COURT FILE NO.: CV-20- 00652550-0000
DATE: 20210531
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Canada Grace Park Ltd.
Plaintiff
– and –
Peter Grigoras and Atlas Healthcare (Brampton) Ltd.
Defendants
Paul H. Starkman, for the Plaintiff
Jeffrey A. Kaufman, for the Defendants
HEARD: May 26, 2021
JUSTICE M.D. SHARMA
[1] This is a motion for summary judgment brought by the plaintiff, Canada Grace Park Ltd. (“Canada Grace”), seeking judgment on two loans it made to defendant, Atlas Healthcare (Brampton) Ltd. (“Atlas Brampton”). Each loan was for $500,000 plus interest. The plaintiff also seeks an order dismissing the defendants’ counterclaim.
[2] Xing Ou Yang, also known as Jenny O, is the sole director, officer and shareholder of Canada Grace. Ms. Yang is not a plaintiff in this action.
[3] The defendant, Peter Grigoras, is the sole director, officer and shareholder of Atlas Brampton.
[4] There is no dispute that the loans went into default.
[5] Should I grant summary judgment, the only remaining claim by the defendants which I must consider on this motion is the treatment of a $300,000 transfer from Mr. Grigoras to Ms. Yang.
[6] Mr. Grigoras says that transfer represents partial payment on the loans to which he is entitled to a credit as a repayment on the loans, or an equitable set-off. Ms. Yang says it was a personal loan to her and not to her company. She argues this Court should not credit or set-off this $300,000 when granting summary judgment to her company.
I. Background Facts
[7] In February of 2018, Ms. Yang wanted to invest $1 million. She was introduced to Mr. Grigoras by a mutual friend.
[8] On April 10, 2018, two loan agreements for $500,000 each were executed with Canada Grace as the lender, and Atlas Brampton as the borrower. As security for the loan, Mr. Grigoras signed a promissory note on behalf of Atlas Brampton. He also signed a personal guarantee for the loan amounts, guaranteeing the obligations of Atlas Brampton as a principal debtor. I refer to these documents as the Loan Agreements.
[9] The Loan Agreements had identical terms, except one loan had an interest rate of 12 % per annum, and the other loan had a 15% per annum interest rate. Interest was payable every six months.
[10] Article 9 of the loan agreements listed default events. Default events includes default in payment of interest or principal, as well as the appointment of a receiver.
[11] On October 10, 2018, interest payments in the amounts of $30,000 and $37,500 were due with respect to each loan. Whether the $300,000 payment by Mr. Grigoras represented advance payment on these interest charges is in dispute.
[12] On December 3, 2018, Atlas Brampton was put in receivership by Order of Justice Wilton-Siegel. The receivership was discharged on April 1, 2019.
[13] When the Loan Agreements matured on April 9, 2019, payments were not made when due.
[14] As a result, there is no dispute that there have been at least two defaults under the loan agreements – the receivership, and the failure to re-pay the loans when they matured on April 10, 2019.
[15] The plaintiff commenced this action on February 14, 2019. An Amended Statement of Defence was filed on August 22, 2019.
[16] The defendants filed a Statement of Defence on March 14, 2019. It was amended on September 6, 2019 to include a counterclaim.
[17] The defendants’ counterclaim has largely been abandoned or overtaken by a decision in another proceeding involving the same parties heard by Justice David Aston, which was appealed to the Court of Appeal, released on April 9, 2021 (see Atlas v. Canada Grace Park, 2020 ONSC 1861, and Atlas (Brampton) Limited Partnership v. Canada Grace Park Ltd., 2021 ONCA 221 (“Atlas”)). This Court of Appeal decision finally resolves aspects of the defendants’ counterclaim.
[18] Other paragraphs of the defendants’ counterclaim were struck by order of Master Abrams on February 3, 2020.
[19] During oral argument, and in light of the Court of Appeal’s decision, counsel for the defendants advised that the only claim they are now pursuing is credit for the partial repayment of $300,000 on the loans, or an equitable set-off for this amount.
$300,000 Payment
[20] The parties agree that $300,000 was paid by Mr. Grigoras to Ms. Yang; $200,000 on or about July 27, 2018 and $100,000 on August 3, 2018.
[21] However, there is a dispute about the purpose for which these funds were paid. Mr. Grigoras asserts they constituted payment on interest and principal on the loans. Ms. Yang says these funds constituted a new personal loan from Mr. Grigoras to Ms. Yang. As such, Ms. Yang would argue that the first default event under the loan agreements occurred on October 10, 2018, when payment of interest on the loans was due.
[22] Mr. Grigoras’ affidavit states that before payment of interest on the loans were due (i.e. October 10, 2018), Ms. Yang was “making improper demands for payments.”
[23] The reason for these demands, according to Mr. Grigoras’ cross-examination transcript, is that Ms. Yang was very distraught at the time because her family in China needed these funds. This is confirmed in Ms. Yang’s transcript of her cross-examination, where she stated her mother was hospitalized in China. Ms. Yang was also in China and needed the money urgently to pay for her mother’s medical expenses.
[24] On July 27, 2018, Mr. Grigoras arranged for payment of $200,000, which Ms. Yang had asked be deposited to her father’s bank account in China. Mr. Grigoras’ affidavit states that this $200,000 payment included payments of interest ($37,500 and $30,000) coming due under the Loan Agreements on October 10, 2018.
[25] Mr. Grigoras states in his affidavit he arranged to pay this $200,000 through Ms. Shumei Lou, who would deposit it in the bank account of Ms. Yang’s father in China. Ms. Yang confirmed in text messages with Mr. Grigoras (attached to his affidavit), that her father did in fact receive these funds. Ms. Yang does not dispute this.
[26] A letter attached as an exhibit to Mr. Grigoras’ affidavit from Ms. Luo to Mr. Grigoras, dated July 28, 2018, documents this transaction. It shows that Mr. Grigoras entered into a loan agreement with Ms. Luo in order to pay these funds to Ms. Yang. The letter states:
“As I Understand these funds is part of your partial payment to Jenny O [Ms. Yang] for her own investment with Atlas; however this is the subject of our loan agreement between yourself and myself with terms and conditions set-out with the obligation that you will repay this fund back to me as per our loan agreement attached from your own sources..
Therefore please acknowledge that the two hundred thousand dollars fund has been advanced as per your and Jenny O instructions and consequently the Loan Agreement attached has been enacted and in full force for repayment as scheduled.”
[27] Mr. Grigoras and Ms. Luo signed this letter. The content of the letter supports the conclusion that it was Mr. Grigoras’ intention that this $200,000 was a partial repayment of the defendants’ loan obligations. I note, however, that Ms. Yang was not copied on this letter, nor did she sign it. It does not speak to what Ms. Yang’s understanding or intention was with respect to this $200,000 payment.
[28] During his cross-examination, Mr. Grigoras confirmed he did not actually pay the $200,000 to Ms. Luo to forward to Ms. Yang’s father’s bank account. Instead, he borrowed the funds from Ms. Luo who invested in his company. In my view, nothing turns on this since it is Ms. Yang’s evidence that the money was received, and the letter between Mr. Grigoras and Ms. Luo make clear that Mr. Grigoras had a debt to Ms. Luo now for $200,000.
[29] Mr. Grigoras further states in his affidavit that, in August of 2018, Ms. Yang asked him to pay $100,000 to her friend Lucy’s bank account. Payment of this money was confirmed via text messages between Mr. Grigoras and Ms. Yang on August 3, 2018. The payment of these funds is not disputed.
[30] During his cross-examination, Mr. Grigoras explained why he paid these funds to Ms. Yang:
“Q: …. So, your version of story is that the payments of $200,000 on about July 27th, 2018 to Jenny personally would apply to as an interest repayment and, you know, partially of principal to the $1,000,000 loan to Atlas Brampton. That’s your version of story, correct?
A: Correct, and there were discussions, extensive discussions with her. And obviously, she said that, “I need the money now as soon as possible. Please help me because I have family issues”. That’s why the funds were wired straight to the family members. I did everything possible in the books to assemble these funds, to give it to her. And I was very clear with her that this goes against the cost of this interest accrued.”
[31] Ms. Yang states that on October 21 and 29, 2018, she sent emails to Mr. Grigoras demanding payment on the interest, pursuant to the loan agreements, but did not receive a response.
[32] On his cross-examination, Mr. Grigoras stated that he did not reply to these emails. He also confirmed that he had no written document with respect to the $300,000 paid to her. He says “it was all verbal” and the product of “many discussions, and many agreements, many agreements verbal.”
[33] His affidavit and his answers on cross-examination make clear that from Mr. Grigoras’ perspective, the $300,000 payment was pre-payment on the interest and partial payment of the principal of the loan.
[34] From December 24, 2018 to February 12, 2019, there were several further demands for payment by Ms. Yang’s counsel.
[35] In Ms. Yang’s reply affidavit, she states that the two payments of $200,000 and $100,000 were personal loans from Mr. Grigoras to Ms. Yang, and are not related to the loans from Canada Grace to Atlas Brampton. She states the two payments do not represent interest payable on the loan agreements.
[36] On her cross-examination, Ms. Yang confirmed receipt of $300,000 from Mr. Grigoras. She stated it was “a loan between two private individuals, we didn’t have any loan agreements.” She stated there were no specific term to this loan and that she and Mr. Grigoras “didn’t talk about interest.” She said, “[i]t was a private loan between myself and Peter, and in terms of the term, it was up to our negotiation.”
[37] When asked if she had paid him back yet, Ms. Yang said:
“No, I didn’t have money to pay him back. He borrowed one million dollars from my company and my company cannot operate. Sorry, you don’t have to translate this, but anyways, I didn’t pay him back.
II. Law and Legal Principles
[38] Rule 20.04(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“Rules”) sets out the test for obtaining relief on a motion for summary judgment: “The court shall grant summary judgment if, (a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence…”
[39] In determining whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and a judge may weigh evidence, evaluate credibility of a deponent, and draw any reasonable inferences from the evidence, unless it is in the interests for such powers to be exercised only at a trial (see r. 20.04(2.1) of the Rules).
[40] As stated in Hryniak v. Maudlin, 2014 SCC 7 (“Hryniak”) 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 proportionate, more expeditious and less expensive means to achieve a just result.”
[41] In Hryniak, the Supreme Court of Canada went on to establish a two-step process to resolve motions for summary judgment. The Court stated at para 66:
“On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a).
If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.”
[42] On a summary judgment motion, each party may not rest on allegations in its pleadings. Each party must “put its best foot forward” or “lead trumps or risk losing.” The court is entitled to assume that the record on a motion for summary judgment contains all the evidence the parties would present at trial (see Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200 at paras 26 and 27).
III. Issue in Dispute
[43] In this case, there is no dispute with respect to the defendants’ default on the loan agreements. There were at least two defaulting events. Atlas Brampton went into receivership and, most certainly, the final payment of interest and principal on the loans has not been made.
[44] With respect to the defendants’ counterclaim, it has been abandoned except their claim for a credit or equitable set-off for the $300,000 paid by Mr. Grigoras to Ms. Yang. If the defendants through their counsel had not made this clear during oral argument, I would have had no reservation in dismissing the defendants’ counterclaims since the defendants have not led any evidence about these counterclaims in their responding motion material. However, they have led evidence about the $300,000 payment by Mr. Grigoras.
[45] As a result, I am satisfied that I may issue summary judgment in favour of the plaintiff for the principal and interest owing under the Loan Agreements, without using my expanded powers under rule 20.04 (2.1). However, this does not end the matter.
[46] There is no dispute that Mr. Grigoras paid $300,000 to Ms. Yang. The only remaining issue on this motion is whether the $300,000 payment constituted a partial re-payment on the loans made by Canada Grace to Atlas Brampton, and therefore should be deducted from the judgment amount, or whether the transfer of these funds established a new personal loan from Mr. Grigoras to Ms. Yang.
IV. Analysis
[47] For the reasons set out below, I find that plaintiff is entitled to judgment for the principal and interest outstanding on the Loan Agreements, less the $300,000 payment made by Mr. Grigoras to Ms. Yang. In so doing, I make a finding that the $300,000 constituted a pre-payment on the loan as expressly authorized under the Loan Agreements. Accordingly, it is not necessary for me to decide whether the $300,000 should be deducted as an equitable set-off.
[48] The issue in dispute arises from contradictory evidence in affidavits and the transcripts of the cross-examinations of Ms. Yang and Mr. Grigoras. As a result, I cannot determine this motion within the first step of the Hyrniak analysis, and without exercising my authority under r. 20.04 (2.1) or 20.04 (2.2).
[49] I did consider conducting a mini-trial under rule 20.04 (2.2) and receiving viva voce evidence from Ms. Yang and Mr. Grigoras on this issue. I decided against it because:
[50] The characterization of the $300,000 payment has been addressed in the affidavits of Ms. Yang and Mr. Grigoras, and it was a principal subject of their cross-examinations. As such, I hold significant doubt that I would glean anything further from the witnesses testifying on this issue, including an assessment of their credibility, if a mini-trial were conducted.
[51] There is no dispute that the $300,000 was paid. Ms. Yang acknowledges it as a liability, and Mr. Grigoras agrees he is to be credited this amount. It is only a matter of when the defendants would be credited this amount from Ms. Yang (if a personal loan) or Canada Grace (if a repayment on the loan agreements) – now or in some subsequent proceeding in the proceeding. It makes little sense to have a mini-trial or further litigation, especially in light of the proceedings involving these same parties that have already been heard in this court and the Court of Appeal, when the parties have already put their best foot forward and it is possible to achieve a fair and just result on that evidence without viva voce testimony. I note that the burden rests with Canada Grace and Ms. Yang to demonstrate that this payment was a personal loan.
[52] Finally, as I explain, a just and fair result can be obtained through weighing the evidence and drawing reasonable inferences, thereby achieving a timely and proportionate resolution of this litigation.
[53] Plaintiff’s counsel argues it would be contrary to the express language of the contract to treat the $300,000 as a pre-payment on interest on the load. He cited Article 4.04 which reads:
The Borrower may prepay at any time all or from time to time any part or parts of the principal balance of the Loan Amount then outstanding without notice, bonus or penalty.
[54] He argues that this section does not permit an early interest payment – only a payment on principal. Therefore, the July and August 2018 payments cannot be considered as pre-payment of interest. An express written amendment to the contract would be needed to permit an early interest payment, as required under article 11.07, which did not occur.
[55] I agree that the contract terms govern. There has been no written amendment to the contract. But since it is not disputed that the defendants are in default, nothing turns on whether the payment constituted payment on the interest. What is in issue is what amount is owing now that the Loan Agreements are in default.
[56] Article 4.04 expressly allows the defendants to make early payment on principal, “at any time all or from time to time any part or parts.” I find that this is what the $300,000 payment represents.
[57] Given the evidence, and on a balance of probabilities, I find it is more reasonable and commercially sensible to draw the inference that the $300,000 payment constituted repayment of the loan agreements. The alternative is to infer that a new debt obligation arose by way of a personal loan agreement, which by Ms. Yang’s evidence, had no terms and was not put down to writing.
[58] To infer the creation of an unwritten contract for the significant sum of $300,000, especially among parties who are in the business of investing, has little or no air of reality. It would undoubtedly spawn further litigation over a debt that Ms. Yang has admitted owing to Mr. Grigoras. Moreover, it would be a commercially unreasonable result. In light of the circumstances of the parties’ relationship and their clear contractual relationship, I prefer to draw a commercially sensible inference that is consistent with that contractual obligation.
[59] The plaintiff also argues that the payment of the $300,000 was not made to Canada Grace, but to Ms. Yang. Since the loan obligation was with Canada Grace, the payment should have been made to this separate corporate entity as required under the Loan Agreements. The Loan Agreements require payment to Canada Grace at an address which also happens to be Ms. Yang’s home.
[60] I find that, on a balance of probabilities, it is reasonable to infer that the payment was made to Canada Grace. Ms. Yang provided express instructions on where to make payment – the $200,000 to a bank account in China that belonged to her father, and the $100,000 to a person named Lucy. Pursuant to those directions, money was wired. It was not paid in cheque or a bank draft to either Ms. Yang or Canada Grace.
[61] Ms. Yang is the President and sole Director of Canada Grace, and on her cross-examination, she also confirmed she is the sole shareholder of Canada Grace. The evidence is that Canada Grace operates out of Ms. Yang’s home. There is no one else who can provide payment instructions, other than Ms. Yang.
[62] I also cannot ignore, as Ms. Yang stated on her cross-examination, that these funds were urgently needed in China to address costs associated with her mother’s hospitalization. Mr. Grigoras’ evidence is that he “did everything possible in the books to assemble these funds, to give it to her.”
[63] It would be manifestly unfair to fault the defendants for following payment instructions directed by the sole director, officer and shareholder of Canada Grace, which instructions were followed to assist Ms. Yang. The Promissory Note requires payment “at the address of the Lender”. Surely, it would not have benefited Ms. Yang’s personal family emergency if Mr. Grigoras strictly adhered to the payment obligations in the Loan Agreements and delivered a cheque to Ms. Yang’s home in Toronto. Although this is what plaintiff’s counsel argued should have been done if these funds were truly a repayment under the loan agreements.
[64] Finally, the plaintiff takes issue with the fact that the defendants are only now saying, just prior to this motion, that the $300,000 payment amounted to a partial repayment of the loans or that an equitable set-off should be applied to their credit. Beginning in October of 2018, the defendants had opportunity to state their position in writing when Ms. Yang and her lawyer made several demands for payment on the interest, but no written response from Mr. Grigoras was received in which he stated this was a repayment.
[65] This argument, in my view, has little weight. The defendants made mention of the $200,000 and $100,000 payments arranged by Mr. Grigoras at the request of Ms. Yang in their initial Statement of Defence, dated March 14, 2019. Paragraph 7 states that the $200,000 payment included the original interest payments that were due. In addition, at Mr. Grigoras’ cross-examination on May 6, 2021, both he and his lawyer expressly stated that the funds constituted a repayment of the loan under Article 4.04. While the evidence of Mr. Grigoras is that he did not respond in writing to Ms. Yang, he had many discussions with her about it. Finally, there is nothing in the loan agreements which requires that notice of prepayment be delivered. In fact, Article 4.04 states a prepayment may be made “without notice”.
[66] Accordingly, I find from weighing the evidence and making inferences from the evidence submitted on this motion, I am able to make a just and fair decision on the genuine issue in dispute in this summary judgment motion such that a trial is not required. It is in the interests of justice to do so. The same parties have already been in protracted litigation in this Court and the Court of Appeal, and a determination of this issue at trial is not required and would not serve the goals of timeliness, affordability and proportionality.
[67] In the result, I find that:
i. the $200,000 payment on principal was made on July 27, 2018 to Canada Grace by the defendants, and this payment shall be applied equally against the principal amounts owing under the Loan Agreements as of that date (i.e., $100,000 pre-payment of principal on each loan on that date).
ii. the $100,000 payment on principal was made on August 3, 2018 to Canada Grace by the defendants, and this payment shall be applied equally against the principal amounts owing under each loan agreement as of that date (i.e., $50,000 pre-payment of principal on each loan on that date).
iii. the defendants’ counterclaim is dismissed.
[68] The parties also made arguments on whether or not an equitable set-off would apply if I were to find that the $300,000 payment constituted a personal loan between Ms. Yang and Mr. Grigoras. Since I have found that the $300,000 payment constituted a repayment of the principal of the loans to Canada Grace as authorized under Article 4.04 of the loan agreements, it is not necessary for me to address this issue.
V. Order
[69] Canada Grace is granted judgment in the amount of
i. $350,000 with respect to the first loan agreement dated April 10, 2018, with pre- and post-judgment fixed at 12% per annum, and determined with reference to the dates when the pre-payment on the principal was made as found by this Court, and
ii. $350,000 with respect to the second loan agreement also dated April 10, 2018, with pre- and post-judgment fixed at 15% per annum, and determined with reference to the dates when the pre-payment on the principal was made as found by this Court.
VI. Costs
[70] The parties are encouraged to agree upon costs for this motion. If the parties are unable to agree, they may make brief written submissions to me (maximum three pages double-spaced, with an attached bill of costs). The plaintiff may have 14 days from the release of this decision to provide its submissions, with a copy to the defendant. The defendant shall have a further 14 days to respond. The plaintiff shall have a further 7 days for a reply, if any.
Justice Mohan D. Sharma
Released: May 31, 2021
COURT FILE NO.: CV-20- 00652550-0000
DATE: 20210531
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Canada Grace Park Ltd.
Plaintiff
– and –
Peter Grigoras and Atlas Healthcare (Brampton) Ltd.
Defendants
REASONS FOR JUDGMENT
M.D. Sharma J.
Released: May 31, 2021