ONTARIO SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 140/14 DATE: 20190221

B E T W E E N:

The Toronto-Dominion Bank Plaintiff

Susanne Balpataky, for the Plaintiff

• and -

Pomer & Boccia Professional Corporation, David Michael Pomer and Douglas LaFramboise Defendants

Neil Kotnala, for the Defendants, Pomer & Boccia Professional Corporation and David Michael Evan Moore, for the Defendant, Douglas LaFramboise

HEARD: September 10, 2018

REASONS FOR JUDGMENT

Tzimas J.

[1] The plaintiff, The Toronto-Dominion Bank, (“TD”), brought a summary judgment against the defendants, Pomer & Boccia Professional Corporation, (P&B), David Michael Pomer, (Pomer), and Douglas LaFramboise, (collectively, the defendants), for breach of an undertaking executed by Douglas LaFramboise (“LaFramboise”), on behalf of “Pomer & Boccia Professional Corporation personally” and “as agent and counsel for Rattle Snake Land & Cattle Corp. and Mustafa Al-Saati also known as Michael Al-Saati”, (the FCA defendants).

[2] The Undertaking appeared to require P&B to pay to the TD’s lawyers, Speigel Nichols Fox LLP (“SNF”), the sum of $150,000 by a certain period of time. That sum was to stand to the credit for TD’s claim in a fraudulent conveyance action, (the FCA), against the defendants’ clients, Faisal Shakir Al-Saati, (Faisal), Sabria Al-Saati, (Sabria), Mustafa Al-Saati, also known as Michael Al-Saati, (“Michael”) and Rattle Snake Land & Cattle Corp. (“Rattle Snake”). In exchange for the Undertaking, TD allowed for the lifting of an injunction so that the FCA defendants could refinance their debts and ultimately respond to TD’s claim against them.

[3] The defendants opposed the summary judgment and asked the court to dismiss the claim against all of the defendants. At the outset and indeed up until its oral submissions in court, the essence with P&B’s position rested on the submissions that it had no knowledge of any undertaking, that if anyone had any such knowledge it was LaFramboise, who worked only in association with P&B, but that in any event, LaFramboise acted as agent for the FCA clients and should not be liable, given TD’s election to obtain the judgment against the FCA defendants.

[4] At the beginning of its oral submission, P&B conceded that LaFramboise had the ostensible authority to bind P&B to the subject Undertaking. The concession was limited to the defence of the main action and did not extend to the Crossclaim against LaFramboise. In the result, the defendants collectively shifted their focus to argue that TD’s claim against them was barred by operation of the legal principles of res judicata, issue estoppel, abuse of process and principal-agent obligations. They asked the court to dismiss both the motion for summary judgment and TD’s claim.

[5] TD disagreed with these arguments. Insofar as the defendants anchored their submissions on the judgment that TD obtained against the FCA defendants TD explained that the FCA action and the corresponding judgment concerned fraudulent conveyances and the depletion of equity in a property known as Farm Lane. The action against the defendants was specific to the breach of the Undertaking. Although the terms of the Undertaking were related to the FCA defendants’ refinancing efforts, the Undertaking in and of itself stood independently of the success or failure of those efforts. When the defendants failed to honour their Undertaking, TD commenced the action to obtain relief for the breach.

[6] As for the suggested reliance on issue estoppel and the related doctrines to bar TD’s claim, the suggestion of an abuse of process, and any competing obligations as between principal and agent, TD argued that those principles had no application because the two actions were not mutually exclusive. The actions engaged different issues and different parties. P&B and LaFramboise had no interest in the outcome of the FCA. Whether or not TD obtained judgment in the FCA action, P&B and/or LaFramboise were obligated to comply with their solicitor’s undertaking to pay $150,000 to SNF.

[7] For the reasons that follow, the motion for summary judgment is granted. Beginning with the Undertaking, there was no dispute that P&B was bound to it and that it subsequently failed to honour the anticipated payment of $150,000. As among the defendants, the determination of their specific obligations is postponed to the adjudication of the Crossclaim.

[8] With respect to the proposed legal bars, the evidence before the court did not engage any of their legal elements related to bar TD’s claim. Both the issues and the parties are different. The FCA and the judgment that followed provided relief to TD for the alleged fraudulent conveyance and for the depletion of the equity by the FCA defendants. It had nothing to do with P&B’s Undertaking. The action before me is against the defendants LaFramboise, P&B, and Pomer and is related exclusively to their breach of the Undertaking they gave on March 28, 2012.

Background Facts

[9] The necessary facts to fairly adjudicate the dispute are not in issue.

[10] TD entered into various credit agreements with Faisal, Sabria and their corporations. Faisal and Sabria are the parents of Michael. Faisal, Sabria and their corporations defaulted under their obligations to TD and as a result, TD commenced a collections action against them in December 2009.

[11] TD obtained judgment in the collection action in February 2010. Faisal was ordered to pay to TD the aggregate amount of approximately $103,000 plus interest and costs. Sabria was ordered to pay $60,000, plus interest and costs. Neither made any such payments. Instead, on February 11, 2010 they both filed assignments in bankruptcy.

[12] On February 8, 2010, TD commenced a fraudulent conveyance action, (“FCA”), against Faisal, Sabria, Michael and Rattle Snake Land & Cattle Corporation. Ian Latimer, of SNF, represented TD in the FCA. The property municipally known as 507212 Highway 89, Shelburne, Ontario Highway and the common shares of Rattle Snake were the subject matter of the FCA.

[13] In the FCA, TD sought declarations that the transfer of the Rattle Snake shares from Faisal and Sabria, to their son Michael, on October 1, 2009 was fraudulent and void and asked for the title to the Rattle Snake shares to vest back to the parents, Faisal and Sabria. Ownership of the Rattle Snake shares was important because Rattle Snake was the registered owner of the property municipally known as 27 Farm Lane, Britt, Ontario, (the Farm Lane Property).

[14] In February 2012, TD brought a motion, initially returnable on March 5, 2012 against the FCA defendants for among other things, an interlocutory order restraining Rattle Snake from selling, encumbering, or disposing the Farm Lane property until the FCA was concluded.

[15] The FCA defendants delivered a statement of defence on March 22, 2012. The statement of defence recorded P&B as their counsel of record. Pursuant to a consent order, the injunction was granted on an interim basis. The motion was adjourned to September 10, 2012 and Rattle Snake was restrained from selling, encumbering or otherwise dealing with the Farm Lane Property.

[16] On March 19, 2012, LaFramboise wrote to TD on behalf of his clients and proposed to settle the injunction with the payment of $150,000 into court. Such payment was to be conditional on TD allowing Michael to obtain refinancing for the Farm Lane property. The proposed refinancing would be obtained in two tranches. The first tranche would be in the amount of $150,000 from which $40,000 would be used to pay out a loan on Michael’s vehicle and $100,000 would be used to buy cattle for Michael’s farm. The second tranche would be used to refinance two mortgages. The proposed payment of $150,000 into court, to the credit of the FCA, would be deducted from the second tranche.

[17] Farm Lane had two pre-existing encumbrances were as follows: a collateral mortgage in favour of Kawartha Credit Union in the sum of $515,000, registered on October 26, 2010 and a second mortgage to Marignani Holdings Inc. in the sum of $350,000, registered on November 22, 2011.

[18] TD rejected LaFramboise’s proposal because there was nothing in the proposal to guarantee the payment of $150,000 into court to the credit of the FCA action. In TD’s view, absent a guarantee, the first tranche would amount to nothing more than a further encumbrance on Farm Lane, without any prospect of recovery. Should the second tranche not come through, the equity on Farm Lane would be further compromised without any protection to TD. But even if the FCA defendants were to secure a second tranche TD had no confidence that there would be sufficient funds to protect TD’s interests.

[19] LaFramboise tried to reassure TD by indicating that, i. the proposed financing had already been secured; ii. P&B would be acting for Rattle Snake on the financing; iii. P&B would receive the second tranche funding into its accounts; and therefore, iv. P&B would be in the position control the payment of $150,000 into court. By implication, LaFramboise represented that he had no reason to doubt the requisite payment into court.

[20] TD rejected LaFramboise’s proposal but countered with an offer that would require P&B to give its personal undertaking to pay the $150,000 into court, to the credit of the FCA.

[21] Ultimately, on March 28, 2012, counsel for TD entered into a settlement agreement, (the Settlement Agreement), with P&B that included the following undertaking:

TD is prepared to allow your clients to proceed with the re-financing described in your letter dated March 19, 2012 on the following terms:

1. In the event that the first tranche of the funding is completed then Pomer and Boccia Professional Corporation will provide us with its personal undertaking to pay $150,000.00 (the “Money”) to Speigel Nichols Fox LLP (“SNF) in trust by no later than the earlier of the closing date of the second tranche of financing referred to in your letter of March 19, 2012 or June 30, 2012.

[22] The remaining terms of the agreement concerned the crediting of the $150,000 payment to Michael, SNF’s agreement and obligation to hold the said sum in an interest-bearing account, to be held as security to stand to the credit of the FCA, recognition of the equity in the Farm Lane property, and TD’s agreement to limit its claim against Michael and not pursue any reconveyance of Michael’s shares to his parents, and the dissolution terms to the injunction.

[23] The said agreement included an acknowledgment as follows:

We agree to the above terms.

Pomer & Boccia Professional Corporation personally as regards its obligations under paragraph 1 and as agent and counsel for Rattle Snake Land & Cattle Corp. and Mustafa Al-Saati also known as Michael Al-Saati.

Per: Douglas LaFramboise

[24] Once the Settlement Agreement was executed and in consideration of the noted Undertaking, TD allowed the FCA defendants to obtain the first tranche financing. Whether the second tranche financing came through, there was no dispute by the parties that in accordance with the terms of paragraph 1, P&B would have to pay SNF $150,000 by no later than June 30, 2012, to be held in trust on account of the FCA. In light of the undertaking, TD dissolved the injunction.

[25] As anticipated by the Settlement Agreement, the FCA defendants obtained the first tranche of financing on April 2, 2012 and a mortgage in the principal sum of $150,000 was registered against the Farm Lane Property in favour of Marignani Holdings Inc. However, June 30, 2012 came and went and the FCA defendants did not obtain their second tranche financing. Nor did P&B honour the terms of its undertaking to pay the promised $150,000.

[26] Beginning in July 3, 2012, SNF sent various communications to LaFramboise to ask about the status of the second tranche refinancing. LaFramboise responded that his client was still working on certain terms but that refinancing would be forthcoming.

[27] On August 14, 2012, Latimer advised LaFramboise that P&B was in breach of its undertaking to pay the sum of $150,000. He specifically noted:

I have been understanding of your firm’s position, which is why I have been following up with you to ask what is the status of the re-financing. You have assured e that the commitment is there and the financing will close. Last time we spoke you mentioned something about an environmental assessment. I am getting concerned that the second tranche of financing will not be completed. I hope that is not the case because that would put your firm in an awkward position. Although Latimer noted the awkward position that the failed re-financing was placing P&B.

[28] LaFramboise ultimately advised counsel for TD that Michael had failed to obtain the second tranche financing and was therefore unable to pay the sum of $150,000 from the financing to satisfy the Undertaking.

[29] On September 22, 2012, SNF formally put P&B on notice that it and its client were in breach of the Settlement Agreement and gave a deadline of October 2, 2012 for the payment of the $150,000.

[30] The amount remained unpaid, TD brought a motion to strike the FCA defendants’ statement of defence to the FCA. The defence was struck on January 21, 2013 and on July 8, 2013, TD obtained declarations and judgment, pursuant to which the court:

a) Declared the transfer of the Rattle Snake Shares by Faisal and Sabria to Michael to be fraudulent and void and set aside the transfer; b) Revested title to the Rattle Snake shares in Paddon + Yorke Inc. (The Trustee in Bankruptcy for Faisal and Sabria); c) Ordered Michael to pay $150,000 for depleting the equity in the Farm Lane Property by virtue of the Marignani Third Mortgage; d) Ordered Michael to pay $154,962.06 in damages relating to the fraudulent transfer of the Hwy 89 Property and the depletion of equity in that property; e) Ordered Michael and rattle Snake to pay costs of $30,000 for the FCA; and f) Ordered Michael to deliver to the Trustee the minute book and share certificates of Rattle Snake.

[31] Efforts to collect on the judgment against Michael, which included attendances at a judgment debtor examination by Michael proved futile. TD’s concern that the first tranche financing would prejudice its position had materialized, but for the existence of the Undertaking.

[32] On June 23, 2014, TD proceeded with its action against P&B, Pomer and LaFramboise for their failure to honour their Undertaking.

Analysis

[33] Given P&B’s concession at the beginning of their submissions as to LaFramboise’s ostensible authority to bind P&B, the issues for my determination were reduced to the following questions:

a) Can the plaintiff’s claim be disposed of by way of summary judgment? b) Is the undertaking of March 26, 2012 clear and unequivocal? and c) Do the doctrines of res judicata, abuse of process, and merger of judgments preclude TD from obtaining judgment against the defendants?

[34] The Crossclaim as between P&B and LaFramboise was set aside for another day. For the purposes of this motion the defendants advanced the same legal issues. I therefore turn to my consideration of each of the issues as outlined above.

a) Can the plaintiff’s claim be disposed of by way of summary judgment?

[35] Given the very focused issue of the defendants indebtedness to the plaintiff on account of the undertaking given on March 28, 2012, summary judgment is the most appropriate course of action to take. The arguments raised by the defendants, apart from the issue of P&B’s actual involvement or knowledge of its commitment, are legal questions and can be addressed on the evidentiary record before me.

[36] My conclusion might have been different had P&B insisted that they were not bound by the undertaking and that any obligation rested solely with LaFramboise. That would have required me to make findings of credibility. On the evidentiary record before me, such a determination would have been difficult. P&B’s concession simplified the issues as between the plaintiff and the defendants and reduced them to questions of law.

[37] Although nobody raised any concerns that the postponement of the Crossclaim to a later date would be analogous to a request for partial summary judgment, in light of the recent cautions by the Ontario Court of Appeal against partial orders, I find it prudent to address that issue. In my view, the postponement of the Crossclaim is not analogous to partial summary judgment. I come to that conclusion for the following reasons.

[38] In the most recent pronouncement on partial summary judgments, the Ontario Court of Appeal, in Butera v. Chown Cairns, 2017 ONCA 783, at paras. 30-33, addressed four concerns with partial summary judgment motions: a) the use of such motions to cause delay; b) the high expense of such motions; c) the judges’ efforts required to address such motions without the benefit of a final disposition of the action, and d) the risk of inconsistent findings between the judge hearing a partial summary judgment on a limited evidentiary record, versus the judge who hears a full trial.

[39] To begin with, none of these concerns exist in this case. TD’s motion was not brought for the purposes of any delay. The matter is about a debt collection. Nobody would stand to gain from any delay. Any further delay would only result in additional costs with unnecessary motions for everyone concerned.

[40] Secondly, the disposition of the motion, particularly if it is in TD’s favour will result in the final disposition of the plaintiff’s claim and will all the defendants to focus their attention to the one issue in the Crossclaim: Did LaFramboise have the authority to bind P&B to the Settlement Agreement of March 28, 2012? This aspect of the dispute is exclusive to the defendants. P&B’s concession on LaFramboise’s ostensible authority to bind P&B eliminated the prospect of a future inconsistent finding by the court on that issue. To keep TD engaged in this aspect of the dispute would only increase the costs for everyone involved.

[41] Turning to the merits of the case, and leaving aside the issues engaged by the Crossclaim, there is no material dispute that the defendants gave an undertaking to pay TD $150,000 by June 30, 2012, whether or not the FCA defendants obtained the second tranche refinancing. There is also no material dispute that the defendants breached that undertaking when they failed to pay the said sum.

[42] The remaining questions before the court raise legal issues concerning the existence of something defective in the terms of the undertaking and whether TD’s judgment in the FCA could be relied on by the defendants to bat TD’s claim against them for their failure to honour their Undertaking.

b) Is the undertaking of March 26, 2012 clear and unequivocal?

[43] The short answer to this question is yes and here is why. The two key components of the undertaking which are contained in paragraph 1 of the Agreement and in the Acknowledgment of the Undertaking make it clear that P&B was bound to make a payment of $150,000 to TD by no later than June 30, 2012, independently of the FCA defendants’ ability to conclude their refinancing efforts. Contrary to the defendants’ suggestion that the Settlement Agreement was not clear if the defendants undertook an obligation independent of their clients, or whether they were to be acting only as agents for their clients, the language in the Settlement Agreement is clear that P&B’s undertaking was given both in its personal capacity and as agent for the FCA defendants.

[44] Specifically, paragraph 1 anticipated: a) the completion of a first tranche financing; b) P&B’s personal agreement to give an undertaking to pay $150,000 once the first tranche was obtained; c) a timeline for P&B’s payment of the $150,000 and an ultimate due date of June 30, 2012; d) the implication that the said sum could be paid as soon as the second tranche financing came through; but also, e) the express recognition that in any event, i.e. whether or not the second tranche financing came through, P&B would have until June 30, 2012, to pay SNF the sum of $150,000. The Acknowledgment clarified that P&B was giving the undertaking personally and as agent for the FCA defendants.

[45] Strictly speaking, paragraph 1 is poorly drafted and might be interpreted as an undertaking to give a future undertaking to pay once the FCA defendants obtained their first refinancing tranche. It would have been clearer if the Undertaking said: “In the event that the first tranche of the funding is complete then Pomer & Boccia Professional Corporation shall pay $150,000.00 (the Money), etc.”.

[46] It is not necessary for the court to consider or decide this possible issue for the following reasons.

[47] First, none of the parties identified this as either a defect in the nature of P&B’s undertaking or as a basis for disputing the paragraph’s clarity.

[48] Second, both the plaintiff and the defendants interpreted paragraph 1 to mean that P&B would have to pay by June 30, 2012 the sum of $150,000 irrespective of the second tranche financing.

[49] Third and in any event, I conclude that the difficulty in the drafting reflects a distinction without a material difference because even as drafted, P&B had no scope to refuse to give the undertaking. There could be no other interpretation than an obligation by P&B to pay. The language is mandatory: if the first tranche of financing is obtained, P&B shall give an undertaking to pay. On that wording, P&B would not have a basis to refuse the undertaking to pay. Accordingly, although it would have been clearer to state that P&B “undertakes to pay”, or “shall pay”, as opposed to “provide an undertaking to pay”, the obligation on P&B, at its core, was to pay the $150,000.

[50] Fourth, this interpretation is also entirely consistent with the intentions and understanding of the parties. On the evidence before the court, TD would not agree to the lifting of the injunction without a guarantee from somebody other than the FCA defendants that the equity of Farm Lane would not be compromised. It was also abundantly clear that TD was concerned that any attempts at refinancing would only serve to deplete Farm Lane’s equity. TD’s counsel was sceptical that the defendants’ clients could actually obtain sufficient refinancing to protect TD’s interest. Accordingly, when LaFramboise outlined the refinancing proposal and explained how the refinancing would be engineered, TD could not have been clearer in its position that it would only agree to the proposed refinancing if P&B gave its own personal undertaking to pay the required sum. Latimer’s explanation that he assumed that an experienced law firm would take the necessary precautions to secure the funding from their client and avoid any risks was compelling even if charitably stated.

[51] TD’s intentions were also reflected in the exchanges between Latimer and LaFramboise in the period between July and September 2012. TD also made it clear, both consistently and repeatedly, that it was looking to P&B for the money, however awkward that might be. Everyone recognized the need and importance of completing the second tranche of financing and payment of $150,000 to avoid liability on the defendants.

[52] Turning to the Acknowledgment Clause and contrary to the submission by P&B, that the reference to a personal undertaking by a corporation created confusion or that the Undertaking should have been contained in a separate document, I do not find either of these concerns to be valid. If anything, the language is very clear, especially when it is read together with paragraph 1. P&B’s obligations are explained both in Paragraph 1 and in the Acknowledgment at the conclusion of the letter.

[53] Whether or not SNF should have drafted a separate Undertaking Document may go to the formality of the exchange but not to the clarity of the obligation it created. Insofar as the clarity and scope of P&B’s obligation is concerned, the Settlement Agreement was very clear.

[54] As with the contents of paragraph 1 and the intentions concerning that paragraph, the clarification that the undertaking would be both personal and as agent for Rattlesnake and Michael, underscored TD’s position that it would not rely on any guarantee from the FCA defendants for the proposed refinancing in the absence of a separate and distinct Undertaking by P&B. LaFramboise’s suggestion to TD that he would be able to control the funds from his clients’ refinancing efforts because those funds would flow through the firm was not satisfactory to TD. Indeed, TD clearly had doubts over the prospects of the refinancing. Particularly given LaFramboise’s explanation that the funds from the first tranche were already spoken for, TD was concerned that the equity on Farm Lane would be depleted without any security for its interests. That greater security rested with P&B’s personal undertaking to pay, in addition to acting as agent for its clients, Rattlesnake and Michael.

[55] Finally, insofar as the defendants asked the court to apply contra proferentum principles to read down the scope of the undertaking, those submissions were weak. I do not accept this submission. To begin with, it was LaFramboise who approached TD with a request to enter into an agreement that would allow his clients to refinance their debts. SNF’s communication of March 28, 2012, which contained the terms of the Settlement Agreement responded to that proposal. Latimer’s proposal was clear and arguably proportional to the magnitude of the potential debt at stake. The terms were firm and clear. LaFramboise and P&B are lawyers. TD was represented by counsel. This interpretation of the obligation under the Undertaking was abundantly clear to everyone up until the second tranche financing fell apart and TD brought the claim.

c) Do the doctrines of res judicata, abuse of process, and merger of judgments preclude TD from obtaining judgment against the defendants?

[56] None of these doctrines apply to bar TD’s claim against the defendants because the issue before this court were never the subject of the FCA and the defendants were never a party to that action.

[57] The defendants anchored their submissions on the judgment that TD obtained against the FCA defendants. They contented that in light of that judgment, the doctrine of res judicata and specifically issue estoppel applied to preclude TD from obtaining judgment against them. They further reasoned that since the judgment obtained in the FCA was triggered by the defendants’ failure to comply with the Settlement Agreement, TD effectively elected to attribute the breach of the undertaking to a failure by the FCA defendants.

[58] To enhance their reliance on res judicata and issue estoppel the defendants relied on privity to argue that when they gave the Undertaking, they stood in the place of a guarantor, a surety and / or agent for Michael and Rattlesnake; they did not create a debt to TD. Accordingly, when TD obtained its judgment against the FCA defendants, the defendants’ obligation under the Undertaking was extinguished.

[59] TD opposed this submission. Although it agreed with the legal principles outlined by the defendants, it disagreed with the proposition that the two actions were one and the same. It agreed that it struck Michael’s and Rattlesnake’s defence in the FCA after the Settlement Agreement was breached. Having struck their statement of defence in the FCA, TD then moved for judgment by way of motion and the relief granted was in accordance with TD’s claim: Michael was ordered to pay $154,962 relating to the fraudulent transfer of the Highway 89 property and $150,000 for depleting the equity in the Farm Lane Property. No relief was awarded or sought in respect of the Undertaking.

[60] Most significantly, TD highlighted the fact that the defendants in this case, were never parties to the FCA. TD said in its factum: “In the FCA, there was no consideration, let alone any adjudication, of the liability of LaFramboise, P&B, or Pomer pursuant to the Undertaking”, to conclude that the FCA ought not to be conflated with the very focused action against the defendants in this case.

[61] I agree with the parties’ overview of the legal principles that apply in the consideration of this issue. Issue estoppel is a species of res judicata that precludes the adjudication of some point or issues of fact that has already been decided in another action. The judicial decision which is said to create an estoppel must be final and the parties to the judicial decision or their privies must be the same person, see Angle v. Minister of National Revenue, [1975] 2 S.C.R. 248, at pp. 254-255 and Sibley v. Rizzuto, 2008 CarswellOnt 2500.

[62] Res judicata, issue estoppel and abuse of process are overlapping and related bars to litigation and preclude a party from re-litigating a claim, a defence or even an issue that has already been determined. Broken down to its constituent elements and considered in relation to this action, these principles come down to a consideration of the following three questions:

i. Has the indebtedness of the defendants been decided? ii. Did the judgment in the FCA, which is suggested to create the estoppel, final? and; iii. Are the parties to the FCA judgment, namely, Michael and Rattlesnake, the same persons as the defendants in this action?

The second question was not disputed. The FCA judgment was a final decision. The first and the third questions are in dispute.

[63] In my review of these questions there can be no doubt that the undertaking was not an issue in the FCA action. It is also trite that the defendants in this action were not the same as the defendants in the FCA action. I will review each of these considerations in greater detail.

[64] To begin with, the relief that TD obtained in the FCA was not directly related to a finding of liability under the Undertaking. While I recognize that P&B’s failure to honour the Undertaking became the triggering event for TD to strike the FCA defendants’ statement of defence, which then allowed TD to obtain default judgment, the relief in that judgment was for the sum of $154,962.06 for the transfer of the Highway 89 property and the sum of $150,000, which represented the value of the first tranche of the refinancing and therefore the value by which the FCA defendants depleted the equity in Farm Lane.

[65] In contrast to the FCA, this claim engaged a different set of questions. It has nothing to do with whether fraudulent conveyances occurred, or the extent of the diminished equity on the Farm Lane property. Instead, this action concerns the parameters of the Undertaking, the defendants’ possible agency relationship to their clients, and the respective obligations of LaFramboise, P&B, and Pomer. None of these issues were adjudicated in the FCA.

[66] The defendants suggested that since TD relied on the breach of the Undertaking to strike the statement of defence in the FCA, it must have elected to pursue its remedies on account of the breached Undertaking against the FCA defendants. Otherwise, TD could not have relied on somebody else’s breach to strike the FCA statement of defence and to then obtain judgment against the FCA defendants.

[67] With respect, I find such an argument too convenient and simplistic an explanation to avoid liability on the Undertaking. There was no dispute that the FCA defendants had engaged in conduct that compromised further TD’s interests in the FCA. They depleted the equity on Farm Lane by $150,000 and then failed to conclude their second tranche financing. These were actions by the FCA defendants that had everything to do with the FCA and very little to do with the defendants’ failure to honour their Undertaking. This observation underscores the impossibility of a merger in the causes of action or the further contention that TD elected to pursue the FCA defendants as the principals to the Undertaking to the exclusion of the defendants. TD had every basis to pursue its remedial options in that action. In so doing, it did not compromise its ability to pursue an independent claim against the defendants on account of P&B’s undertaking.

[68] Given these findings, there is simply no basis to conclude that the same issue was raised in both of the proceedings.

[69] A similar analysis applies to the consideration of whether the persons in the FCA are the same as the persons in this action. Obviously, on the face of the two actions the defendants are different. The defendants’ way around this reality was to argue that once TD obtained judgment against the FCA defendants, any claims arising out of the Settlement Agreement merged with the FCA. They also submitted that TD’s decision to obtain judgment against the FCA defendants amounted to an election by TD to treat the Undertaking solely as Michael’s personal undertaking. With a final judgment against the FCA defendants, TD could not re-litigate the breach of the undertaking against the defendants in this action.

[70] The defendants relied on the following cases to support their submissions: Murray v. Delta Copper Co., [1926] S.C.R. 144 at p.152, Lang Transport Ltd. v. Plus Factor International for the Respondent Trucking Ltd. at para.2, and Tedrick v. Big T Restaurants of Canada Co. (1982), 17 A.C.W.S. (2d) 305 at para. 4 to support this submission. In this instance, the defendants explained that since judgment was obtained against the FCA defendants, the rights and obligations set out in the Undertaking were completely resolved and no further relief could be obtained against the other parties who gave the Undertaking.

[71] Neither the defendants nor the plaintiff took into account section 139 of the Courts of Justice Act, R.S.O. 1990, c. C.43 or the decision of the Ontario Court of Appeal in 1196303 Inc. v. Glen Grove Suites Inc., 2015 ONCA 580, which held that “the common law rule that judgment against one person jointly liable releases the other has been abrogated in Ontario by s.139 (1) of the Courts of Justice Act”, see para. 85. Although I could have invited the parties to make supplementary submissions on this point, having regard for both the additional costs of such a request, but more importantly, P&B’s express acknowledgment on the face of the Settlement Agreement that the Undertaking was given in two capacities, both personal and as agent, any agency considerations are eclipsed by P&B’s personal liability.

[72] As I already discussed above in my interpretation of the paragraph 1 and the Acknowledgment of the Settlement Agreement, P&B’s Undertaking stood independently of the FCA defendants and their obligations to TD. In other words, when the defendants agreed to the terms of the Undertaking, and more particularly, to pay $150,000 to SNF by a certain deadline, in any event of the outcome to the FCA defendants’ refinancing efforts, they ceased to be acting as mere agents for the FCA defendants.

[73] The evidence before me was unequivocal that the reason TD requested and obtained P&B’s Undertaking was because it wanted to protect its interests in the FCA from any further depletion of the FCA assets and required additional security from the other sources, namely P&B. Very significantly, in all of its dealings, TD was clear that it did not consider P&B as merely the agent for the FCA defendants. It expressly rejected the terms of LaFramboise’s preceding offer that would have limited P&B’s exposure to any independent liability. It was only after P&B agreed to a personal Undertaking that TD agreed to allow the FCA defendants to proceed with their re-financing efforts.

[74] Against these findings, the only available conclusion is that the persons in the FCA were different from the current defendants. Any suggestion that issue estoppel or the related doctrines could operate to bar TD’s claim against these defendants is without any foundation. In the same vein, TD was entitled to pursue its remedies on account of the breached Undertaking and to have done so does not amount to an abuse of process.

[75] Finally, given my findings, although TD submitted that if all else failed, the court could exercise its discretion that TD’s claim to be adjudicated and to protect TD against an injustice, I do not find it necessary to rely on such grounds to support my conclusions.

Conclusion

[76] In light of my findings and conclusions, the motion for summary judgment is granted in favour of the plaintiff. Insofar as the Crossclaim is concerned, and in keeping with the principles laid out in Hryniak v. Mauldin, [2014] 1 S.C.R. 87, subject to my availability, the defendants may proceed to schedule a trial of the Crossclaim before me. They may also schedule with my office a trial management conference to discuss the particular procedural issues for that trial.

[77] On the subject of costs, the parties are strongly encouraged to reach their own settlement. Should they be unable to do so, then the plaintiff, as the successful party shall have until March 1, 2019 to make submissions and the respondents shall have until March 22, 2019 to respond. The submissions shall be limited to three pages, double-spaced, in 12 point font. They are also to include a Bill of Costs.

Tzimas J. Released: February 21, 2019