Court File and Parties
SUPERIOR COURT OF JUSTICE – ONTARIO
FAMILY COURT
RE: Toronto-Dominion Bank, Plaintiff
AND:
Hasnain Medicine Professional Corporation, TMC Clinic Inc., Tecumseh Medical Clinic Inc., and Haider Hasnain, Defendants
BEFORE: ASTON J.
COUNSEL: Tony Van Klink for the plaintiff
William Fawcett, for the defendants
HEARD: at London (virtual hearing) October 28, 2020
ENDORSEMENT
1The plaintiff brings this motion for summary judgment in relation to three commercial loans to the defendants in which they are identified as principle debtors or guarantors.
2The material filed is quite lengthy. Briefly stated, the indebtedness stems from the restructuring of prior loans, the terms of which are found in a “Letter Agreement” dated August 10, 2017. It was prepared by the Bank. It was signed by Dr. Hasnain on behalf of himself, Hasnain Medical Professional Corporation (HMPC) and TMC Clinic Inc. (TMC) as the principle debtors, then returned to the Bank September 11, 2017. Further documentation for the debt restructuring, including the guarantees, were completed in December 2017. The loan to TMC for $50,000 was primarily to retire and refinance a debt of its corporate predecessor, Hasnain Sekhon Corp.
3Marta Bienek, who has a professional and personal relationship with Dr. Hasnain, is now the sole officer and director of TMC. She deposes that she never authorized the creation of the $50,000 operating loan for TMC that replaced the Hasnain Sekhon Corp. operating loan. More on that to follow.
4On a motion for summary judgment, the court first examines the evidence before it to determine whether there is a genuine issue for trial. If there is, the court then determines whether it is appropriate to utilize the fact-finding powers in Rule 20.04(2.1) to achieve a fair and just result that is timely, affordable and proportionate to the action as a whole. Issues of credibility only come into play if credibility cannot be determined on the written record alone, but a genuine issue of credibility on a key point will necessitate a trial.
Is the letter agreement of August 2017 enforceable against TMC respecting the $50,000 credit facility advanced to TMC?
5On Dr. Hasnain’s own evidence TMC took over the operation of the clinic formerly run by Hasnain Sekhon Corp. on December 29, 2014, long before the loan restructuring at issue in this case. Each month TMC was paying interest on the operating loan of its corporate predecessor. After the restructuring of the debt it continued to make payments. Ms. Bienek cannot credibly deny knowing that TMC had a new operating loan of $50,000, which was used to replace the indebtedness of Hasnain Sekhon Corp.
6The Letter Agreement dated August 10, 2017 was delivered to Marta Bienek before it was signed. She participated directly, and indirectly through Dino Villalta, in discussions and emails with the Bank’s representative Greg Manina. The Letter Agreement clearly spelled out that TMC was to assume Hasnain Sekhon’s operating loan. There is no evidence that she declined to accept the terms of the Letter Agreement and it is disingenuous to now say she did not authorize the transaction.
7However, TMC’s liability does not depend on a negative assessment of Ms. Bienek’s credibility. The material on this motion includes a corporate profile report for TMC, attached as Exhibit A to the February 21, 2020 affidavit of Mr. Emanuel. The document confirms that Haider Hasnain was the first director of TMC as of December 19, 2014 and he was still the sole director and corporate president on the date of the report, September 11, 2017. This information is based upon TMC’s annual Corporations Information Act return (Form 1C) filed on July 30, 2017. Dr. Hasnain had ostensible authority. Sections 19(2)(b) and (d) of the Ontario Business Corporations Act provide that the corporation’s registration of this information with the Ontario government prevents TMC from asserting that the Letter Agreement was signed without the authority to bind the corporation, unless the Bank knew or ought to have known Dr. Hasnain did not have that authority.
8TMC submits that the bank knew, or ought to have known, that Marta Bienek was the sole officer and director at the time of the Letter Agreement based upon the Bank’s internal credit review in July 2017. That review disclosed that she was managing the day-to-day operations of TMC. However, there is no evidence to indicate why her day-to-day management of TMC would necessarily indicate she was the sole director and officer, or that Dr Hasnain was not a director and officer.
9In November 2017, Ms. Bienek signed the guarantee and general security agreement on behalf of TMC to implement the restructuring contemplated by the Letter Agreement. By that time, she may have become the sole director and officer of TMC but the plaintiff was never informed before November 2017 that she had taken over the role of Dr. Hasnain as the sole director of that company.
10In addition to its liability as a guarantor on the other two loans, TMC is liable as the principle debtor on the $50,000 credit facility advanced to it under the Letter Agreement, unless some other defence is available to it.
Were the Letter Agreement of August 2017 and the subsequent guarantees of November 21, 2017 executed under duress and therefore voidable?
11The defendants assert that the Letter Agreement of August 2017 and subsequent guarantees executed in November 2017 were only agreed to under duress. Dr. Hasnain deposes that he “felt there was a gun to my head” and that he had no choice or free will in accepting the bank’s “demands”.
12I am prepared to assume, for the purposes of this motion, that Dr. Hasnain genuinely felt the way he describes. However, duress is not just a question of his state of mind. There is also the question is whether the bank took advantage of its bargaining position in the loan restructuring. A finding of duress requires a finding of illegitimate or undue pressure on the part of the Bank.
13There were legitimate commercial reasons for the bank requiring the loans to be restructured. More importantly, a careful review of the conversations and emails in August and September 2017 reveals that, at its highest, the bank’s “threat” consisted of telling the defendants that the bank would not permit the existing overdraft (already beyond the approved maximum) to increase any further.
14The Bank could have made a demand for payment because these were demand loans. It was free to do so if the financial restructuring was not acceptable but there is no evidence the bank made any formal demand for payment. It simply refused to advance additional credit in August 2017.
15The defendants had more than a week between receiving the Letter Agreement and Dr. Hasnain signing it. It took more than three months after the Letter Agreement was signed for the completion of the documentation to restructure the loans. The defendants’ own lawyer prepared the documents to complete the debt restructuring.
16It was open to the defendants to obtain refinancing elsewhere but there is no evidence they made any real attempt to do so, either at the time of the Letter Agreement or afterwards. The defendants never protested or complained. There is no evidence the feeling of compulsion on Dr. Hasnain’s part persisted when he signed the guarantees in November 2017. He thought about approaching another bank but did not follow through on that option.
17A contract obtained through duress is voidable, not void. The defendants took no steps to avoid their obligations under the Letter Agreement after it was signed. To the contrary, they continued to make use of and enjoy the credit facilities for a year and a half after the Letter Agreement was signed. The defendants, through their conduct, affirmed the contract when no longer subject to the professed duress Dr. Hasnain and Marta Bienek felt in August and September 2017 by making use of and receiving the benefit of the credit facilities provided by the plaintiff.
18When the Bank made demand for payment in February 2019 there was no protest of liability. The defendants only requested time to refinance the debt elsewhere. The assertion of duress was never mentioned by any of the defendants until the delivery of the statement of defence in 2019.
19The material filed on this motion allows the court to conclude there is no merit to the defence founded on duress.
Is insurance available for the outstanding debt, and if so should the motion for summary judgment be denied on that basis?
20The defendant Dr. Hasnain does not know that there is insurance available to the plaintiff which could satisfy the debt owing, in whole or in part, but he asserts a belief that there is. The basis of that belief is that “as a condition of advancing credit [on the original loan years earlier] HMPC was required to maintain insurance through TD which I understood insured both my life and my continued employment”. He states that he does not have copy of any insurance policy and has produced no ancillary documents relating to any insurance. He simply deposes “the insurance policy is within TD’s control but TD has never produced it”.
21For its part, the plaintiff responds “there is no insurance policy held by the Bank under which TD Bank may make a claim for payment of the credit facilities. The insurance policy referred to the statement of defence is a life insurance policy on Hasnain’s life”.
22I can only conclude that there may be a life insurance policy. Even assuming there is, it is not relevant to the present liability of the defendants since Dr. Hasnain is alive. There is no evidence of any other insurance.
23Insurance would only be available with the consent of Dr. Hasnain as the insured and surely if there was insurance to protect against his loss of employment, he would be able to provide some evidence that such insurance was ever taken out. The fact that it may have been a “condition” in the paperwork for the prior financing for TMC’s predecessor begs the question of whether that condition was ever fulfilled, and, if so, who holds the policy.
24It would surely be in the plaintiff’s best interests, not just the defendants, to pursue the possibility of income protection insurance if it exists, and to make a claim if there is any policy in place. The submission by Dr. Hasnain that the bank is hiding an income protection insurance policy to enable it to garner a “windfall” makes no sense because the Bank would surely have to give credit against the amount owing for any insurance funds it recovered. The only logical inference is that it is in the Bank’s interests to encourage and enable Dr. Hasnain to make a claim if possible.
25Absent any evidence of the existence of income protection insurance or any corroborating documentation from Dr. Hasnain, there is no reason to believe the evidence at trial would be any different from the evidence now before the court. There is no basis upon which to conclude that such insurance is in fact available. Moreover, any insurance, including life insurance, is only relevant to the subsequent repayment of the debt and not the present liability for payment.
Did the plaintiff afford the defendants a reasonable opportunity to satisfy the debt?
26The loans are all payable on demand. The plaintiff demanded payment February 7, 2019 after learning Dr. Hasnain had been suspended from practicing medicine the previous month, an event specifically identified as a default in the terms of the Letter Agreement. The defendants’ business manager requested time to pay and Marta Bienek herself sent emails requesting time to pay. The plaintiff was assured that the obligation would be satisfied by July 31, 2019 or “at maximum” five months after the demand for payment. It was not.
27The defendants had a reasonable opportunity to satisfy the demand for payment.
Conclusion
28Summary judgment in favour of the plaintiff is the most efficient way to determine liability on the facts of this case because the court has all the necessary evidence to determine that there is no merit to any of the defences raised.
29Judgment is granted against each defendant for the full amount of their respective debts. If counsel are unable to agree on the breakdown for the individual loans or the interest calculations they may make written submissions or submit draft judgments for my consideration.
30The terms of the Letter Agreement provide a contractual entitlement to costs on a scale effectively amounting to substantial indemnity. If counsel are unable to agree on the quantum of costs payable to the plaintiff, brief written submissions may be made within the next 30 days.
Justice D. R. Aston
Date: November 25, 2020