COURT FILE NO.: CV-16-561325
DATE: 20180307
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
WAVERLY CORPORATE FINANCIAL SERVICES INC. and FARBER CFO RESOURCES INC.
Plaintiffs (Moving Party)
– and –
KANWAL INC. and SOCIÉTÉ EN COMANDITE INDUSTRIEL-LEGER
Defendants/Plaintiffs by Counterclaim (Responding Party)
– and –
WAVERLY CORPORATE FINANCIAL SERVICES INC.
Defendant by Counterclaim
Matthew B. Lerner, for the Plaintiffs
Amandeep S. Dhillon, for the Defendants
HEARD: March 2, 2018
ENDORSEMENT
DIAMOND J.:
Overview
[1] The plaintiffs are both companies incorporated pursuant to the laws of the province of Ontario. The plaintiff Farber CFO Resources Inc. (“Farber”) carries on business in the professional recruitment industry. The plaintiff Waverly Corporate Financial Services Inc. (“Waverly”) carries on business in the corporate finance industry. Farber and Waverly are separate entities, but are both part of a group of businesses carrying on under the “umbrella operation” of the A. Farber & Associates partnership.
[2] The defendant Kanwal Inc. (“Kanwal”) is a company incorporated pursuant to the laws of the province of Quebec carrying on business in the automotive manufacturing industry.
[3] In July 2015, Farber and Kanwal entered into two separate engagement letters. Pursuant to a July 6, 2015 engagement letter, Farber was retained to place a Chief Financial Officer (“CFO”) at Kanwal. Pursuant to a July 31, 2015 engagement letter, Farber was retained to place an Interim Financial Controller at Kanwal.
[4] Farber successfully located and placed both a CFO and an Interim Financial Controller at Kanwal. Farber subsequently delivered invoices to Kanwal for services rendered totaling $120,542.75.
[5] After receiving Farber’s invoices, Kanwal signed an engagement letter dated September 22, 2015 retaining the services of Waverly to act as Kanwal’s financial advisor in refinancing a portion of its third party debt.
[6] A dispute subsequently arose between Kanwal and Waverly which resulted in a breakdown of their contractual relationship.
[7] Farber and Waverly jointly commenced this action against Kanwal on September 28, 2016. Farber seeks damages in the amount of $120,542.75 for unpaid fees pursuant to the two engagement letters. Waverly seeks damages in the amount of $750,000.00 for breach of a refinancing agreement.
[8] Kanwal defended this action, and issued a counterclaim against Waverly only for damages in the amount of $800,000.00 for, inter alia, Waverly’s alleged breach of contract, negligence, and breach of the duty of good faith.
[9] Farber now brings this motion for partial summary judgment against Kanwal for the $120,542.75 in unpaid fees. While this motion was initially resisted by Kanwal, on the eve of the hearing Kanwal confirmed that it did not oppose Farber being granted summary judgment as requested, but took the position that execution of Farber’s judgment should be stayed until the disposition of Kanwal’s counterclaim. Argument of that sole issue proceeded before me, and I took my decision under reserve.
Stay of Execution
[10] Rule 20.08 provides as follows:
“Where it appears that the enforcement of a summary judgment ought to be stayed pending the determination of any other issue in the action or a counterclaim, crossclaim or third party claim, the court may so order on such terms as are just.”
[11] As held by Justice DiTomaso in Perdue v. Myers 2005 CanLII 30860 (ONSC), “granting a stay of execution of a summary judgment pending the determination in the counterclaim is a pure exercise of discretion.” Both parties relied upon various authorities in which stays of execution were either granted or refused. The jurisprudence confirms that, in exercising its discretion, the Court may take the following factors into consideration:
whether the plaintiff had a prima face right to summary judgment (i.e. there was no real defence on the merits);
the strength or weakness of the counterclaim;
any prejudice arising to a plaintiff in delaying the enforcement of its judgment;
the equities between the parties, and in particular the conduct of a defendant in balancing those equities;
whether the subject matter of the judgment and the counterclaim are closely connected; and,
whether the plaintiff resides out of the jurisdiction or is impecunious and likely unable to satisfy a potential judgment on the defendant’s counterclaim.
Decision
[12] The crux of Kanwal’s argument is that Farber and Waverly are “inter-related parties and/or one in the same”, and since both plaintiffs are under the “Farber umbrella”, Kanwal’s counterclaim is intertwined with Farber’s judgment, and that judgment should not be “weaponized” against Kanwal in this proceeding.
[13] I find that there are several reasons to reject Kanwal’s position:
(a) Kanwal has no actual counterclaim against Farber. All of the allegations set out in Kanwal’s counterclaim have been made against Waverly. It is not alleged that Farber did, or omitted to do, anything which led to Kanwal allegedly suffering the damages sought in its counterclaim;
(b) while Farber and Waverly are both part of a group of businesses in the A. Farber & Associates partnership, they are both separate corporate entities carrying on separate business identities of interest. Indeed, the executive placements carried out by Farber were completely unrelated to Waverly’s financing mandate. The evidence confirms that no one from Farber’s business operation was involved with Waverly’s financing efforts, and vice versa;
(c) Kanwal has filed no actual evidence to support the merits of its counterclaim, but has simply chosen to rely on the allegations set out in its pleading. It is therefore difficult, if not impossible, for the Court to assess the strengths or weaknesses of Kanwal’s counterclaim, and such a consideration is squarely Kanwal’s onus to discharge;
(d) the underlying transactions in question (i.e. the transactions forming the basis of Farber’s judgment, and the transactions giving rise to Kanwal’s counterclaim) are not even remotely connected. Kanwal’s counterclaim is premised upon a set of facts that took place after Farber’s engagement letters were fully performed; and,
(e) Farber and Waverly carry on business in Ontario and are not impecunious. On the other hand, Kanwal carries on business in Quebec, and there is at least some evidence in the record that Kanwal may be experiencing a lack of liquidity.
[14] Kanwal further submits that there would be no prejudice to Farber if its judgment is stayed pending the resolution or disposition of Kanwal’s counterclaim, as (a) this proceeding was commenced over a year after Farber issued its first invoice under the engagement letters, and (b) this motion for summary judgment was not pursued until one year after this proceeding was commenced.
[15] I disagree, and adopt the observations of Justice Reilly in Brantford Engineering and Construction Limited v. 1562772 Ontario Inc. 2007 CanLII 14322 (ONSC) (my emphasis in bold):
“However, even if the defendant were to be successful to some degree at trial on its counterclaim, in my view the equities clearly favour the plaintiff and lead me to the conclusion that the damages awarded as a result of this summary judgment should be directed to the benefit of the plaintiff without delay. I determine without reservation that there should be no stay of enforcement of this judgment. The defendant has had the benefit of Brantford Engineering’s services for almost two years now. Whatever counterclaim the defendant may pursue, Brantford Engineering’s services have permitted the defendant to proceed with the development of the subdivision and profit financially therefrom. Looked at another way, the defendant has had the use of money to which the plaintiff has been entitled for almost two years. It would be patently unfair to deny the plaintiff the proceeds of its services any longer, which denial has undoubtedly resulted in cash flow problems for some period. The same equities apply to the other claimant, J. Franze Concrete Limited, whose claim has been included in the claims made by Brantford Engineering. Thus, the claim of J. Franze Concrete Limited will in effect be satisfied by this court’s judgment in favour of Brantford Engineering. The further participation of J. Franze Concrete Limited in this litigation will likely be rendered unnecessary.”
[16] Finally, although Kanwal no longer opposes Farber’s motion for partial summary judgment, as held by the Court of Appeal for Ontario in Butera v. Chown, Kairns LLP 2017 ONCA 783, I still must be satisfied that there are no risks involved with granting partial summary judgment in light of the litigation as a whole. In my view, the issue of Kanwal’s liability to Farber is discrete and distinct from the balance of the issues in this proceeding, and there is little to no risk of duplication or inconsistent findings to offset the benefit of proceeding in a proportionate and costs effective manner by the granting of partial summary judgment.
[17] For these reasons, Farber is granted partial summary judgment in the amount of $120,540.75 against Kanwal, and Kanwal’s request for a stay of execution of Farber’s judgment is dismissed.
Costs
[18] I would urge the parties to exert the necessary efforts to try and resolve the costs of this motion and Farber’s action. If such efforts prove unsuccessful, the parties may exchange written costs submissions (totaling no more than four pages including a Costs Outline) in accordance with the following schedule:
(a) Farber may serve and file its costs submissions within 10 business days of the release of this Endorsement; and
(b) Kanwal shall thereafter have an additional 10 business days from the receipt of Farber’s costs submissions to deliver its responding costs submissions.
Diamond J.
Released: March 7, 2018
COURT FILE NO.: CV-16-561325
DATE: 20180307
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
WAVERLY CORPORATE FINANCIAL SERVICES INC. and FARBER CFO RESOURCES INC.
Plaintiffs/Moving Party
– and –
KANWAL INC. and SOCIÉTÉ EN COMANDITE INDUSTRIEL-LEGER
Defendants/Plaintiffs by Counterclaim/Responding Party
– and –
WAVERLY CORPORATE FINANCIAL SERVICES INC.
Defendant by Counterclaim
ENDORSEMENT
Diamond J.
Released: March 7, 2018