Court File and Parties

COURT FILE NO.: 18-0000-1052 DATE: 2020-01-29

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: P AND A HOLDINGS INC., Plaintiff AND: JAE KIM, Defendant

BEFORE: Mr. Justice P.R. Sweeny

COUNSEL: Lukasz (Luke) Szymura, Counsel for the Plaintiff Peter Neufeld, Counsel for the Defendant

HEARD: January 24, 2020

ENDORSEMENT

[1] This is a motion for summary judgment on a promissory note. This motion was heard together with a motion in court file number CV-18-00001051.

Background

[2] On November 30, 2016 the plaintiff loaned the principal sum of $300,000 to the defendant, on the terms set out in a promissory note dated November 30, 2016 (the Note), the terms of the loan as detailed in the Note include:

(a) The principal amount of the loan is $300,000;

(b) The maturity date of the loan is, as follows:

(i) $150,000 was due and owing on November 30, 2017; and

(ii) the balance of the principal and accrued interest was due and owing on November 30, 2018;

(c) Interest accrues on the unpaid principal amount as follows:

(i) 8% per annum, payable monthly on the last business day of each month;

(ii) Interest began to accrue at the rate of 8% of the principal balance of $300,000 on November 30, 2016;

(iii) The first interest payment was due on February 28, 2017. This payment included all interest from November 30, 2016 to February 28, 2017. Thereafter, interest payments were to be made on a monthly basis on the last business day of each month; and

(iv) In the event that there is a default of the loan, interest is to accrue on the outstanding principal balance at the rate of 16% per annum from the date of default until the unpaid principal balance is paid in full.

(d) An event of default on the loan will occur if the principal or interest payment is not paid when due; and

(e) The defendant agreed that in the event of his default he would reimburse the plaintiff for all reasonable costs and expenses (including reasonable legal fees of my counsel) incurred in connection with enforcement and collection of the Note.

[3] Danielle Goreski, Dr. Takhar in the name of the Takhar Family Trust, and the defendant are shareholders in a corporation, Cambridge Medical Imaging Inc. (CMI), which provides diagnostic imaging in the City of Cambridge, Ontario. CMI required $2,500,000 to purchase an active business license to run a medical clinic and a dormant business license associated with another clinic. To raise the necessary funds, the defendant entered into the loan agreement and executed the Note.

[4] The Note was drafted by the defendant’s former lawyer and signed by the defendant. Plaintiff demanded repayment of the loan and Note in writing on December 19, 2017 and May 1, 2018. The Defendant has failed to repay the loan.

[5] CMI continued to operate the diagnostics imaging centre until that asset was sold on May 13, 2019.

Procedural History

[6] The Statement of claim in this matter was issued on August 14, 2018. On October 4, 2018 the defendant served a statement of defence. On November 26, 2018 the plaintiff served this motion for summary judgment. On December 24, 2018, the defendant served his responding material to the motion for summary judgment. In that material, the defendant acknowledged: that he borrowed $300,000 from the plaintiff; that he had not repaid the Note; and that the Note is past due. On January 16, 2019 the defendant served the proposed amended statement of defence.

[7] On February 8, 2019 the plaintiff in the companion action was cross-examined on her affidavits and a representative of the plaintiff in this action was also cross-examined. On February 13, 2019, the defendant was cross-examined on his affidavit. The parties have delivered answers to undertakings. A motion with respect to undertakings and refusals was heard by Justice Broad who released his decision on June 14, 2019. These motions came on for hearing before me on January 24, 2020.

Positions of the Parties

[8] The plaintiff asserts this is an appropriate case for summary judgment. There are no material facts in dispute. Although the defendant raises issues in his pleadings and in argument, the defendant has not led sufficient evidence to support any of his allegations to avoid payment on the promissory note, or the defences are not available on the facts in this case.

[9] I understand the defendant raises the following issues:

(1) There is no consideration for the Note;

(2) The defendant relied on representations from Baldeep Takhar about her ability to obtain referrals from local physicians to support the business of CMI;

(3) The Note was executed in the context of the transaction involving the purchase of shares and accordingly the unanimous shareholders’ agreement (USA) made between the shareholders gives rise to rights and obligations that need to be considered in this action;

(4) An arbitration has been requested by the plaintiff and there is a risk of inconsistent findings, so this motion should not be heard until after the arbitration; and

(5) In any event, the defendant has made interest payments for which he should receive credit.

[10] I will address each of these issues.

No consideration for the Note

[11] The defendant has deposed in his affidavit that he entered into separate loan agreements with the plaintiffs to loan him $300,000.00 each in accordance with the terms. This was to provide his contribution to finance CMI. Further, on his cross-examination, he confirmed that he borrowed $300,000 for each of the plaintiffs, on the terms of the Note.

[12] He received consideration for the Note. There are no material facts in dispute on this issue.

The defendant relied on representations of Baldeep Takhar

[13] The defendant’s argument is that he executed the promissory note as part of the plan to purchase the assets, which were then rolled into CMI, based on representations made by Dr. Takhar that she would obtain referrals from other physicians. The argument goes on to be that the CMI was unsuccessful because there were not sufficient referrals from physicians. There were not sufficient referrals from physicians because of the fact that patients made complaints about Dr. Takhar and an investigation was commenced by the College of Physicians and Surgeons.

[14] This argument fails for a number of reasons. First, there is no evidence aside from the defendant’s assertion that he relied on any representation of Dr Takhar. The defendant does refer to a business plan, which Dr. Takhar and the plaintiff both denied ever having seen. Dr Takhar is not a party to either Note; Further, as a responding party on a motion for summary judgment, the defendant has the obligation to put his best foot forward. He has provided no evidence that the business failed as a result of physicians not referring patients, because they were aware of some allegations against Dr. Takhar. It is Dr. Takhar’s evidence that she did not know of any complaint to the College until one year after the promissory note was executed. There is no evidence that doctors refused to refer patients because of complaints against Dr. Takhar.

[15] The defendant has not led evidence to support his position. There are no material facts in dispute on this issue. Accordingly, the defendant is unsuccessful on this issue.

The interrelationship between the Notes and shareholding of CMI

[16] The Notes are referred to in the USA. However, the Notes are referenced in the context of what would happen if the defendant failed to pay on the Notes. The defendant’s obligation to pay on the Notes is not in any way contingent on any obligation in the USA. There are no material facts in dispute on this issue.

The motion should be delayed pending arbitration

[17] The plaintiffs in both actions have requested Arbitration arising out of the USA. As I have already observed, the obligation to pay the Notes is not addressed in the USA. The USA simply addresses default in payment. It does not provide a mechanism for collecting on the promissory Notes. There is no reason to delay this motion or this proceeding because Arbitration with respect to the USA has been requested. In any event, the defendant has not asked for a stay of this proceeding pending the arbitration. There are no material facts in dispute with respect to this issue.

Defendant should get credit for interest paid

[18] The defendant asserts that he made payments to CMI on behalf of both plaintiffs. Those payments were payments made with the interest money that would be payable to the plaintiffs. That is, the defendant made contributions toward the business: 60% of the amounts advanced were on his account as a 60% shareholder and the other 40% on behalf of the other two shareholders. The plaintiffs initially objected to this claim. They assert that the plaintiff, P and A Inc., is not a shareholder and would have no obligation to make any contributions. They make other arguments.

[19] On the hearing of the motion, the plaintiff agreed to provide credit to the defendant for the interest payments made. The plaintiffs acknowledge $49,800 paid on behalf of each of the plaintiffs. The plaintiff has provided a calculation of the amount outstanding under the Note, assuming that the interest payments were made as required and that the default on the Note did not occur until the plaintiff failed to repay $150,000, being one-half of the principal amount, on November 30, 2017 as required. This is $77,698.92 (to January 29).

Conclusion

[20] The defendant executed a promissory note to the plaintiff for $300,000. He will be given credit for certain payments made on account of interest. He has not paid the principal or interest due and owing for some time. There are no material facts in dispute. Summary judgment affords the best, most expeditious and least expensive determination of the issues in this case. It is in the interests of justice that summary judgment be granted.

[21] The plaintiff shall have judgment against the defendant for $300,000 plus prejudgment interest of 77,698.92 (to January 29). The per diem interest is $131.51.

[22] The plaintiff shall have post judgment interest at 16% on the principal amount of $300,000.

[23] With respect to the issue of costs, at the hearing of the motion, the parties provided cost outlines. I heard some submissions on costs. However, there may be offers to settle which would impact any award of costs. Accordingly, if the parties are unable to agree on costs, I will accept written submissions addressed to me at the Kitchener Courthouse. The submissions are limited to four pages, plus any offers to settle. The plaintiffs have until February 5, the defendant until February 12. The plaintiff shall have a right of reply due by February 17. If no submissions are received by February 4, 2020, the issue of costs will be deemed settled.

P.R. Sweeny J.

Date: January 29, 2020