Court File and Parties
COURT FILE NO.: CV-19-629381 DATE: February 12, 2021 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: LISHENG CHENG AND: PETER GRIGORAS
BEFORE: J.E. Ferguson J.
COUNSEL: Paul H. Starkman, for Lisheng Cheng Jeffrey A. Kaufman, for Peter Grigoras
HEARD: December 2, 2020
Revised Endorsement
[1] This motion is for:
(i) summary judgment against Peter Grigoras (“Mr. Grigoras”), in the amount of $1,200,000;
(ii) pre-judgment interest at the rate of 12 percent per annum on the sum of $1,200,000 from January 16, 2017 to the date of judgment pursuant to the subscription agreement; and
(iii) post-judgment interest at 12 percent per annum pursuant to the subscription agreement.
Summary Judgment
[2] The court shall grant summary judgment if satisfied that there is no genuine issue requiring a trial with respect to a claim or defence. [1]
[3] 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. [2] This will be the case when the process (i) allows the judge to make the necessary findings of fact; (ii) allows the judge to apply the law to the facts; and (iii) is a proportionate, more expeditious and less expensive means to achieve a just result. [3]
[4] On a motion for summary judgment, each party is expected to put its best foot forward. While the onus is on the moving party to demonstrate that there is no genuine issue for trial, the responding party must refute the moving party’s evidence and cannot rely solely on allegations or denials. In this way, the responding party must “lead trump or risk losing”. [4]
[5] The court is entitled to assume that the parties have respectively advanced their best case and that the record contains all the evidence that the parties will respectively present at trial. [5] Summary judgment motions are decided by evidence of the facts and by inferences drawn from those facts. They cannot be decided by speculation about the facts. [6] The responding party may not rely on the prospect of additional evidence that may be tendered at trial, even where that party is self-represented. [7]
[6] Mr. Cheng submits that there is no genuine issue for trial. The only matter to be resolved is the interpretation of the guarantee agreement, and there is no dispute about the words used. While Mr. Grigoras submits that there are issues of credibility to be determined, Mr. Cheng submits that he has failed to specify any of the issues he is referring to or which witnesses the court needs to hear from.
[7] Mr. Grigoras submits that justice requires the court review a more fulsome evidentiary record regarding Mr. Cheng’s investment and the repayment extensions. He submits that the court needs to hear from witnesses on both sides, as there are genuine issues of credibility, exacerbated by the fact that Mr. Cheng does not speak English. At the motion, Mr. Grigoras’ counsel submitted that neither Mr. Cheng nor Mr. Grigoras have yet submitted all the evidence that would be germane to a trial.
[8] I agree with Mr. Cheng. This is an appropriate summary judgment motion. There are no issues of credibility. Mr. Cheng has put his best foot forward. Mr. Grigoras has not led trump and cannot rely on the prospect of additional evidence.
Background
[9] Mr. Grigoras is the sole officer, director, and shareholder of Atlas Healthcare (Richmond Hill) Ltd. (“Atlas Ltd.”). Atlas Ltd. is the general partner of Atlas (Richmond Hill) Limited Partnership (“Atlas Richmond Hill”). Lisheng Cheng (“Mr. Cheng”) is a resident of Shanxi, China and an investor in Atlas Richmond Hill. Mr. Cheng claims that Mr. Grigoras owes him $1.2 million plus interest and costs based on a guarantee agreement executed as security for his payment to Atlas Richmond Hill.
[10] Mr. Grigoras and Mr. Cheng were introduced in China by an immigration consultant. Mr. Grigoras indicated that he could assist with Mr. Cheng’s immigration to Canada if Mr. Cheng invested in Atlas Richmond Hill, which was constructing a medical centre in Richmond Hill, Ontario (the “project”). On January 16, 2014, Mr. Cheng entered into the subscription agreement with Atlas Richmond Hill and subsequently transferred $1,000,000 for 1000 units of Atlas Richmond Hill. The subscription agreement indicated that Mr. Cheng’s investment would be repaid with interest within three years, for a total of $1,200,000.
[11] On January 16, 2014, the same day that the subscription agreement was signed, Mr. Cheng and Mr. Grigoras entered into the guarantee agreement. The guarantee agreement was drafted by Mr. Grigoras’ lawyer and reads, in part, as follows:
2.01 Guarantee. Subject to the terms and conditions herein contained, the Guarantor hereby unconditionally and irrevocably guarantees payment to the Creditors of all the Indebtedness with interest heron from the date of demand for payment at the rate set out in Section 2.05.
2.02 Nature of Guarantee. The Guarantee shall be a continuing guarantee of all the Indebtedness and shall apply to and secure any ultimate balance due or remaining unpaid to the Creditors, or any one of them.
2.03 Liability Not Lessened or Limited. Subject to the provisions hereof, the liability of the Guarantor under this guarantee agreement shall be absolute, unconditional and irrevocable irrespective of, and without being lessened or limited by:
(a) any lack of validity, legality, effectiveness or enforceability of the subscription agreement;
(b) the failure of the Creditors, or any one of them:
(i) to assert any claim or demand or to enforce any right or remedy against the Debtor or any other person (including any other guarantor) under the provisions of the subscription agreement or otherwise, or
(ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any of the Obligations;
(c) any amendment to, rescission, waiver or other modification of, or any consent to any departure from, any of the terms of the subscription agreement or any other guarantees or security;
(d) the loss of or in respect of or the unenforceability of any other guarantee or other security which the Creditors may now or hereafter hold in respect of the Obligations, whether occasioned by the default of the Creditors or otherwise; or
(e) any other circumstance (other than final payment in full of all Obligations) which might otherwise constitute a defence available to, or a legal or equitable discharge of, the Debtor, any surety or any other guarantor.
Any Obligation which may not be recoverable from the Guarantor as a guarantor shall be recoverable from the Guarantor as principal debtor in respect thereof.
2.04 Demand. To the extent that any Creditor has not been repaid the Indebtedness by the Debtor within ninety (90) days following the third anniversary after such Creditor’s delivery to the Debtor if all its deliverables under the subscription agreement which include (i) a signed copy of the subscription agreement, (ii) a certified cheque, bank draft or electronic wire transfer (details of which are outlined in Schedule “E” of the subscription agreement) in an amount equal to the Aggregate Subscription Amount, payable to (a) Atlas Healthcare (Richmond Hill) Ltd. or (b) Denis Grigoras Law Office, in trust, the Partnership’s legal counsel, (iii) a properly completed Particulars of the Subscriber Form in the form attached to the subscription agreement as Schedule “A” and if applicable “Schedule B,” and (iv) for subscribers governed by the securities laws of the United Kingdom, a properly completed Additional Representations, Warranties and Covenants of Subscribers Resident in the United Kingdom attached to the subscription agreement as Schedule “D” (collectively, the “Deliverables”), the Guarantor shall pay to such Creditor on demand the balance of the Indebtedness owed to such Creditor, which amount shall bear interest on the amount outstanding from time to time in accordance with Section 2.05 hereof.
2.05 Interest. The annual rate of interest payable by the Guarantor from the date of demand shall be 12.00% non-compounded, calculated monthly.
2.06. Maximum interest rate. Notwithstanding the provisions of Section 2.05, in no event shall the aggregate “interest”, as that term is defined in s. 347 of the Criminal Code, R.S.C. 1985, c. C-46, as the same may be amended, replaced or re-enacted from time to time, exceed the effective annual rate of interest on the “credit advanced,” as defined therein, lawfully permitted under that section. The effective annual rate of interest shall be determined in accordance with generally accepted actuarial practices and principles over the term of this agreement and, in the event of dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Creditor shall be conclusive for the purposes of such determination.
2.07 Enforcement. In the event and to the extent of non-payment of the Indebtedness by the Debtor within ninety (90) days after the third anniversary of a Creditor’s Deliverables, such Creditor may, by notice of demand to the Debtor and to the Guarantor, declaring that all unpaid amounts of the Indebtedness of the Debtor to the Creditor may forthwith collect from the Guarantor the total amount hereby guaranteed and may apply any sum so collected against the Indebtedness. A written statement of the Creditor as to the amount remaining unpaid to the Creditor at any time by the Debtor shall, if agreed to by the Debtor, be conclusive evidence and shall, in any event, be prima facie evidence against the Guarantor as to the amount remaining unpaid to the Creditor at such time by the Debtor. Each Creditor may act individually and need not act collectively to enforce any Indebtedness it is owed.
2.08 Limitation of liability. Notwithstanding any other provision hereof, the liability of the Guarantor hereunder shall be limited to the amount of $1,200,000.00 for every $1,000,000.00 advanced by the Creditors, or any one of them, calculated on a pro rata basis together with interest from the date that is ninety (90) days following the third anniversary after the Creditor’s delivery of its Deliverables calculated at the rate of 12.00% per annum non‑compounded, calculated monthly.
2.09 Limited recourse. Notwithstanding any other provision hereof, the Guarantee is granted by the Guarantor to the Creditors, and each one of them, for the sole purpose of enabling the Creditors to obtain an effective security interest in and to the Guarantor’s assets listed in Appendix “A” (the “collateral”) and, notwithstanding any other provisions hereof:
(a) the liability of the Guarantor to the Creditors, or any of them, hereunder is limited to the extent such liability (if any) is required to permit such Creditors to realize upon the collateral;
(b) the Creditors, or any one of them, shall not be entitled to sue or commence any action against the Guarantor to recover any sum owing by the Guarantor to the Creditors, or any of them, pursuant to the provisions hereof unless such suit or action is necessary to permit such Creditor(s) to realize upon the collateral; and
(c) the sole recourse of the Creditors, or any of them, against the Guarantor hereunder shall be with respect to the collateral and the rights and remedies of the Creditors hereunder are expressly limited to the realization by the Creditors upon the collateral or any amounts received upon the realization thereof, and the Creditors shall not under any circumstances have right to payment from the Guarantor or against any of the other property or assets of the Guarantor.
Issues
(i) Is the guarantee limited or unlimited?
(ii) Is the guarantee contingent on completion of construction?
(iii) Is this action an abuse of process considering the Court of Appeal proceedings?
(iv) Did Mr. Cheng make a proper demand?
Issue 1: Is the Guarantee Limited or Unlimited?
[12] Appendix A of the guarantee agreement is signed by Denis Grigoras, a notary public and Mr. Grigoras’ son. It is titled “Notarial Certificate of Guarantor’s Personal Assets” and states that it is a “personal net worth statement of the principal developer, Peter Grigoras, comprising the list of assets that are being personally guaranteed by him”.
[13] Mr. Cheng submits that he contacted representatives of Atlas Richmond Hill in January of 2017, when his investment was to be repaid, and was told that payment would be delayed. By July of 2018, his investment had still not been repaid. He subsequently returned to Toronto, where he met with Mr. Grigoras and Hailey Qiang (“Ms. Qiang”), the Vice President of Atlas Global Healthcare Ltd., on August 2, 2018. An associate of Mr. Cheng, Jun Li, was also in attendance and took an audio recording of this meeting. Mr. Cheng was told that Atlas Richmond Hill was dealing with withholding tax issues related to Mr. Cheng’s foreign investments and was seeking a commercial loan. Ms. Qiang advised that repayment of Mr. Cheng’s investment would be delayed for half of a year.
[14] Mr. Cheng submits that Atlas Richmond Hill has defaulted on the security agreement and wants to realize on Mr. Grigoras’ guarantee. Mr. Cheng submits that Mr. Grigoras’ personal guarantee is unlimited and unconditional. Mr. Grigoras submits that his liability is limited by s. 2.09 to collateral listed in Appendix A (the “collateral”).
[15] Mr. Cheng submits that Mr. Grigoras’ guarantee is unlimited and continuing. He relies on the language of s. 2.01 (“the Guarantor hereby unconditionally and irrevocably guarantees payment”), s. 2.02 (“The Guarantee shall be a continuing guarantee of all the Indebtedness”), and s. 2.03 (“the liability of the Guarantor under this guarantee agreement shall be absolute, unconditional and irrevocable”). He submits that s. 2.03 in particular contains clear language that the guarantee is not limited.
[16] Mr. Grigoras submits that 2.09 provides the clear answer with the use of the phrase “notwithstanding any other provision hereof” and as a result the guarantee is limited to the collateral in Appendix “A”.
[17] I agree with Mr. Grigoras. There is no ambiguity in this contract. The contract is express and states that 2.02 and 2.03 are subject to other terms and 2.09 operates “notwithstanding any other provision hereof”. The assets listed in Appendix “A” are the collateral which in the section repeats “notwithstanding any other provisions thereof”. This guarantee is not an unlimited and unconditional guarantee.
Issue 2: Is the guarantee contingent on the completion of the construction?
[18] Mr. Cheng submits that the idea that his claim is contingent on the completion of the project has no merit. The guarantee agreement is unambiguous in this regard and the term sheet referenced by Mr. Grigoras is not related to the terms of the guarantee agreement. Mr. Cheng also submits that Mr. Grigoras admitted that the guarantee agreement does not contain a provision that would make it contingent on the completion of construction:
Q 78. No, but, sir, in your...okay, I am not going to argue with you, but there is no paragraph in here, in these agreements, in the guarantee that makes your liability contingent on completion of construction. And if that were the case, right, then all of the events of default referred to in the guarantee would be nebulous, it would be nothing. Right? Because you are saying, as is the case, Atlas Richmond Hill...correct me if I am wrong, you are saying Atlas Richmond Hill could be in receivership, which it has been since December 3, 2018, and that is no longer an event of default.
A. I am not saying that, no, sir.
[19] It is true that Mr. Grigoras and Ms. Qiang told Mr. Cheng that one of the reasons payment was delayed was because they were waiting on a commercial loan, which would come once the project was completed. However, it is not fair to say that Mr. Cheng agreed not to be repaid under the guarantee agreement until construction was completed. At best, Mr. Cheng tacitly agreed to extend the repayment period during the August 2, 2018 meeting, but there is no evidence that he agreed that his rights under the guarantee agreement were tied to construction.
[20] I also agree with Mr. Cheng that the term sheet is not related to the guarantee agreement. The term sheet sets out that it will take three years to complete construction on the project but that “[a]ctual events or results could differ materially from the forward-looking statements and expectations herein.” Further, Mr. Cheng notes in his own affidavit that “[t]he subscription agreement requires Atlas Richmond Hill to pay the principal with the interest for a total for $1,200,000.00 after three (3) years or by January 16, 2017, which is the time period to complete the construction of a medical/surgical centre”. But the guarantee agreement clearly applies when “any Creditor has not been repaid the Indebtedness by the Debtor within ninety (90) days following the third anniversary after such Creditor’s delivery to the Debtor of all its deliverables under its subscription agreement”. Whether or not the subscription agreement is tied to construction, the guarantee agreement is tied to a fixed date.
[21] This guarantee is not contingent on the completion of the construction.
Issue 3: Did Mr. Cheng make a proper demand?
[22] Mr. Cheng submits that he made numerous demands from 2017 to 2019, including one at the August 2, 2018 meeting. He also submits that his statement of claim from October of 2019 constitutes demand.
[23] Mr. Grigoras submits that Mr. Cheng has not made any demand on the guarantee agreement and the guarantee is not enforceable because Mr. Cheng agreed to extend the term of repayment. The August 2, 2018 meeting did not constitute a demand, particularly because Mr. Cheng agreed that the indebtedness would extend and be due once the project was completed. He also submits that any demands that may have been made were with the debtor company pursuant to the subscription agreement and not with Mr. Grigoras, as required under the guarantee agreement.
[24] I agree with Mr. Cheng. The submissions of Mr. Grigoras are just an attempt to get around his guarantee. He made a proper demand at the August 2, 2018 meeting. Other demands were made between 2017 to 2019. The statement of claim was served in October of 2019. During his cross‑examination Mr. Grigoras refused to answer whether a statement of claim is a demand or not. I draw an adverse interest from that silence. I find that a demand was made.
Issue 4: Is this action an abuse of process considering the Court of Appeal proceedings?
[25] Mr. Cheng submits that the issue before the Court of Appeal does not involve any parties to this action and is irrelevant to the personal guarantee of Mr. Grigoras. The asset in question is not owned by Mr. Grigoras and has nothing to do with his liability. Mr. Cheng submits that Mr. Grigoras is simply attempting to confuse the issues.
[26] Mr. Grigoras submits that this action has been brought for an improper purpose. Mr. Starkman, counsel for Mr. Cheng, also acts as counsel for another client who has taken steps to take over some of the collateral. Mr. Starkman acted for that other client to foreclose on the collateral before commencing these proceedings, and frustrated the precondition of determining if there is collateral to be realized. Mr. Starkman has brought this action arguing the guarantee agreement contains an unlimited guarantee because it is the only recourse available based on his previous actions.
[27] Mr. Grigoras is trying to divert attention from the issue – his guarantee. Other actions in any other court are simply not relevant nor is the fact that Mr. Starkman acted for another client who has taken steps with respect to the collateral. I do comment that Mr. Starkman appears to be in a position of conflict with respect to two of his clients attempting to realize on the same collateral.
Conclusion
(i) The guarantee is limited to the collateral in Appendix “A”;
(ii) The guarantee is not contingent on the completion of the construction;
(iii) Mr. Cheng made a proper demand; and
(iv) This action is not an abuse of process.
Costs Section
[28] If the parties cannot agree on costs, I am prepared to receive the defendant’s submissions within 20 days and the plaintiff’s responding submissions within 14 days thereafter. The defendant’s response, if any, can be provided within 7 days thereafter. They can be sent by email to my assistant at lorie.waltenbury@ontario.ca.
J.E. Ferguson J. Date: February 12, 2021
Citations:
[1] Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 20.04(2)(a).
[2] Hryniak v. Mauldin, 2014 SCC 7, at para. 4.
[3] Hryniak v. Mauldin, 2014 SCC 7, at paras. 49, 50.
[5] Starcall Wireless Communications Inc v Bell Mobility Inc, 2017 ONSC 2813, at para. 29.
[6] Chernet v RBC General Insurance Co, 2017 ONCA 337, at para. 12.
[7] Jacobson v Skurka, 2018 ONSC 4483, at para. 34; Khan v Krylov & Company, 2019 ONSC 1666, at paras. 60-61.