be in the cause.
Perell, J. Released: May 16, 2017