BARRIE COURT FILE NO.: CV-18-240 DATE: 20190612 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ROBERT VAN NISPEN AND DONNA VAN NISPEN Plaintiffs – and – MCCARRON & CHOBOTIUK FINANCIAL SERVICES Defendant

Counsel: Lawrence Hansen, for the Plaintiffs S. Steven Sands, for the Defendant

HEARD: March 19 and April 18, 2019

REASONS FOR DECISION

CASULLO J.:

OVERVIEW

[1] The plaintiffs bring this motion for summary judgment for payment of the purchase price of a business they sold to the defendant, and for an order dismissing the counterclaim.

[2] The defendant denies there is a debt owing, and has counterclaimed against the plaintiffs for, inter alia, breach of contract and damages.

[3] The action was commenced under r. 76 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, although the prayer for relief exceeded the $100,000 cap. The defendant objected to the action continuing under the simplified procedure.

[4] While no r. 76.02(6) notice stating that the action would continue as an ordinary action was served, it is clear this was the intent of the parties. For example, the defendant conducted cross-examinations on affidavits, a procedure not available pursuant to r. 76.04(1).

BACKGROUND

[5] The plaintiffs, Robert Van Nispen and Donna Van Nispen, were the owners of Nispen Financial Services.

[6] The defendant, McCarron & Chobotiuk Financial Services Inc., is an Ontario corporation providing financial advice to the general public. Justin McCarron is the operating mind of the defendant.

The Agreement

[7] On February 24, 2017, the plaintiffs entered into a share purchase agreement with the defendant, wherein the defendant agreed to purchase all common shares of Nispen Financial Services. The defendant agreed to pay the plaintiffs $174,241.49. Upon closing, the defendant paid the closing price of $10,000, leaving a balance of $164,241.49.

[8] In respect of the balance, two promissory notes were issued and executed by the defendant on August 10, 2017. The first promissory note required the defendant to pay the sum of $77,120.75 (50% of the purchase price minus the $10,000 closing price) by December 31, 2017. The remaining balance of $87,120.75 formed the subject matter of the second promissory note.

[9] Both promissory notes provide that in the event of default, the plaintiffs were entitled to declare the entire outstanding balance immediately due and payable.

[10] The defendant defaulted on the first promissory note. A demand for the payment was issued on January 11, 2018. It went unanswered. On January 29, 2018, the plaintiffs demanded all amounts owing pursuant to the promissory notes.

The Transition Period

[11] To assist with a smooth transition, Mr. Van Nispen worked with the defendant from March to October 2017. During this time, neither of the plaintiffs were officers or directors of the defendant, and they were paid as independent contractors.

[12] As part of the transition arrangements, Mr. Van Nispen became a party to an associate advisor’s agreement, as required by Sun Life. His role in assisting with the transition included attending at some client meetings along with other Sun Life financial advisors.

[13] The advisor’s agreement contained a non-solicitation provision which bound the plaintiffs from soliciting the defendant’s clients.

[14] While working with the defendant, Mr. Van Nispen put all information into a client summary and provided it to the firm’s administrative assistant. All client files, all client notes, all client lists – in essence, any and all documentation related to the operation of the business, were turned over to the defendant. Mr. Van Nispen did not even take old client phone numbers with him.

POSITION OF THE PARTIES

[15] The plaintiffs submit this is a straightforward debt collection matter, imminently suited to summary judgment. The defendant agreed to pay a certain price for the business, which payment remains outstanding.

[16] The defendant claims that Mr. Van Nispen solicited clients of Nispen Financial Services to transfer their assets to third party institutions, and solicited and diverted clients of McCarron to other Sun Life investors, both of which caused the value of Van Nispen Services Inc. to be less than what was initially represented.

[17] The defendant further claims that Mr. Van Nispen is in breach of his fiduciary duty pursuant to the advisor’s agreement.

ADDITIONAL MOTION MATERIAL

Day One

[18] This motion was initially scheduled for August 15, 2018, with counsel estimating it would take two hours in total. There was no judge available, and the matter was traversed to January 24, 2019. Through no fault of counsel the matter was again adjourned to March 18, 2019.

[19] At the outset of the hearing on March 18, 2019, the defendant sought leave to file additional material. More particularly, a responding supplementary motion record consisting of two requests to admit, and two responses to request to admit. The four documents were not appended to an affidavit.

[20] Counsel for the defendant submitted that much like pleadings and affidavits are part of the record on a summary judgment motion, so too are admissions of fact, and denials of admissions of fact. This is so given the potentially serious outcome of a summary judgment motion. These admissions of fact, which would be before the court in the normal course of a trial, should therefore be considered by the court to ensure a fair hearing.

[21] Counsel for the plaintiffs objected to the filing of the supplementary motion record, as there was no evidentiary value to requests to admit, and denials to requests to admit, without a supporting affidavit. He further submitted that the defendant was seeking to provide the court with material beyond the scope of what is permissible on a motion for summary judgment.

[22] I permitted the material to be filed, with the weight it should be accorded to be determined.

[23] The hearing then proceeded with the unspoken, but what I must trust to be mutual, understanding that all necessary material was before the court. The motion was not completed that day, and a return date was obtained.

[24] Just before court was adjourned, counsel for the defendant handed up to the court three additional decisions in response to the summary judgment motion. I accepted them, and acceded to counsel for the plaintiffs’ request that he be permitted, if necessary, to provide a further factum addressing the legal issues raised in the case law.

[25] Ultimately, I gave no weight to the material provided in the supplementary motion record. Without determining whether requests to admit, and responses to requests to admit, constitute evidence upon which a judge may rely on a motion for summary judgment, the material contained therein was of limited probative value.

[26] For example, one lengthy request to admit reiterated the refusals given at Mr. Van Nispen’s cross-examination. Additionally, a number of requests referenced legal/trial strategy. Generally, the information contained in the supplementary motion record did not assist the defendant, and if memory serves correctly, the court was not directed to any of the four documents during submissions.

Day Two

[27] When the motion resumed on April 19, 2019, defence counsel again sought to introduce additional material, this time in the form of affidavit evidence sworn by Lee-Ann Manley, an employee of Sun Life. The defendant also sought an adjournment. Counsel for the plaintiffs objected to both forms of relief.

[28] As with the defendant’s request on the first day of the hearing, because the defendant had already cross-examined Mr. Van Nispen on August 7, 2018, pursuant to rr. 39.02(1) and (2), leave was required before further affidavit evidence could be delivered.

[29] I heard submissions and declined the relief sought by the defendant. The following paragraphs expand on my oral reasons.

[30] As stated in Brock Home Improvement Products Inc. v. Corcoran, [2002] O.J. No. 931, at para. 8, leave under r. 39.02(2) should only be granted “in exceptional circumstances”:

Rule 39.02(1) and (2) are an important and integral part of the procedural code governing the conduct of motions and applications. These rules are designed to place finite terms on the evidentiary element of those proceedings, an element that is all too frequently time consuming, expensive and drawn-out These rules oblige the parties to consider the issues and to put all relevant evidence forward before embarking upon cross-examination of the opposite party’s witnesses. This is the approach mandated by the rules to achieve the “just, most expeditious and least expensive” determination of motions and applications. Consistent with that approach, it is only in exceptional cases that resort should be had to Rule 39.01(2).

[31] The rule should not be a “mechanism for correcting deficiencies in the motion materials”: see Lihou v. VIA Rail Canada Inc., at para. 24.

[32] In [Chitel v. Rothbart, [1984] O.J. No. 2238], the court began hearing submissions on a long motion on one day, and adjourned to the next day to continue the hearing. On the next day, one of the parties sought to file an affidavit which had been prepared overnight, something the court refused, observing that it would be “essentially unfair” do to so (para. 34).

[33] For the following reasons I find it would likewise have been unfair to admit Ms. Manley’s affidavit:

• The plaintiffs’ motion record was served in April, 2018; the defendant’s motion material was delivered in July 2018;
• The plaintiffs’ last set of affidavits were served in August 2018;
• Cross-examination of Mr. Van Nispen took place August 7, 2018;
• The hearing of the motion started on March 19, 2019, and was adjourned to April 19, 2019;
• The plaintiffs’ submissions were completed on March 19, 2019, subject to any comments on the case law provided at the close of day one;
• During his submissions on March 19, 2019, counsel for the plaintiffs specifically addressed the lack of an affidavit from Ms. Manley;
• The information sought to be introduced did not stem from an issue first raised during Mr. Van Nispen’s cross-examination, but is an issue that Mr. Van Nispen swore to in his affidavit, and upon which counsel could have cross-examined him.

TEST ON SUMMARY JUDGMENT

[34] Rule 20.04(2)(a) of the Rules of Civil Procedure provide that the court shall grant summary judgment if it “is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence” (emphasis added).

[35] Rules 20.04(2.1) and 20.04(2.2) empower the court to weigh evidence, evaluate the credibility of a deponent, and to draw reasonable inferences from the evidence.

[36] As a unanimous Supreme Court of Canada stated in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 49:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[37] The moving party has the initial onus of showing there is no genuine issue for trial [r. 20.01(2)]. The burden then shifts to the responding party to demonstrate specific facts showing there is a genuine issue requiring a trial [r. 20.02(1)(2)].

[38] As the Court of Appeal has held, the responding party to a motion for summary judgment has an obligation to lead trump or risk losing: see Corchis v. KPMG Peat Marwick Thorne, at para. 6.

[39] The court is entitled to assume that the record before it is complete and that it contains all of the evidence that a party would rely on at trial: see Broadgrain Commodities Inc. v. Continental Casualty Company (CAN Canada), 2018 ONCA 438, at para. 7.

DISCUSSION

[40] A brief timeline would be of assistance. The defendant began operating Nispen Financial Services in February of 2017. The plaintiffs’ clients were transferred to the defendant at the beginning of March 2017.

[41] From March 2017 to his retirement in October 2017, Mr. Van Nispen worked for the defendant to ensure a smooth transition. There was evidence before the court that Mr. Van Nispen assisted the defendant even after his October retirement.

[42] The parties agreed to extend the March 1, 2017 closing date to October 23, 2017. Payment of the $10,000 closing price was also extended to October 23, 2017. The defendant continued to operate the business.

[43] The defendant did not make the $10,000 payment until Mr. Van Nispen had his lawyers write a letter requesting same. When received, the cheque was post-dated, and McCarron asked that Mr. Van Nispen wait until November 3, 2017 to cash it.

[44] In early December 2017, Mr. Van Nispen contacted McCarron in respect of the pending $77,120.25 payment, to be made by December 31, 2017, in accordance with the first promissory note. Mr. Van Nispen asked McCarron for a post-dated cheque. McCarron advised he would get back to Mr. Van Nispen.

[45] McCarron did not get back to Mr. Van Nispen. Mr. Van Nispen tried several times to reach McCarron to make arrangements for the payment. He spoke with an employee of the defendant, who said he would send McCarron a text message to get back to him about the matter.

[46] Again, McCarron did not get back to Mr. Van Nispen. No cheque was forthcoming, and the defendant is in default.

[47] It is instructive to the court that before the statement of claim was served in February 2018, neither the defendant, nor McCarron, raised with the plaintiffs any of the accusations contained in the statement of defence and counterclaim. Recall these allegations include diverting clients away from the defendant and breach of fiduciary duty.

[48] At no time during the eleven months between the sale of the business and the issuance of the statement of claim did the defendant raise these serious concerns:

• Not during the nine-month transition period when Mr. Van Nispen worked for the defendant;
• Not when Mr. Van Nispen stopped working for the defendant;
• Not when the Van Nispens’ lawyers wrote the defendant’s lawyers seeking the $10,000 closing payment;
• Not during the two months when Mr. Van Nispen made efforts to contact the defendant for payment pursuant to the promissory note; and
• Not in response to the letters sent by the Van Nispens’ lawyers demanding payment, and thereafter advising the defendant it was in default of the promissory note.

[49] I see no evidence that clients were diverted away from the defendant. To the contrary, the evidence supports the opposite conclusion. For example, there are emails showing Mr. Van Nispen directing former clients to McCarron, and referring to McCarron as their “new financial advisor.”

[50] In another example, the power of attorney of a former client contacted Mr. Van Nispen for assistance in investing with the defendant, and the funds were placed through the defendant, not Mr. Van Nispen.

[51] It is true that the plaintiffs took their personal accounts elsewhere. However, this was not until January 2018, following the defendant’s failure to pay the promissory note. This is not a surprising result. Despite this, many of the plaintiffs’ family members remained clients of the defendant.

[52] McCarron’s affidavit sworn July 18, 2018, alleges that Mr. Van Nispen enlisted Tom Allen, a financial advisor with Sun Life, to participate in the diversion of the defendant’s clients to the two of them.

[53] Tom Allen’s affidavit, sworn August 1, 2018, refutes these allegations. He swore that McCarron did not raise with him the accusation that he assisted Mr. Van Nispen in diverting clients.

[54] Tom Allen clarifies that during any meetings he participated in with Mr. Van Nispen, during the transition period, Mr. Van Nispen promoted continuity of service with the defendant. Further, he swore that Mr. Van Nispen did not ask him to help divert clients from the defendant.

[55] McCarron’s July 18, 2018 affidavit also alleged that he was informed by Roger Kennedy of Sun Life, that Sun Life sent a “cease and desist” letter to Mr. Van Nispen arising from his conduct after his retirement from Sun Life, and as an advisor for the defendant.

[56] Roger Kennedy provided an affidavit, sworn August 1, 2018, in which he confirms that, to the best of his recollection, that he did not tell McCarron that a “cease and desist” letter had been sent to Mr. Van Nispen.

CONCLUSION

[57] The defendant has not put its best foot forward. I see no credible evidence that Mr. Van Nispen was diverting clients away from it. Attached to McCarron’s affidavit was a spreadsheet documenting the names of clients who have left the defendant, the size of their portfolio, and a brief description of why McCarron thinks they left.

[58] McCarron does not indicate who prepared the spreadsheet, how it was prepared, and what information was relied upon to prepare it. Without any evidence to substantiate that clients were diverted, beyond McCarron’s assertion that it happened, the document lacks evidentiary value.

[59] One would have anticipated, given the significant losses the defendant claims he has sustained, evidence in the way of emails, notes, complaints from clients that Mr. Van Nispen has been soliciting their business, or letters from the defendant’s lawyers to Mr. Van Nispen, demanding that he stop interfering with its clients, would have been produced.

[60] The defendant appears to be doing what Kristjanson J. warned against in R.B. v. E.S. (Litigation guardian of), 2017 ONSC 7866, at para. 3:

In a post- Hryniak world, a party cannot sit back, assert that it will file future evidence, or merely argue that a matter is clearly not suited for summary judgment…the court is entitled to assume that the parties have placed before it all of the evidence that will be available for trial; the responding party must present its best case or risk losing.

[61] The defendant argued that a trial of the claim and counterclaim was necessary, and that Tom Allen, Roger Kennedy, and Lee-Ann Manley would be called as witnesses to Mr. Van Nispen’s transactions. However, the evidence of Tom Allen and Roger Kennedy had been produced by the plaintiffs, by way of affidavits, in August of 2018. No cross-examinations were conducted.

[62] Further, if the defendant believed Manley’s evidence was imperative, then her affidavit should have been produced prior to Mr. Van Nispen’s cross-examination, not on the second day of the motion, once the plaintiffs’ submissions were complete.

[63] Counsel also suggested that professional forensic reports, calculating the losses sustained by the defendant, would be required. Again, this information should have been produced in response to the motion.

[64] Finally, I do not find that the advisor’s agreement imposed upon Mr. Van Nispen a fiduciary duty to the defendant. If I am incorrect in this regard, I do not find that Mr. Van Nispen breached his fiduciary duty to the defendant.

[65] For the foregoing reasons, the motion for summary judgment is granted and the counterclaim is dismissed.

COSTS

[66] I invite the parties to resolve the issue of costs on their own. If they are unable to do so, they may make arrangements with the trial co-ordinator to schedule a costs hearing on a regular motions day in Barrie.

[67] If written submissions are going to be relied upon, they should be filed by the plaintiffs at least fifteen days in advance of the hearing, and by the defendant at least 10 days in advance of the hearing. No reply without leave of the court.

[68] In order to assess costs that are fair and reasonable, the reasonable expectations of the unsuccessful party are an important factor in the court’s determination. Both parties are to provide a bill of costs.

CASULLO J. Released: June 12, 2019