COURT FILE NO.: CV-18-590053 DATE: 2018/08/23 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Trez Capital Limited Partnership, Trez Capital (2011) Corporation, and Computershare Trust Company of Canada Plaintiffs – and – Ontario International College Inc./ College International de l’Ontario Inc. Defendant

COUNSEL: Dominique Michaud for the Plaintiffs Jennifer Tam for the Defendant

HEARD: August 17, 2018

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] The Plaintiffs, Trez Capital Limited Partnership and Trez Capital (2011) Corporation and Computer Trust Company of Canada (collectively “Trez Capital”) bring a summary judgment motion to enforce a Guarantee and Postponement of Claim signed by Ontario International College Inc./College International de l’Ontario Inc. (“OIC”).

[2] OIC resists the summary judgment motion, and in its factum, it requests leave to amend its Statement of Defence to assert a crossclaim against Evan Shapiro, its lawyer who acted when OIC signed the Guarantee. At the hearing of the motion, I advised OIC that since Mr. Shapiro was not a defendant, if a claim was to be brought against him, it would have to brought by a Third Party Claim or by a new proceeding. In other words, I advised OIC that I could not and would not deal with its request for leave to assert a crossclaim and would address only Trez Capital’s summary judgment motion.

B. Facts

[3] Trez Capital carries on business as a commercial mortgage lender.

[4] In April, 2015, 2481043 Ontario Inc., which at the time was owned by Trez Real Estate Operating Partnership, purchased a commercial property, municipally known as 1450 Don Mills Road, Toronto. 2481043 Ontario financed the purchase by placing a $30 million mortgage on the property.

[5] In January, 2016, Trez Real Estate Operating Partnership entered into a Share Purchase Agreement with Norstar Investment Consortium Inc. for the sale of all issued and outstanding shares of 2481043 Ontario. It was a term of the Share Purchase Agreement that the mortgage encumbering the 1450 Don Mills Road property would have a principal sum of $23.4 million with a variable interest rate of 4.5% per annum to 7.00% per annum. (The Mortgage currently accrues interest at 6.0% per annum from January 1, 2018 to December 31, 2018 and at 7.00% per annum from January 1, 2019 onwards.) The purchase price for the shares was $1.0 million in cash and the assumption of liability for the $23.4 million mortgage.

[6] Norstar Investment is owned by Anchuan Jiang. Mr. Jiang is an officer and director of Norstar Investment, and he is also an officer and director of 2481043 Ontario and of OIC. Mr. Jiang’s plan was to use 2481043 Ontario’s property at 1450 Don Mills Road as a campus for OIC’s private school.

[7] It was a term of the Share Purchase Agreement that OIC would execute a guarantee.

[8] On the share purchase transaction, Mr. Jiang, Norstar Investment, and OIC were represented by Evan Shapiro, a lawyer practicing in Toronto. Mr. Shapiro spoke to Mr. Jiang in English, which is not Mr. Jiang’s first language.

[9] Mr. Jiang’s first language is Mandarin, and Mr. Jiang deposed that although he had taken classes at the University of Toronto in English, spoke English in managing OIC, spoke English in dealing with school regulators, spoke English to the lawyers acting for 2481043 Ontario in the receivership proceedings, described below, and although he was comfortable in communicating with his companies’ lawyers in English, nevertheless, he did not understand the nature of the Guarantee document that he signed for OIC.

[10] Mr. Jiang deposed that he has no experience with respect to legal matters and no knowledge of legal jargon and terminology. Mr. Jiang says that he did not understand that OIC was exposed to a liability beyond the $1.0 million portion of the purchase price for the 1450 Don Mills Road property.

[11] Mr. Jiang blames Mr. Shapiro for not explaining the documents that were being signed to acquire 2481043 Ontario and its principal asset the property at 1450 Don Mills Road.

[12] Here, it may be noted that Mr. Jiang swore his affidavit for the summary judgment motion in English and he was cross-examined without the assistance of a translator.

[13] Mr. Shapiro, who was served with a subpoena to give evidence in aid of the summary judgment motion, deposed that he met with Mr. Jiang before the Share Purchase Agreement was executed. He says that they discussed which of Mr. Jiang’s companies would provide the Guarantee for the transaction.

[14] Mr. Shapiro testified that he explained what it meant to be a guarantor and that he explained the possible consequences of providing a guarantee. Mr. Shapiro said that Mr. Jiang gave him instructions to make OIC the guarantor. Mr. Shapiro said that he was confident that Mr. Jiang understood the share purchase transaction and the related agreements, including the Guarantee.

[15] Mr. Shapiro was not cross-examined by OIC, which did not attend at the cross-examination.

[16] In paragraph 12 of the Guarantee, the guarantor acknowledges that there was no coercion in signing the Guarantee. Paragraph 12 states:

The Covenantor further confirms that the Covenantor [. . .] [has] entered into this Guarantee and Postponement of Claim on its own volition and without fear, threats, compulsion, influence or pressure from the Borrower or any other covenantor in respect of the Loan.

[17] Mr. Jiang deposed and argued that OIC was not provided with true (i.e., genuine) independent legal advice and that OIC did not understand the nature of the Guarantee document it was signing. As already noted above, Mr. Jiang deposed that when he signed the documents on behalf of OIC, he thought the limit of OIC’s liability was the $1 million portion of the purchase price for 2481043 Ontario’s shares.

[18] Mr. Jiang acknowledges signing the Guarantee for OIC, and Mr. Jiang testified that he read it before he signed it. Section 12 of the Guarantee provides that by signing the Guarantee, the Guarantor confirms that it is fully aware of the nature and effect of the Guarantee and of its the obligations.

[19] In the spring of 2016, 2481043 Ontario defaulted on the mortgage, and the parties discussed whether Trez Capital would forbear in enforcing its security. At that time, a draft Forbearance Agreement was prepared by Trez Capital and reviewed by Mr. Shapiro. However, the Forbearance Agreement became unnecessary when 2481043 Ontario brought the mortgage into good standing.

[20] In the fall of 2016, 2481043 Ontario defaulted again in making its payments under the mortgage and negotiations for a Forbearance Agreement resumed. On October 5, 2016, OIC executed a Forbearance Agreement. Once again, before OIC signed the Forbearance Agreement, it was reviewed by Mr. Shapiro.

[21] Under the Forbearance Agreement, the terms of the mortgage were amended and 2481043 Ontario and Norstar Investment agreed to provide additional security for the mortgage loan.

[22] 2481043 Ontario, Norstar Investment, and OIC signed a certificate that they respectively had received independent legal advice with respect to the Forbearance Agreement.

[23] The recitals to the Forbearance Agreement confirms, among other things, that the Guarantee was provided to Trez Capital as a condition of Norstar Investment entering into the Share Purchase Agreement.

[24] Pursuant to Articles 1.2 and 1.3 of the Forbearance Agreement, Norstar Investment, 2481043 Ontario, and OIC acknowledged that 2481043 Ontario was in default of the mortgage loan and indebted in the amount of $22,499,334.04 as of August 31, 2016.

[25] Article 1.6 of the Forbearance Agreement provided:

The Borrower, the Guarantor and the Beneficial Owner hereby consent to the terms of the Lender's forbearance and other accommodations as set out herein. The Borrower, the Guarantor and the Beneficial Owner specifically acknowledge that they have, as of the date hereof, no defences, counterclaims or rights of set-off or reduction to any claims which might be brought by the Lender under the security granted by the Borrower or the Guarantor to the Lender or in respect of the Loan, notwithstanding the provisions of the Limitations Act, 2002.

[26] Mr. Shapiro testified that he had several discussions with Mr. Jiang about the draft and final versions of the Forbearance Agreement and about its operation and meaning. Mr. Shapiro testified that OIC was in no way coerced or forced to sign the Forbearance Agreement and that Mr. Jiang knew the purpose and effect of that agreement.

[27] Mr. Jiang, however, deposed that when OIC signed the Forbearance Agreement, it did not receive true independent legal advice, it was unduly influenced, and the Forbearance Agreement was unconscionable.

[28] In the summer of 2017, the mortgage went into default yet again, and Trez Capital commenced receivership proceedings in Commercial Court.

[29] Eventually, after several adjournments, by Order of Justice Conway dated December 15, 2017, MNP Ltd. was appointed receiver over 2481043 Ontario’s assets.

[30] In the receivership proceedings, MNP Ltd. sold the 1450 Don Mills Road’s property and Trez Capital received a distribution of $20 million.

[31] On January 15, 2018, Trez Capital commenced an action against OIC to enforce the Guarantee and to recover the balance of the indebtedness.

[32] By Statement of Defence and Counterclaim dated March 7, 2018, OIC alleged that: (a) it did not enter into the Guarantee; (b) the actual guarantor was Trez Capital Group Limited Partnership; (c) Trez Capital is precluded from enforcing its Guarantee until it has moved against Trez Capital Group Limited Partnership; (d) the amount owing on the loan is overstated; (e) Trez Capital breached duties owed to the Guarantor, including the duty to advise the Guarantor to obtain independent legal advice; and (f) Trez Capital is the author of its own misfortune, which in turn, releases the Guarantor of its obligations under the Guarantee.

[33] Trez Capital brings a summary judgment for the balance outstanding on the $23.4 million mortgage. As of August 15, 2018, the outstanding balance on the mortgage loan is $2,794.929.55 million, inclusive of principal, interest, expenses, costs and legal fees. The per diem charge after August 15, 2018 is $438.36.

[34] OIC resisted the summary judgment motion, and Mr. Jiang delivered an affidavit upon which he was cross-examined. OIC declined to cross-examine Trez Capital’s witnesses for the summary judgment motion.

C. Discussion

1. Is the Case Appropriate for a Summary Judgment?

[35] Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the court shall grant summary judgment if: “the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.” With amendments to Rule 20 introduced in 2010, the powers of the court to grant summary judgment have been enhanced. Rule 20.04 (2.1) states:

20.04 (2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.
2. Evaluating the credibility of a deponent.
3. Drawing any reasonable inference from the evidence.

[36] In Hryniak v. Mauldin, 2014 SCC 7 and Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, the Supreme Court of Canada held that on a motion for summary judgment under Rule 20, the court should first determine if there is a genuine issue requiring trial based only on the evidence in the motion record, without using the fact-finding powers introduced when Rule 20 was amended in 2010. The analysis of whether there is a genuine issue requiring a trial should be done by reviewing the factual record and granting a summary judgment if there is sufficient evidence to fairly and justly adjudicate the dispute and a summary judgment would be a timely, affordable and proportionate procedure.

[37] If, however, there appears to be a genuine issue requiring a trial, then the court should determine if the need for a trial can be avoided by using the powers under rules 20.04 (2.1) and (2.2). As a matter of discretion, the motions judge may use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if their use will lead to a fair and just result and will serve the goals of timeliness, affordability, and proportionality in light of the litigation as a whole. To grant summary judgment, on a review of the record, the motions judge must be of the view that sufficient evidence has been presented on all relevant points to allow him or her to draw the inferences necessary to make dispositive findings and to fairly and justly adjudicate the issues in the case. Campana v. The City of Mississauga, 2016 ONSC 3421; Ghaeinizadeh (Litigation guardian of) v. Garfinkle Biderman LLP, 2014 ONSC 4994, leave to appeal to Div. Ct. refused, 2015 ONSC 1953 (Div. Ct.); Lavergne v. Dominion Citrus Ltd., 2014 ONSC 1836 at para. 38; George Weston Ltd. v. Domtar Inc., 2012 ONSC 5001.

[38] Hryniak v. Mauldin does not alter the principle that the court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trial. The court is entitled to assume that the parties have advanced their best case and that the record contains all the evidence that the parties will present at trial. Dawson v. Rexcraft Storage & Warehouse Inc., [1998] O.J. No. 3240 (C.A.); Bluestone v. Enroute Restaurants Inc. (1994), 18 O.R. (3d) 481 (C.A.); Canada (Attorney General) v. Lameman, 2008 SCC 14, [2008] 1 S.C.R. 372 at para. 11.

[39] In my opinion, in the immediate case there are no genuine issues requiring a trial and the case at bar is an appropriate case for a summary judgment. It is further my opinion that if there were genuine issues requiring a trial, then there is a more than adequate evidentiary record to decide the genuine issues and it would be in the interests of justice to do so.

2. Should Trez Capital be Granted a Summary Judgment?

[40] There is no evidentiary basis whatsoever for OIC’s allegations of undue influence or unconscionability.

[41] While there is some evidence in support of OIC’s allegation that it did not receive genuine independent legal advice and in support of its plea of non est factum, neither the allegation nor the plea provide OIC with a defence. There are no genuine issues requiring a trial.

[42] It is not a defence to a claim on a guarantee that the guarantor did not receive independent legal advice. Zwaig Associates Inc. v. Mok at para. 2 (C.A.). The presence of absence of independent legal advice is relevant to whether the guarantor has a defence based on misrepresentation, fraud, mistake, duress, undue influence, or unconscionability, but apart from its relevance to a plea of those defences, the absence of independent legal advice, standing alone, provides no defence to a claim on a guarantee. In Bank of Montreal v. Featherstone (1989), the Court of Appeal stated:

The failure of a wife to obtain independent legal advice before executing a guarantee will not in every case entitle her to escape liability under the guarantee. The obvious purpose of the bank in requiring a certification of independent advice is avoid, if possible, the spouse’s later raising defences such as non est factum, unconscionability, fraud, misrepresentation or undue influence. The burden of proving each of these defences rests upon the person seeking to set aside the guarantee.

[43] In the immediate case, strictly speaking, the legal advice that Mr. Shapiro provided OIC was not independent legal advice because Mr. Shapiro was also acting for Mr. Jiang, Norstar Investment, and 2481043 Ontario, which in law are separate entities. However, the legal advice provided by Mr. Shapiro was adequate to rebut any argument that OIC had a non est factum, misrepresentation, mistake, duress, undue influence, or unconscionability defence to Trez Capital’s claim to enforce the guarantee.

[44] The legal advice provided by Mr. Shapiro rebuts the notion that OIC has the defence of non est factum to Trez Capital’s claim on the Guarantee. Non est factum is a pleading of a particular kind of mistake. To establish non est factum, the pleader must show that when he, she, or it signed the document, without carelessness or negligence, he, she, or it was mistaken about the legal nature or legal character of the document being signed. Marvco Colour Research Ltd. v. Harris; Royal Bank of Canada v. 966566 Ontario Inc.; Bifrost Commercial Credit Corp. v. 1654670 Ontario Inc., aff’d 2010 ONCA 3862; Balut v. Carter, 2014 ONCA 424.

[45] In the immediate case, OIC knew that it was signing a guarantee. Mr. Jiang admitted as much. His complaint is not that he did not know that he was signing a guarantee but that he thought OIC’s exposure was limited to $1.0 million. That complaint is akin to a misrepresentation complaint, but Mr. Shapiro’s evidence rebuts that defence as well.

[46] In short, there is no genuine issue for trial. OIC knew it was signing a guarantee and it knew the possible legal consequences of doing so. There was no misrepresentation and no non est factum. Bank of Nova Scotia v. Compas, 2018 ONSC 3262; Mohr v. Hayes, 1999 SKQB 260.

[47] OIC was not a mere accommodation party to the transaction; independent legal advice is not required for a guarantor who is a direct beneficiary from the loan transaction. Toronto Dominion Bank v. 1503345 Ontario Ltd. at para. 22 (S.C.J.); Meridian Credit Union Ltd. v. 2428128 Ontario Ltd., 2017 ONSC 4578 at paras. 21-22.

[48] While separate legal entities, the interests of Mr. Jiang and his corporations Norstar Investments, 2481043 Ontario, and OIC were complimentary and unconflicted. OIC was the intended beneficiary of the purchase of the 1450 Don Mills property, which property was to be used for a campus for OIC’s campus. In any event, OIC was adequately and properly advised and it has no defence to Trez Capital’s claim to enforce the Guarantee.

D. Conclusion

[49] For the above reasons, I grant Trez Capital a summary judgment for $2,794,929.55 plus $438.36 per day from August 15, 2018 to the date of this judgment, plus costs of $2,457.75, all inclusive.

Perell, J. Released: August 23, 2018