COURT FILE NO.: CV-19-341

DATE: 2021 07 12

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: GURMANT GREWAL, Plaintiff

AND:

102095 P.E.I. INC., 2151488 ONTARIO INC., and KAMALPREET KHAIRA, Defendants

BEFORE: KURZ J.

COUNSEL: M. Suria, counsel for the Plaintiff

S. Bhangu, counsel for the Defendants

HEARD: May 11, 2021

ENDORSEMENT

Introduction

1This is a motion by the plaintiff, Gurmant Grewal (“Grewal”), for summary judgment against the defendants on both a collateral mortgage (“the mortgage”) and the underlying debt secured by both the mortgage and a promissory note. Grewal claims payment of $470,687.23 plus 1 per cent per month interest and possession of the property secured by the mortgage.

2The defendants originally sought an adjournment of the hearing of this motion on the date that it had long been scheduled to be heard. For reasons given on May 11, 2021, I exercised my discretion not to grant the adjournment and instead to proceed with this motion.

3For the reasons that follow, I find that there is no genuine issue for trial and that the summary judgment process allows the court to reach a fair and just determination on the merits of this action. Accordingly, having heard the arguments of the parties and reviewed their materials, I grant summary judgment to Grewal as set out below.

Background

4Canadian Nectar is a Prince Edward Island (“PEI”) corporation. It develops and sells land in PEI to prospective Canadian immigrants who seek to meet certain immigration standards. Grewal was an original officer, director, and shareholder of Canadian Nectar.

5The personal defendant, Kamalpreet Khaira (“Khaira”), is an immigration consultant and businessman. His brother was an original shareholder in Canadian Nectar. Through his brother, Khaira became involved in Canadian Nectar. At various points, Khaira assumed the role of CFO, CEO, president, and director of Canadian Nectar. Khaira is also the principal and sole shareholder of the two corporate defendants,102095 P.E.I. Inc. (“102 PEI”) and 2151488 Ontario Inc. (“215 Ont.”).

6On or about July 27, 2017, Grewal, 102 PEI, and Canadian Nectar entered into a share purchase agreement (“the SPA”). Under the SPA, Grewal sold his 20 per cent of the shares in Canadian Nectar to 102 PEI for $825,000. The relevant terms of the SPA were as follows:

a. $825,0000 purchase price payable as follows:

i. $60,000 payable upon the execution of the SPA;

ii. $140,000 payable on the closing date;

iii. $125,000 payable three months following the closing date;

iv. $125,000 payable six months following the closing date;

v. $125,000 payable nine months following the closing date;

vi. $125,000 payable twelve months following the closing date; and

vii. $125,000 payable fifteen months following the closing date;

b. The outstanding amounts owing after the closing date would incur interest at 1% per month until the balance is paid;

c. The $625,000 balance of the purchase price after closing to be secured by a mortgage;

d. Grewal shall be released from all liability regarding Canadian Nectar. The exception to that general release was for any damages incurred by Canadian Nectar arising from the adverse events disclosed in Schedule “B” to the SPA. Any such liability would only be in proportion to the percentage of the shares of Canadian Nectar being sold through the SPA (i.e. 20 per cent of the shares); and

e. The SPA would be the entire agreement as between the parties, subject to any written amendments.

7The “adverse events” Schedule “B” of the SPA sets out eight potential claims against Canadian Nectar each of which, if made, would operate as an exception to the SPA’s general release of Grewal. The potential events covered by the adverse events clause that are germane to this action were:

b. Any and all matters pertaining to claims by current investors, suppliers, contractors, employees or associates.

c. Any and all matters pertaining to any claims advanced by investors in the Company [i.e. Canadian Nectar] for such investments including the Maintenance of the Orchard and Fruit Purchase Contracts that occurred prior to the Closing Date.

7. Any and all matters pertaining to any claims advanced by Randeep Panag, pertaining to matters that arose prior to the Closing Date [of the SPA], arising from the actions of the vendor [Grewal] as a Director, Officer or Agent of the Company.

8. Any and all matters pertaining to any claims advanced by Rajeev Chauhan, pertaining to matters that arose prior to the Closing date [of the SPA], arising from the actions of the vendor [Grewal] as a Director, Officer or Agent of the Company.

8The SPA closed on October 2, 2017. As set out above, Grewal received a $60,000 deposit upon the signing of the SPA. On closing, Grewal was provided with $140,000; postdated cheques for the $625,000 balance; and a promissory note for $625,000 that was signed by Khaira in his personal capacity (“the first note”). The first note was payable upon the same terms as those in the SPA.

9The mortgage was granted by 215 Ont. against the property municipally described as 19-2565 Steeles Avenue East, Brampton, Ontario (“the Property”). It was registered on October 11, 2017. The terms of the mortgage included:

a. Principal amount of $625,000;

b. Interest charged at the rate of 1% per month until 60% of the principal sum of $625,000 has been paid to Grewal, “after which the parties agree that the interest rate shall be reduced to a rate agreed upon in writing between the parties”; and

c. Payment to be made in five equal installments of $125,000 plus interest on January 2, 2018, April 2, 2018, July 2, 2018, October 2, 2018 and January 2, 2019.

10Grewal says, without contradiction, that the defendants went into default of their obligations to pay him on April 18, 2018. On January 25, 2019, Grewal initiated this action.

11In or about April 2019, Khaira and Grewal met in a hotel in India, where both were visiting. The meeting came at Khaira’s suggestion. During the meeting, Khaira and Grewal arrived at a further, informal, oral agreement for the payment of the outstanding amounts owing to Grewal. As part of that informal agreement, Khaira personally signed a second promissory note payable to Grewal (“the second note”) on September 29, 2019. Neither party contests that the second note replaced the first note.

12In the second note, Khaira promised to pay Grewal $586,936.38 and interest at 1% per annum. The first $150,000 was due by May 7, 2019, a further $100,000 was due on June 10, 2019, and the $336,936 balance was to be paid on September 15, 2019. The second note contained this term regarding default of payments:

Default in any payment under this Note as aforesaid constitutes default of the whole of the balance outstanding and interest shall accrue from the default until the balance amount accrued interest and legal cost of collection of funds is paid in full.

13As a result of the informal agreement between Grewal and Khaira, this action was held in abeyance for a time. Khaira wanted Grewal to withdraw the action but he refused. Grewal says that as of October 31, 2020, $208,000 was paid towards the debt and that $470,687.23 remained owing. That is the amount, along with interest and costs, that Grewal claims in this motion. The defendants do not question Grewal’s math.

Defences Raised by the Defendants

14Despite being represented by counsel and contrary to r. 20.03(1) and (3), the defendants failed to file a factum for this motion. As such, they failed to provide the court with a written articulation of their argument opposing Grewal’s summary judgment motion. Consequently, I must rely on their statement of defence and the oral arguments of their counsel to determine the details of their defence.

15The defendants’ defence to this action, as pled in their statement of defence, is as follows:

a. Grewal “has not come to this court with clean hands and has not provided true facts and circumstances leading to the registration of the [mortgage]”.

b. “[A]llegations” were made by unspecified persons against Grewal and [former director and officer of Canadian Nectar, Amarjeet] Jatana. These allegations, as described in the statement of defence, are that during the term of Grewal’s “engagement” with Canadian Nectar and another corporation, Canadian National Producers (“National”), he and Jatana “were engaged in embezzlement of funds of the [two] companies.” The pleading continues, citing the further allegation that Grewal and Jatana, “in capacity of directors of the companies [i.e., Canadian Nectar and National] did not act in the best interest of the companies”.

c. Both Grewal and Jatana were removed as directors of Canadian Nectar and National. The two companies “are being audited”.

d. Grewal sold his shares of Canadian Nectar to Khaira “[i]n order for a resolution of the issues which had cropped up after allegations of embezzlement of funds by [Grewal]”.

e. “[I]t was also understood at the signing of the [SPA] that “in case any share holder or investor initiates a claim against the company [Canadian] Nectar or any company of which the Plaintiff was director, vice-president or officer, an amount equivalent to the amount claimed shall be held back from the purchase price by [102 PEI] and shall be released after such claim is finally decided in favour of the Plaintiff.”

f. “On or about November 22, 2017”, another PEI corporation, 101917 P.E.I. Inc. (“101 PEI”), which the defendants described as “one of the investors”, sued Grewal and others for $352,000. After Grewal was notified of the claim, “the parties began to find an amicable resolution of the purchase price of shares in light of the claim filed by [101 PEI]”.

g. The payment of the installments called for in the SPA “was stopped pursuant to the [unspecified] terms of the [SPA]”.

h. Grewal “is not entitled to any amount at this time until” the 101 lawsuit “is decided or settled”.

i. Grewal did not loan any money to the defendants.

j. Grewal is not entitled to “any interest at the rate of 12 per cent compounded monthly”, as he claims.

k. “[T]he payment of installments were [sic] stopped pursuant to the terms of [the SPA]. It is denied that any amount became payable at any time.”

l. “[T]he [mortgage] is subject to the terms of [the SPA] and …the payments have been stopped pursuant to its terms and understanding of the parties.”

m. “The claim of the Plaintiff is either liable to be dismissed or stayed until resolution of the claim [by 101 PEI]”.

16In his oral submissions for this motion, counsel for the defendants, Mr. Bhangu did not argue all of the allegations raised in his client’s statement of defence. He conceded that there is no dispute as to the validity and terms of the SPA and that the defendants owe certain amounts to Grewal under the SPA, mortgage, and promissory note. The issues as he articulated them, are what is actually owing at this time, the applicable interest rate on any amounts owing, and what amount is to be held back on account of the claims of investors.

17Without citing the concepts of legal or equitable set off, Mr. Bhangu argued for an unspecified “holdback” on the amounts claimed by Grewal. Mr. Bhangu cited three grounds for the defendants’ alleged right to hold back payments owed to Grewal:

a. First, he pointed to alleged financial misconduct by Grewal when he was a director of Canadian Nectar.

b. Second, he referred to claims of certain “investors” against Canadian Nectar, for which Mr. Bhangu says Grewal should indemnify the defendants under Schedule “B” to the SPA.

c. Third, Mr. Bhangu argued that 101 PEI’s lawsuit against Grewal and others with respect to a purchase of land from Canadian Nectar at the time that Grewal was a director of Canadian Nectar permitted the defendants to stop payment.

18In addition, the defendants claim that Khaira and Grewal reached an agreement in India that no further interest would be charged once Khaira and his companies paid $200,000 of the amount owing under the mortgage. They offer no written evidence of that alleged agreement; they do not even assert that it was reduced to writing.

Issues

19In any motion for summary judgment, the overarching issue is whether there is a genuine issue for trial. In determining that issue, the court must consider whether summary judgment process allows it to reach a fair and just determination on the merits. Here, that larger issue can be determined in the context of whether the summary judgment process appropriately allows the court to determine the following case-specific issues:

a. Did Grewal commit any misconduct which disentitles him to enforce the mortgage, the SPA, and the second note?

b. Do the defendants have a claim to a hold-back or set-off of the amounts owed to Grewal because of claims by any third parties?

c. If Grewal is entitled to summary judgment, what is the appropriate remedy and interest rate?

Law Regarding Summary Judgment

20This motion is brought under r. 20.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The terms of r. 20.04 are mandatory: the court shall grant summary judgment if it is satisfied that there is no genuine issue for trial with respect to a claim or defence (see also Hryniak v. Mauldin, 2014 SCC 7 (“Hryniak”), at para. 68, and Mega International Commercial Bank (Canada) v. Yung, 2018 ONCA 429 (“Mega International”), at para. 83).

21The principles under which the court makes the determination of a genuine issue for trial are set out by the Supreme Court of Canada in Hryniak, at paras. 44-45, 49-50 and 66.

22There will be no genuine issue requiring a trial if the summary judgment process allows the court to reach a fair and just determination on the merits on a motion for summary judgment. That will be the case when the process (1) provides the court with the evidence required to fairly and justly adjudicate the dispute by making the necessary findings of fact, (2) allows the judge to apply the law to those facts, and (3) is a proportionate, more expeditious, and less expensive means to achieve a just result: Hryniak, at paras. 49, 66.

23The Hryniak approach requires a “broad assessment of the entire record to determine whether summary judgment [is] appropriate or whether a trial would be required”: Pichelli v. Kegalj, 2021 ONCA 445, at para. 12. Despite this “robust approach to summary judgment, the overarching goal remains to have ‘a fair process that results in a just adjudication of disputes’”: Pichelli at para. 23, citing Hryniak at para. 28..

24Each party to a motion for summary judgment has an obligation to “...‘put its best foot forward’ with respect to the existence or non-existence of material facts that have to be tried” (Ramdial v. Davis (Litigation Guardian of), 2015 ONCA 726, 341 O.A.C. 78, at para. 27, citing Papaschase Indian Band No. 136 v. Canada (Attorney General), 2008 SCC 14, [2008] 1 S.C.R. 372, at para. 11).

25The onus for proving that there is no genuine issue for trial rests with the moving party. However, in response to the evidence of the moving party, the responding party may not rest on mere allegations or denials in the party’s pleadings. That party must set out in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial. A self-serving affidavit is not sufficient itself to create a genuine issue for trial in the absence of detailed facts and supporting evidence: Rules of Civil Procedure, r. 20.01(2); Guarantee Co. of North America v. Gordon Capital Corp., 1999 CanLII 664 (SCC), [1999] 3 S.C.R. 423, at para. 31.

26In the oft-repeated maxim of Justice Coulter Osborne, then of the Court of Appeal for Ontario, the responding party to a motion for summary judgment must “lead trump or risk losing”: 1061590 Ontario Ltd. v. Ontario Jockey Club, 1995 CanLII 1686 (ON CA), [1995] O.J. No. 132 (C.A.), at para. 35. The principle was reaffirmed in Ramdial, at para. 28.

27The court is entitled to assume that the record before it is complete, that it contains all of the evidence that a party would present if there were a trial: Broadgrain Commodities Inc. v. Continental Casualty Company (CNA Canada), 2018 ONCA 438, at para. 7, citing Dawson v. Rexcraft Storage & Warehouse Inc., 1998 CanLII 4831 (Ont. C.A.), at para. 17; Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at paras. 27, 33-34, aff'd 2014 ONCA 878, leave to appeal to S.C.C. refused, [2015] S.C.C.A. No. 97; and Tim Ludwig Professional Corporation v. BDO Canada LLP, 2017 ONCA 292, at para. 54.

28Once the moving party discharges the burden of showing that there is no genuine issue for trial, the onus shifts to the responding party. That party must then provide evidence of specific facts showing that there is a genuine issue requiring a trial: Ramdial, at para. 30. An adverse inference may be drawn from a failure to support the allegations or denials in a party’s pleadings: Pearson v. Poulin, 2016 ONSC 3707, at para. 40.

29Under r. 20.04(2.1) the court may exercise enhanced powers on the motion unless it is in the interest of justice to exercise them at trial instead. Those enhanced powers allow the court to weigh the evidence, evaluate the credibility of a deponent, and draw any reasonable inference from the evidence. As Paciocco J.A. wrote for the Court of Appeal for Ontario in Mega International, above, those powers “...are presumptively available to a summary judgment motion judge to use to fairly and justly adjudicate a claim at a motion for summary judgment”: at para. 83; see also Hryniak, at para. 45. However, the court is not required to resort to those powers to make up for a party's evidentiary shortcomings: Broadgrain Commodities Inc., at para. 7.

30Here, the defendants did not argue that the summary judgment process prevents the court from reaching a fair and just determination of the issues. Rather, they argue that judgment should not be granted in light of the alleged misconduct and “holdback” claims summarized above and that the request for summary judgment is effectively premature. If it is to be granted, they challenge Grewal’s arguments about the appropriate interest rate.

Issue No. 1: Did Grewal commit any misconduct which disentitles him to enforce the SPA, the Mortgage and the second note?

31The defendants rely on the alleged financial misconduct by Grewal to justify their failure to make the payments called for in the SPA, the Mortgage and the second note. As set out above, in their statement of defence, the defendants alluded to vague allegations of embezzlement made against Grewal and Amarjeet Jatana (“Jatana”) regarding Canadian Nectar and National as well as Jatana’s removal as an officer and director of Canadian Nectar.

32In his role as an officer and director of Canadian Nectar, Jatana was responsible for its day-to-day operations from November 2013 to August 2016. However, issues arose regarding the propriety of Jatana’s management of Canadian Nectar. In July 2016, Jatana was removed as a director and on August 11, 2016, Khaira was appointed as president of Canadian Nectar. He led a corporate management committee which included Grewal and others.

33Khaira held a number of leadership roles with Canadian Nectar – including CFO, CEO, president, and director – before entering into the SPA and executing the mortgage and first note. That gave him a great deal of control over and knowledge of the workings of Canadian Nectar. In August 2016, Kharia retained an accountant, presumably on behalf of Canadian Nectar, to perform a financial audit of that company. The audit turned up no evidence of financial improprieties under Grewal and Jatana’s watch. At para. 5 of his affidavit, Khaira referred to that audit. He stated that he was attaching a letter from the auditor as Exhibit “A” to his affidavit. But that exhibit had no contents. At his cross-examination for this motion, Khaira admitted that there was no such auditor’s letter.

34On the evidence before me, I simply cannot find that the defendants have proven any misconduct by Grewal or Jatana. Even if they had, the court would have to determine whether any such evidence would have entitled the defendants to a set-off or hold-back of the payments owed to Grewal.

35I note that counsel for the defendants raised a second issue of misconduct during his argument that was neither pleaded nor even contained in Khaira’s affidavit for this motion: that Khaira signed the second promissory note under “duress.” Mr. Bhangu argued that Grewal threatened to hold a press conference to denounce an Indian politician who is a friend of Khaira. I give no effect to this argument, which is not properly before the court and which does not amount to duress in any event.

36In sum, the defendants have provided no proof of misconduct by Grewal that would justify their failure to make the payments called for in the SPA, the Mortgage and the second note.

Issue No 2: Do the defendants have a claim to a hold back or set-off of the amounts owed to Grewal because of claims by any third parties?

37The defendants claim a right to a “holdback” of the payments owing to Grewal under the SDA, the mortgage and the second note. The defendants offer no authority for the proposition that they are entitled to any “holdback”, what the term, “holdback” means in the context of the parties’ dealings, and how far the alleged holdback extends. Their claim is in essence a right to a legal or equitable set-off of Grewal’s claims. They claim this right because of the application of the adverse events provisions in Schedule “B” of the SPA to two sets of real or potential claims by third parties. Those real or potential claims are a lawsuit by 101 PEI, in which Canadian Nectar is a defendant, and potential claims against Canadian Nectar by Randeep Panag and Rajeev Chauha.

38The statement of defence makes no reference to a right of set-off, despite the requirement to plead such a defence under s. 111 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The defence of set-off is not available to a party who fails to plead legal or equitable set-off in their statement of defence: Mujtaba v. Yasin, 2020 ONSC 2554 at para.48. Further, none of the relevant instruments executed by the parties, i.e. the SDA, the mortgage and the second note, make reference to any right to a legal or equitable set-off or even a “holdback”.

39I add that as the promissory note is a bill of exchange: Bills of Exchange Act, RSC 1985, c B-4, s. 16(1). There is no equitable set off for a bill of exchange under the Bills of Exchange Act: Comtract Air Compressors Inc. v A.W. Service Industries Inc. , 2000 CanLII 22763 (ONSC) at para 13- 17, citing Iraco Ltd. v. Staiman Steel Ltd. (1986), 1986 CanLII 2739 (ON SC), 54 O.R. (2d) 488 (Ont. H.C.J.), affd. (1987), 1987 CanLII 4072 (ON CA), 62 O.R. (2d) 129 (Ont. C.A.).

40In his cross examination on his affidavit in this motion, Khaira admitted that nothing in the SDA or the second note granted the right to hold back any payments owing to Grewal. Instead, Khaira vaguely referred to Grewal’s “promises” and “verbal commitments,” presumably attempting to invoke parole evidence of the terms of the SDA and second note. At the same cross-examination, the defendants’ counsel admitted that there is no right to stop payments under the terms of the SDA but that it is “implied.”

41I do not interpret any of the SDA, the mortgage or the second promissory note as granting or even implying a right to hold back or set off any payments owing under their terms. To the extent that the defendants allege any oral agreement that contradicts the clear terms of those instruments, the parole evidence rule holds that the alleged oral agreement cannot prevail over the clear written contractual terms: Fung v. Decca Homes Ltd., 2019 ONCA 848, at para. 5; Hawrish v. Bank of Montreal, 1969 CanLII 2 (SCC), [1969] S.C.R. 515, at p. 520.

42My comments above are sufficient to deal with the issue of an alleged right to a hold back of payments. However, in case I am incorrect in that regard, I will review the defendants’ specific claims to a right to a hold back, which demonstrates that the right is not available on the facts of this case.

101 PEI Claim Against Canadian Nectar

43The defendants argue that Schedule “B” of the SPA, which refers to adverse events, allows them to hold back all payments owed to Grewal. They rely on the provision that applies “in case any share holder or investor initiates a claim against the company Nectar or any company of which the Plaintiff was an officer or director.” They say that a PEI lawsuit launched by 101 PEI against Grewal, Jatana, National and Canadian Nectar is such an adverse event, entitling them to hold back all payments owing to Grewal.

44In addition to the application of the parole evidence rule cited above, the four following facts contradict this argument:

a. First, Schedule “B” the SPA makes no reference to 101 PEI.

b. Second, here is no evidence that 101 PEI ever was either a shareholder or investor in Canadian Nectar. The term “investor” is not defined in the SPA. However, its common definition, as set out in the D. Dukelow, ed., Dictionary of Canadian Law, 3rd ed. (Toronto: Thompson Carswell, 2004), is “one who invests money in property or a business venture.” There is no evidence before me that 101 PEI ever invested any money in Canadian Nectar. Rather, in its PEI lawsuit against Canadian Nectar, National, Grewal, and Jatana, discussed below, 101 PEI claims to have purchased an orchard from Canadian Nectar with which it is dissatisfied. That does not make 101 PEI an investor in Canadian Nectar.

c. Third, Grewal and Khaira reached their agreement to fully settle the issues in this action with payment of the balance of the claim and no “holdback” when they were in India in April 2019. The 101 PEI action was commenced in the Supreme Court of PEI seventeen months earlier, on November 22, 2017. While I do not have a copy of the statement of defence of Canadian Nectar in the 101 PEI lawsuit, Grewal filed a defence to its crossclaim (and that of Jatana) against him on September 5, 2018. In other words, the defendants were aware of the 101 PEI lawsuit when they initially settled this action in April 2019 without reference to any “holdback”.

d. Fourth, it should be recalled that any claim covered by Schedule “B” of the SPA is limited to the extent of 102 PEI’s shareholding in Canadian Nectar, which is 20 per cent. In other words, any liability that Grewal may have to 102 PEI is limited to 20 per cent of any claims made by 101 PEI. At this point, more than two and a half years after initiating its lawsuit, 101 PEI has neither obtained judgment nor even set out a specific amount that it is claiming against Canadian Nectar. It is far from clear that 101 PEI intends to proceed further against Canadian Nectar.

45I add that the merits of any claim by 101 PEI against Canadian Nectar, to the extent that it is based on any of the conduct of Grewal and/or Jatana, is best dealt with in 101 PEI’s lawsuit. In its statement of claim, 101 PEI seeks unspecified damages for breach of contract, negligence and misrepresentation. As stated above, Canadian Nectar has already initiated a cross-claim against Grewal in that PEI action. Inasmuch as 101 PEI, Grewal, Jatana and Canadian Nectar are all parties to that lawsuit, the merits of any issues with regard to 101 PEI’s claims against Canadian Nectar should be resolved in that action. As s. 138 of the Courts of Justice Act states, “[a]s far as possible, a multiplicity of legal proceedings should be avoided.”

Potential Claims Against Canadian Nectar by Randeep Panag and Rajeev Chauhan

46The defendants claim that the right to a holdback of the amounts owing to Grewal also arises from potential claims by Randeep Panag and Rajeev Chauhan against Canadian Nectar. Those potential claims were cited as potential “adverse events” in Schedule B to the SPA. Those two individuals advanced a total of CAN$100,000 and US$35,000 to National, then controlled by Grewal. The money was supposed to be forwarded to Canadian Nectar. The parties dealt with this issue in an October 1, 2017 written amendment to the SDA which added the following term to their agreement:

It is agreed by the Purchaser [102 PEI] and the Company [Canadian Nectar] that upon verification of the amounts of CDN$100,000 and US $35,000 respectively claimed by Mr. Rajeev Chauhan and Mr. Randeep Panag paid to Canadian National Producers Inc. and IF THE ABOVESAID AMOUNTS (100,000 CAN$ & 35,000 US$) ARE CREDITED TO BANK ACCOUNTS OF CANADIAN NECTAR PRODUCTS BY CANADIAN NATIONAL PRODUCERS INC. AND CANADIAN NECTAR PRODUCTS INC. will assume responsibility to settle the amounts on behalf of the claimants and release the Vendor [Grewal] from ABOVE obligation.

[Note: the fully capitalized terms were handwritten into the typed October 1, 2017 amendment to the SDA, with other terms crossed out.]

47Grewal claims that he produced the requisite proof to Khaira, but Khaira denies this claim. However, at his discoveries, Grewal produced National’s relevant, unredacted bank statements showing the relevant payments to Canadian Nectar. While Khaira denies this assertion, claiming that the records produced by Grewal are ambiguous, he has produced no records of Canadian Nectar showing the error or falsity of National’s bank records. Recall that he controls Canadian Nectar and should be able to access its bank records. In fact, at his cross examination at q. 428, he admitted that he did not have bank records which could disprove Grewal’s allegations and records. The question and answer were as follows:

428. Q. So there’s no proof that you didn’t—that the payments [from National to Canadian Nectar on account of receipt of payments from Randeep Panag and Rajeev Chauhan] were not made?

A. I didn’t have seen it, you know. So when I see it, I will – I will definitely say that I have seen it. But since I haven’t seen the bank statements which has – Mr. Gurmant Grewal has an access to it [sic], and that’s what I’m requesting him since so many years.

48Counsel for Grewal continued, asking, regarding Grewal’s failure to deliver those bank records to him:

430. Q. So assuming what you say is true, then you - -Does this allow you to not pay the purchase price for the shares? The lack of disclosure, is that what you are saying?

A. No, I never – I never said that I’m not going to payments on account of the amounts owing to Grewal …

49Khaira went on to say that he has made 66 percent of the payments on the “principal amount” to Grewal. In response the following exchange occurred:

431. Q. But you haven’t paid the 100 percent [of the purchase price for the shares].

A. Well I – But he has -- He’s supposed to do the 100 percent work, you know what he promised me and I’m requesting. And I’m always there to pay him ---

432. Q. He’s done that, he’s given you 100 percent of the shares.

A. He has not. He has not. I’m still today requesting him by way of this, that kindly share the bank statements. What is the harm in sharing the bank statements to prove this -- these liabilities are coming to the company? And I’m – And I’m requesting him.

50Nothing in any of the SPA, the mortgage or the second note obliges Grewal to produce the documents that Khaira claimed to be the reason for not honouring those instruments. Further, Khaira is an officer, director and shareholder of Canadian Nectar. In his role as an officer, he ordered an audit of the company. While he claims that Grewal is holding the corporation’s bank records, he does not say why he does not have a copy as well. He would be entitled to request them from Canadian Nectar’s bank. He does not say that he attempted to do so but was unable to obtain the relevant bank records. Instead, he merely claims not to have them. Thus, he makes his claim of non-payment in the absence of records that should be available to him.

51Here, I find that no further or better evidence would be available at either a “mini-trial” or a trial than has been presented in this motion. I say this because of the absence of evidence of nonpayment of the money advanced to National, the fact that Grewal and Khaira were cross-examined on their affidavits in this motion, and the requirement that the defendants put their “best foot forward” in this motion. The key issue in this motion is more one of accounting than credibility. As Grewal has produced his proof in the form of National’s bank records and the defendants have failed to provide any responding evidence, I find that the funds have been paid.

52Furthermore, even if I were to reject the evidence of the payments of Can$100,000 and US$35,000 from National to Canadian Nectar, that only means that Grewal and National are liable to Messrs. Chauhan and Panag. There is no evidence that those two individuals have sued any of the defendants. Grewal’s uncontested evidence is that they sued him and National but not Canadian Nectar. They obtained default judgment against him, which he is moving to set aside and resolve.

53Of course, even if there is any liability by Grewal, it would be limited to 20% of the claim, which would be Can$100,000 and US$35,000, or Can$20,000 and US$7,000.

54In sum, the defendants have proven no right to any holdback or set off of the money that they owe to Grewal under the SDA, the mortgage and the second promissory note.

Conclusion Regarding Genuine Issue for Trial

55In Hryniak, the Supreme Court explained that the court looks first to whether it can determine the issue of a genuine issue for trial without reference to the enhanced powers found in r. 20.04(2.1) and (2.2). If not, it must look to whether it is in the interests of justice to use those enhanced powers.

56Here, I am able to resolve the issues in this motion without reference to the court’s enhanced powers. Relying on the affidavit and documentary evidence as well as the cross-examinations of Grewal and Khaira, I am able to determine the issues in this action in a manner that serves the goals of timeliness, affordability, and proportionality without a trial or further reference to my enhanced powers.

57In doing so, I find that:

a. each of the SPA, the mortgage and the second promissory note are valid and enforceable by Grewal against the defendants;

b. Those instruments do not give the defendants the right to hold back on the payments that they are obligated to make to Grewal;

c. The defendants’ pleadings do not entitle them to claim a legal or equitable set-off;

d. In any event, nothing in the facts of this case allows for a set-off or the holdback claimed by the defendants;

e. In his questioning, Khaira did not dispute that the money in question was owing, and

f. Grewal is entitled to summary judgment against the defendants.

Issue No 3: If Grewal is entitled to summary judgment, what is the appropriate interest rate and remedy?

58During the course of argument of this motion I raised the issue of the effect of s. 4 of the Interest Act, R.S.C. 1985, c. I-15 (“the Act”) on an interest payable under the instruments in question. That provision states:

When per annum rate not stipulated

4 Except as to mortgages on real property or hypothecs on immovables, whenever any interest is, by the terms of any written or printed contract, whether under seal or not, made payable at a rate or percentage per day, week, month, or at any rate or percentage for any period less than a year, no interest exceeding the rate or percentage of five per cent per annum shall be chargeable, payable or recoverable on any part of the principal money unless the contract contains an express statement of the yearly rate or percentage of interest to which the other rate or percentage is equivalent.

59In short, under s. 4, with the exception of mortgages and security over immovable property, interest that is chargeable under a written contract must be expressed on an annual basis. Otherwise the interest collectable will be limited to 5 per cent per annum.

60In my endorsement of May 11, 2021, I gave each party the opportunity to make written submissions regarding the effect of s. 4 of the Act on the instruments in question. I have received the written submissions on behalf of Grewal but none from the defendants.

61Grewal concedes that on its face, s. 4 of the Act applies to both the SPA and the second promissory note. Yet he asks the court to see them as part of a larger transaction which includes the mortgage. He argues that s. 4 reflects consumer protection legislation and that the transactions in question are commercial ones, entered into by sophisticated businessmen. He continues, arguing that it would be unfair to allow Khaira to escape the effect of his commercial bargain through the application of s. 4. I do not agree.

62Section 4 of the Act is clear on both the breadth and limitations of its application. Grewal offers no authority for the exception to the application of s. 4 that he seeks. Grewal argues in the alternative that upon maturity of the terms of the SPA and the second note, I should exercise my discretion to effectively award him the 1 per cent monthly interest called for in those instruments.

63The legislature having spoken, the applicable interest rate under the SPA and the second note is 5 per cent annually. However, the interest terms of the mortgage are clearly excepted from the application of s. 4. Accordingly, Grewal is entitled to insist that 102 Ont. pay the interest called for under the mortgage, including the compound interest after default set out in s. 6 of the standard charge terms of the mortgage: Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, [2002] 2 S.C.R. 601, at para. 52.

64According to Grewal’s calculation, as set out in his supplemental submissions, which have not been challenged by the defendants, the total owing, as of May 25, 2021 on a straight 5 per cent interest rate contemplated by s. 4 of the Act, is $474,396.05 (calculated as principal of $388,207.06 and interest of $86,188.99). This is the amount that 102 PEI and Khaira owe to Grewal.

65With respect to the mortgage, Grewal’s unchallenged calculation is that 215 Ont. owes Grewal $532,804.80 as of May 25, 2021 (based on principal of $433,470 and interest of $99,334.61).

Conclusion and Order

66In conclusion, I grant summary judgement in favour of Grewal against the defendants as follows:

a. As against 102 PEI and Khaira:

i. $474,396.05, as of May 25, 2021; plus

ii. further prejudgment interest from May 25, 2021 until the date of release of these reasons at the rate of 5 per cent per annum on the principal of $388,207.06;

b. As against 215 Ont.:

i. $532,804.80, as of May 25, 2021, plus

ii. further prejudgment interest from May 25, 2021 until the date of release of these reasons at the rate of 1 per cent per month, compounded monthly;

iii. post judgment interest from the date of release of these reasons until payment at the rate of 1 per cent per month, compounded monthly;

iv. Possession of the Property;

v. Leave to issue a writ of possession with respect to the Property;

Costs

67I suggest that the parties attempt to determine costs among themselves. If they are unable to do so, Grewal may file costs submissions of up to three (3) pages (double spaced, 12-point font, one-inch margins), plus bill of costs/cost outline and dockets, within 14 days. The defendants may do the same within a further 14 days. If I do not hear from the parties within the time frame set out above, I will assume that they have resolved the costs issue. The parties need not file authorities as long as they properly cite them and offer the appropriate paragraph numbers.