2451954 Ontario Inc. and Shadi Alghouti v. CWB Maxium Financial Inc., Medview Inc., and Daniel Nead

COURT FILE NO.: 2042/18 and 2429/19

DATE: 20210727

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

2451954 Ontario Inc. and Shadi Alghouti

Plaintiffs

– and –

CWB Maxium Financial Inc., Medview Inc., and Daniel Nead

Defendants

M. Theberge and S. Stewart for the plaintiffs

Mr. Curuana, E. Ivkovic, and R. Mignardi for the defendants

HEARD: March 1, 2, 3, and 4, 2021

leitch j.

[1] In this action, originally commenced as an application, the plaintiffs seek 1) a declaration that an equipment lease, a general security agreement, a guarantee, and an amending agreement between the plaintiffs and one of the defendants, CWB Maxium Financial Inc. (“CWB”), are void and unenforceable and 2) an order that CWB return all funds paid by the plaintiffs pursuant to the equipment lease (i.e., $42,175.10).

[2] The application was heard March 13, 2019 and, at that time, Garson J. ordered that the application proceed to trial and be treated as an action, pursuant to r. 38.10(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[3] CWB also commenced an action against the plaintiffs, claiming the balance owing under the equipment lease for the full five-year term plus the amount to be paid to purchase the equipment at the conclusion of the lease (i.e., 33 outstanding payments of $1,622.74 plus the fair market value of the equipment ($2,194.74) plus taxes, for a total of $62,992.03 less a discount of $1,860). In addition to its claim of $61,133, CWB also seeks its legal costs and interest at 18% following the date of default pursuant to the terms of the equipment lease. The plaintiffs defended the claim based on the allegations contained in their Notice of Action.

[4] CWB’s action (2429/19) was consolidated with this action, pursuant to an order dated March 5, 2020.

[5] The plaintiffs served the application on the defendants Medview Inc. (“Medview”) and Daniel Nead (“Mr. Nead”) as well. However, they have not responded or participated in either the application or the action and the plaintiffs are not seeking a remedy against them.

[6] The dispute between the plaintiffs and CWB arises because CWB advanced $85,358.64 to Medview at Medview’s request. These funds represented the amount the plaintiffs would pay to Medview for equipment, software, and licensing services to set up a virtual walk-in clinic in their pharmacy. The plaintiffs never finalized its arrangements with Medview and never signed any agreement with Medview. Medview never provided the equipment, software, and services to the plaintiffs. This action will determine who should bear the loss resulting from Medview “absconding” with the funds CWB advanced.

[7] The plaintiffs’ counsel described Medview and Mr. Nead as the “bad actors,”, but she also contended that CWB was not an innocent party and was careless in its procedures. On the other hand, CWB’s counsel asserted that the plaintiffs were careless, took a gamble, and carelessly assumed risks, the consequences of which should not be imposed on CWB.

[8] To put these issues in context, it is necessary to consider some background information in relation to Medview and its operations.

The Medview business and its operations

[9] Mr. James Ashton (“Mr. Ashton”) first met Mr. Nead in January or February 2015 after being introduced to Mr. Nead as a potential investor in a business Mr. Nead was developing. This new business, Medview, involved setting up virtual walk-in clinics in pharmacies. A pharmacist would provide space for an examination bed and desk and Medview would provide an audiovisual conference camera, a 32-inch screen, software, and licensing equipment and services. Medview would also hire a nurse to intake patients and perform preliminary examinations. Medview would also arrange for a doctor to be conferenced in to make a diagnosis, order and prepare a test, or prescribe medication. The pharmacists who entered into a business arrangement with Medview did so for the opportunity to attract customers to their pharmacy and to fill the prescriptions issued to patients who used the telemedicine services.

[10] Mr. Ashton invested a significant amount of money in Medview, and he became Medview’s Vice-President of Corporate Development. In that role, Mr. Ashton helped recruit nurses, who reported to him for operational advice; liaised with pharmacists providing technical support; and helped set up about 20 to 24 of the virtual walk-in clinics in various pharmacies across Canada.

[11] Mr. Ashton explained that Medview and the pharmacy would enter into a service agreement before Medview submitted a purchase order to Medview’s equipment supplier. Mr. Ashton was adamant that, without a signed service agreement, Medview would not order the equipment.

[12] Mr. Ashton was also adamant that he ordered all equipment (other than a camera, which was ordered by Mr. Nead). According to Mr. Ashton, “nothing happened” without him doing the ordering. Once equipment was ordered, it was Mr. Ashton’s responsibility to set it up in the pharmacy. Mr. Nead was not capable of doing that work.

[13] Mr. Ashton testified that he did not order any equipment for the plaintiffs and was certain no other Medview employee had done so, reiterating that he was the only one in the Medview organization who issued purchase orders for equipment.

[14] As Mr. Ashton put it, it was “not even on his radar” to set up equipment at Shadi Alghouti (“Mr. Alghouti”)’s pharmacy.

[15] It was apparent that Mr. Ashton, as he put it, “felt for Mr. Alghouti” and that Mr. Alghouti was not Mr. Nead’s “only victim.” Mr. Ashton indicated that Medview had cash flow problems and that at least four pharmacies did not receive their equipment even though they paid Medview for it.

[16] It was also apparent that Mr. Ashton, as he put it, had “no faith” in Mr. Nead whatsoever. Mr. Nead made “a lot of promises” and there was “little performance.” According to Mr. Ashton, Mr. Nead represented to pharmacists that Medview had access to 1,500 doctors but, in fact, only 3 worked with Medview. Medview struggled for cash flow from May 2016 onward and, in January 2017, Mr. Ashton, along several other employees, left Medview. Medview owes Mr. Ashton money.

[17] Nancy Ciutat (“Ms. Ciutat”) was another employee of Medview who ultimately became disillusioned with its operations. She too was sympathetic towards Mr. Alghouti and, as she put it, felt “very badly about all of this” and hoped “the truth comes out.” She was Medview’s Vice-President of Business Development for Eastern Canada from April 15, 2016 to June 27, 2016, when Mr. Nead terminated her. Medview also owes her money.

[18] As Ms. Ciutat explained, each pharmacist who wished to set up a telemedicine clinic had to sign a managed service agreement with Medview (a “MSA”). The MSA outlined the services Medview would provide, including office equipment, studio setup, service and support relating to the equipment, marketing material, access to a roster of qualified medical professionals, onsite registered nurse practitioners, technicians, and other required staff, billing services and support for the physicians, and other day-to-day administrative costs. The pharmacist would pay a monthly fee for these services. Medview would also ensure the equipment continually met all Health Canada requirements.

[19] When Mr. Nead and Mr. Dan Gilchrist (“Mr. Gilchrist”), CWB’s Vice-President of Health Care at the relevant time, first met in April 2016, Mr. Nead provided Mr. Gilchrist with a copy of the MSA and a lease financing proposal which noted that Medview would enter into a MSA with each pharmacy for a term of 36 to 60 months. The “Preferred Lease Financing Process,” included as the final two steps in the process, the following:

On receipt of completed MedviewMD MSA and Underwriter Lease Application, Underwriter advances funds to MedviewMD and installation commences and staff hired.

Location to commence Lease payments from Month 4 once equipment installed and operations underway

[20] Mr. Gilchrist testified that CWB financed the first pharmacy Medview did business with in June 2016 and ultimately financed 5 pharmacies in total.

Mr. Alghouti’s background and how he came to be involved with Medview

[21] Mr. Alghouti completed his education to become a pharmacist in 1998 in Jordan. He worked as a medical representative from 2000 until 2006, which is when he moved to Canada.

[22] His first language is Arabic; however, he studied English at school in Jordan and, as a newcomer to Canada, had English-as-a-second-language training for four months.

[23] He became qualified to practice as a pharmacist in Ontario in December 2007.

[24] Mr. Alghouti is the corporate plaintiff’s sole director, sole officer, and majority shareholder (51%). The wife of a friend of Mr. Alghouti holds the remaining shares of this company.

[25] The plaintiff corporation operates a pharmacy in London, Ontario under the banner Pharmasave. On a day-to-day basis, Mr. Alghouti is the person in charge of the pharmacy.

[26] Mr. Alghouti, through a different corporation, had a pharmacy in a Target store from March 2013 until February 2015, which is when Target went out of business.

[27] I found Mr. Alghouti to be a competent businessperson who has ambition to expand his business and consider inventive or innovative projects. He attended a marketing expo in Ottawa in May 2016. Mr. Alghouti met Ms. Ciutat at this marketing expo, where the latter was promoting Medview’s business. Mr. Alghouti expressed interest in Medview’s telemedicine opportunity. As a result of that initial meeting, Ms. Ciutat visited Mr. Alghouti’s pharmacy on May 6. She responded to his questions about the doctors and nurses Medview employed and what examinations they could perform. She explained that a “break even” for a pharmacy would be filling five additional prescriptions per day because of the telemedicine services.

[28] On May 9, Ms. Ciutat e-mailed Mr. Alghouti, enclosing the MSA and the CWB credit application. She explained that she would have mentioned to Mr. Alghouti that Medview worked with CWB and that, if he did not want to obtain his own financing, Medview could be the middleman in offering the services of a finance company to fund the purchase of the equipment required to set up the telemedicine clinic. Mr. Alghouti informed Ms. Ciutat that he could go to his bank for financing. Ms. Ciutat indicated that a business plan would likely be required and that it would be “easier” to proceed with CWB, who was familiar with the equipment. A couple of days later, she followed up by e-mail, inviting Mr. Alghouti to e-mail her any of his questions regarding the MSA.

[29] Mr. Alghouti never signed an MSA with Medview. Ms. Ciutat was clear that that was because Mr. Alghouti was trying to “figure out” if he wanted to move forward with the program. She indicated that she most likely told him that the deal would not be finalized unless the MSA was signed.

[30] Ms. Ciutat’s employment with Medview was terminated around June 24, 2016. According to Ms. Ciutat, at that time, Mr. Nead was very stressed out about financing. Mr. Nead called Ms. Ciutat many times, telling her to finalize the transaction with Mr. Alghouti. According to Ms. Ciutat, Mr. Nead terminated her employment because she did not have Mr. Alghouti sign all the documents, including the MSA.

[31] I note here that I found Mr. Ashton and Ms. Ciutat to be credible and reliable witnesses. They held some animus towards Mr. Nead. However, they were independent, impartial, and objective witnesses in relation to the issues between the plaintiffs and CWB. I was satisfied that they did not “adjust” their evidence in any way to favour the plaintiffs over the defendants.

The application for credit from CWB

[32] Both Mr. Alghouti and Ms. Ciutat explained that Mr. Alghouti was interested in learning more about the Medview program and was also interested in learning if he could obtain third-party financing to purchase the equipment required for the telemedicine clinic. As a result, he completed the credit application.

[33] Mr. Alghouti signed CWB’s standard form of credit application and returned it to Ms. Ciutat on June 1, 2016. She acknowledged receipt of this document and indicated that she would “submit to finance” and keep him posted about any follow-up from them.

[34] Ms. Ciutat forwarded the credit application to Kelly Cappadocia (“Ms. Cappadocia”), a customer relations specialist at CWB, and Catherine Wang, a credit analyst at CWB, requesting that they “process credit application.” The application package included an invoice from Medview dated June 1, 2016. This invoice will be described in more detail below.

[35] CWB undertook a credit analysis, noting under the “purpose of the transaction,” that CWB had been “requested to finance the equipment, technology and soft costs associated with” Medview for the corporate plaintiff and that “the assets financed will allow the customer to provide telemedicine from the pharmacy.” The credit report summary stated that this would be a “deal under new program established between [CWB and Medview] to finance the set-up of the telemedicine service to be provided”.

[36] Mr. Gilchrist explained that CWB’s analysts would primarily check the credentials of the pharmacists and their ability to borrow funds.

[37] The CWB credit department approved the plaintiffs’ credit application.

[38] On June 6, Ms. Ciutat emailed Mr. Alghouti with the message, “Congratulations! You’ve been approved.” She also forwarded an email from Ms. Cappadocia, which contained instructions respecting the documentation to be signed in favour of CWB.

[39] The instructions were to “please sign in all areas indicated” with respect to the lease schedule (the front page of the lease) and to “please sign where indicated” with respect to the lease agreement’s terms and conditions and the other documents. The places at which Mr. Alghouti was to sign the documents were indicated by “post it” pointed arrows containing the words “sign here”.

[40] In her forwarding e-mail to Mr. Alghouti, Ms. Ciutat indicated that Mr. Alghouti should “please see below on instructions for the documents attached.”

[41] Other than this e-mail from Ms. Cappadocia enclosing the documentation, CWB did not provide any instructions about what Ms. Ciutat should explain to Mr. Alghouti or how Mr. Alghouti should sign the documents. CWB did not provide Ms. Ciutat with a checklist, did not ask Ms. Ciutat to explain to Mr. Alghouti the nature of the documents Mr. Alghouti was asked to sign, and did not ask Ms. Ciutat to bring Mr. Alghouti’s attention to any clause.

[42] On June 7, Ms. Ciutat wrote to Ms. Cappadocia on behalf of Mr. Alghouti asking for a quote for a 5-year lease term. Ms. Cappadocia provided those details to Ms. Ciutat and, on June 8, Ms. Ciutat forwarded that information to Mr. Alghouti.

[43] On June 8, Ms. Cappadocia prepared new documents, reflecting a 5-year lease term, and forwarded them on to Mr. Alghouti.

[44] Ms. Ciutat was clear that she asked Mr. Alghouti to sign all the documentation she had received from CWB because Mr. Alghouti was “just trying to figure out if he could get financing.” Ms. Ciutat did not understand Mr. Alghouti to be committing himself to a lease with CWB and, according to Ms. Ciutat, he signed the documentation to see if he could obtain financing for the purchase. Ms. Ciutat was also clear that, before Mr. Alghouti received any equipment, he would have to sign the MSA with Medview.

The documentation signed by Mr. Alghouti in favour of CWB

[45] On June 8, Mr. Alghouti, on behalf of 2451954 Ontario Inc., signed a lease agreement and a general security agreement in favour of CWB.

[46] As secretary of 2451954 Ontario Inc., he signed a certificate confirming that the company was authorized to lease equipment and to borrow funds from CWB and that it had properly authorized the execution of the agreements in favour of CWB.

[47] He also signed a personal guarantee of all debts and liabilities 2451954 Ontario Inc. owed to CWB.

[48] Ms. Ciutat picked up the signed documents and returned them to CWB.

[49] Mr. Alghouti did not include the general security agreement from him personally in the package of signed documents, so Ms. Ciutat returned on June 10 to have Mr. Alghouti sign that document. At this time, Mr. Alghouti also provided her with an insurance certificate. The signing instructions stated that certificate was to be “forwarded to your insurance broker to complete” and was required prior to invoice payment.

[50] This insurance certificate, dated June 10, 2016, includes a statement that, with respect to “various medical equipment, telemedicine equipment, hardware, software, licenses,” which was described as the “equipment to be leased”, the parties understood and agreed that CWB, described as “the lessor”, was added to the coverage as a first loss payee and an additional named insured “but only with respect to the equipment … which is the subject of a lease with the Lessee”, the corporate plaintiff. The details of the insurance were to be set out and the certificate signed by an authorized representative of the insurance agency or insurer.

The terms of the lease agreement and personal guarantee

[51] The terms and conditions of the equipment lease, which was signed by the corporate plaintiff, and the personal guarantee, which was signed by Mr. Alghouti, are critical to the issues in this action.

[52] The schedule to the lease agreement (the front page) outlined the lessee’s name, the equipment supplier (Medview), a description of the equipment (as detailed in an invoice dated June 1, 2016 issued by Medview), and the payment details.

[53] The front page noted June 15, 2016 beside the words “Commencement Date” and noted a term of 60 months. It reflected what is described as a “contract of $76,213.07 plus an administration fee of $250 for a total contract cost of $76,463.07.” CBW did not charge any payments for the first 3 months of the term, but 57 payments of $1833.70 per month were due commencing September 15, 2016 and ending May 15, 2021.

[54] Mr. Gilchrist testified that the cost of this financing was determined as follows. Over the term of the lease, the plaintiffs would pay $92,500 to CWB. The equipment’s cost before taxes was $76,500, representing a $16,000 differential. $16,000 as a percentage of $76,000 was 21% over the life of a 5-year contract. On an annual basis, the cost was 7% per year.

[55] On the front page of the lease, beside the heading “Delivery and Acceptance,” the following was outlined:

You acknowledge having read your supplier’s agreement and understand it. You also agree all of the Equipment has been delivered and/or installed; is in good operating order and condition; is in all respects satisfactory; and has been accepted by you.

[56] Mr. Alghouti signed the acknowledgment “where indicated.” There was a space for a “delivery date” to be inserted beside Mr. Alghouti’s signature but no date was inserted when Mr. Alghouti signed the acknowledgement on June 8, 2016. There was no indication or arrow or any instruction that a delivery date was to be inserted.

[57] Mr. Alghouti signed the front page of the lease agreement in a second place “where indicated,” acknowledging he understood and agreed to be bound by “the terms and conditions attached which form part of this lease agreement.”

[58] The terms and conditions were outlined in small font in one-and-a-half pages attached to the lease’s front page.

[59] As outlined in clause 1 of the attached terms and conditions, CWB agreed to lease, to 2451954 Ontario Ltd., the equipment, which was defined in clause 2 as personal property described in an attached schedule (which was the front page of the lease).

[60] In clause 3, CWB specified that the obligation to pay rent was absolute and would not be reduced or terminated if the equipment did not operate as specified.

[61] In clause 5, CWB stated it was not responsible for the selection of the equipment and it made no warranties regarding same.

[62] Pursuant to clause 8, CWB retained title to the equipment.

[63] In clauses 9 and 10, CWB stated that the lessee had no opportunity to cancel the lease under any circumstance and the lessee confirmed that the lease agreement constituted the complete agreement between the parties.

[64] In clause 15, the lease also contained a broad indemnity clause in favour of CWB:

Indemnity. You shall indemnify us against, and save us harmless from, any and all damages, claims, actions, obligations and liabilities caused by or resulting from the installation or removal of the Equipment, the possession, use and operation of the Equipment, or our ownership of the Equipment, at all times during the Term of this Agreement and for a period of two years after the end of the Term of this Agreement. Such indemnity shall include our legal fees and costs arising from any of the foregoing and any payment made by us in settlement of any of the foregoing. Notwithstanding any other provision hereof, the indemnity contained in this section shall survive termination or expiration of this Agreement.

[65] In clause 16, CWB described the events of default, which included a failure to abide by any term of the contract, any change in the primary nature of the business, any circumstance or event which could have a materially adverse effect on the financial condition of the business, and any creditor seizing the equipment.

[66] On default, CWB, in its sole discretion, had the right to require the lessee to pay “as a genuine pre-estimate of liquidated damages and not as a penalty, the Discounted Rents at such time and all other accrued and then unpaid amounts under the agreement.” CWB also had the right to “enter any place where the Equipment is located and take possession of and remove the equipment without court order or other process of law.”

[67] The definition of “discounted rent” was set out in clause 2 as follows:

“Discounted Rents” means, with respect to the Equipment, the present value of all instalments of Rent during the Term of this Agreement that have not been paid at the date of calculation (whether or not accrued or due and payable), discounted from the respective dates on which such instalments would otherwise be payable to the date of calculation of the Discount Rate.

[68] The lease required the lessee to purchase the equipment on the last day of the term “on an as is, where is, basis and without representation or warranty of any kind or nature” for a price equal to its purchase price (which was defined in clause 2 to mean “the purchase price specified in the attached lease schedule for the Equipment as at the last day of the term representing the fair market value of the Equipment on such date”).

[69] In addition to the clauses referenced above, the lease contained many other provisions reflecting that the equipment was in the lessee’s possession: clause 6 required maintenance and allowing inspection of the equipment, clause 7 addressed alterations and modifications, clause 11 prohibited removal of the equipment from the specified place of business without CWB’s prior written notice and consent, clause 12 addressed damage and loss of the equipment, and clause 14 prohibited parting with possession of the equipment.

[70] Importantly, CWB defined the lease’s “effective date” as the date the equipment is delivered and accepted by the lessee:

“Effective Date” means the date on which the Equipment is delivered to and accepted by you as indicated in the Delivery and Acceptance Certificate.

[71] Also, importantly, the “Delivery and Acceptance Certificate” was defined as follows:

“Delivery and Acceptance Certificate” means, with respect to the Equipment, a certificate in the form prescribed by us (or in such other form as may be acceptable to us) to evidence the delivery to and acceptance by you of the Equipment.

The terms of the personal guarantee

[72] Mr. Alghouti’s personal guarantee indicated in clause 3 that there was no limit on his guarantee obligations.

[73] Pursuant to clause 4, Mr. Alghouti absolved CWB of any liability:

We do not owe you any duty (as a fiduciary or otherwise) and you hereby waive any right to make any claim or counterclaim and to raise any right of set off, equitable or otherwise, arising from any alleged breach of a duty owed to you, or the Customer or any other person. We will not be liable to you nor shall you make any claim for any negligence or any breaches or omissions on our part, or any of our employees, officers, directors or agents, or any receivers appointed by us, in the course of any of our actions or their actions.

[74] In clause 6, it was stated that any setoffs or counterclaims were prohibited.

[75] Clause 10 contained a very broad indemnity in favour of CWB:

As an original and independent obligation under this Guarantee, you shall (a) indemnify us and keep us indemnified against any cost, loss, expense or liability of whatever kind resulting from the failure by the Customer to make due and punctual payment of any of the Obligations or resulting from any of the Obligations being or becoming void, voidable, unenforceable or ineffective against the Customer (including, without limitation, all legal and other costs, charges and expenses incurred by us in connection with preserving or enforcing, or attempting to preserve or enforce, our rights under this Guarantee), and (b) pay on demand the amount of such cost, loss, expense or liability whether or not we have attempted to enforce any rights against the Customer, any other guarantor, or any other person.

The circumstances under which Mr. Alghouti signed and delivered the lease agreement and collateral documentation to CWB

[76] Mr. Alghouti received the documents electronically June 6. He read the documents quickly only one time. He tried to understand as much as he could. He indicated that the documents contained “too much information,” that the font was very small, that the language was difficult, and they were not what he was used to reading.

[77] He signed the documents while Ms. Ciutat was at his pharmacy on June 8. He described Ms. Ciutat as “pushy,” which is consistent with her evidence of the pressures Mr. Nead was placing on her to finalize the deal.

[78] During Ms. Ciutat’s visit to his pharmacy on June 8, where she spent 30 minutes with Mr. Alghouti, most of the conversation related to Mr. Alghouti’s arrangements with Medview. Mr. Alghouti was still trying to understand the MSA, which he described as a new concept and as something he needed to take his time to understand.

[79] Ms. Ciutat testified that the first time she was involved with third-party financing was during her interactions with Mr. Alghouti. She only interacted with CWB to receive the e-mail that contained the instructions on what documents Mr. Alghouti had to sign described above. She had never seen these types of documents before, did not know what was in the package, and did not know what the documents stated. She confirmed that CWB sent her no instructions or directions and that she was not speaking on CWB’s behalf. She confirmed that, if she had questions, she would turn to Mr. Nead, who she took her orders from, and he would obtain the information from CWB.

[80] As a result, Ms. Ciutat did not draw Mr. Alghouti’s attention to any clauses in the CWB documentation. She did not explain anything to Mr. Alghouti. She simply told Mr. Alghouti to sign where there were sticky tabs.

[81] Mr. Alghouti had no contact with CWB at all.

[82] Mr. Alghouti signed all the documents, other than his personal general security agreement, on June 8. Mr. Alghouti signed the personal general security agreement on June 10.

[83] When Mr. Alghouti was cross-examined on his affidavit, dated December 21, 2018, he acknowledged that he had agreed with the suggestion that he had a rough understanding of what he was signing in the lease agreement. He further acknowledged, as he outlined in his affidavit, that he does not deny reading the agreement. He explained that he did not understand the agreement like a lawyer but understood it to the best of his abilities. I note that, during closing submissions, plaintiffs’ counsel did not pursue the defence of non est factum or the lack of independent legal advice.

[84] While Mr. Alghouti usually keeps copies of documents, Ms. Ciutat took the originals, and Mr. Alghouti did not retain any copies of the documents he signed on June 8 and 10.

[85] Mr. Alghouti testified that all these documents were to be held in escrow. He emphasized that he signed them to get the financing part of the process “out of the way.” He analogized the process to signing a mortgage but the mortgage not being registered and the money not being advanced before the property that is subject to the mortgage was purchased. In other words, Mr. Alghouti expected that CWB, as the lessor of the equipment, would not advance funds before confirming that he had the equipment (CWB’s security) in his possession.

[86] Ms. Ciutat testified that she was not familiar with the term “escrow.” I accept that Mr. Alghouti did not instruct her to hold the CWB documentation in escrow. Before Mr. Nead terminated Ms. Ciutat’s employment, she returned to CWB all the documentation CWB had requested, including the insurance certificate Mr. Alghouti obtained from his broker.

[87] CWB argues that Ms. Ciutat was not its agent and had no authority to make any representation on its behalf and, in any event, that such a representation would be inconsistent with the entire agreement clause in the lease. I agree that Ms. Ciutat did not act as CWB’s agent and I make no finding that Ms. Ciutat made a representation to Mr. Alghouti or that Mr. Alghouti signed the documentation in favour of CWB after Ms. Ciutat induced him into doing so by making a representation.

[88] However, in considering whether Mr. Alghouti was careless, I accept Mr. Alghouti’s evidence that he did not understand that the documents he signed would be enforceable without him having an agreement with Medview; that he did not understand CWB would demand rent whether or not he received the equipment from Medview; that he did not appreciate, think about, or understand the no-cancellation clause in the lease; and that he did not understand the impact of an entire agreement clause.

[89] I also accept Mr. Alghouti’s evidence that he signed the documentation in favour of CWB to get the financing “out of the way” since that process takes time. He was very mindful of the fact that he had not finalized all the terms and conditions of an arrangement with Medview, he still had several questions for Medview, he had not signed the MSA and, of course, he did not have the equipment. Mr. Alghouti’s belief that the documents he signed in favour of CWB would not result in money being advanced to Medview on his behalf is entirely reasonable. It is also entirely reasonable that he did not believe the equipment lease would be enforceable without him having entered into an agreement with Medview and without him having possession of the equipment.

[90] Mr. Alghouti’s belief is consistent with the equipment lease’s Effective Date; the purported use and significance of the Delivery and Acceptance Certificate; and the language of the acknowledgement of delivery on the front page of the lease, which included an acknowledgment of reading “your supplier’s agreement.”

[91] Mr. Alghouti’s evidence is also consistent with his conduct on June 16, 2016, as confirmed in an e-mail of that date, which I will detail below.

[92] Mr. Alghouti’s evidence is also consistent with Ms. Ciutat’s evidence. As outlined earlier, Ms. Ciutat’s understanding was that Mr. Alghouti would have to sign a MSA and that Medview would have to deliver equipment to him before the plaintiffs would be obliged to make payments to CWB. As a result, it is not surprising that Mr. Alghouti did not express any concern that the delivery date of the equipment was left blank. As Ms. Ciutat explained, they were not talking about a delivery date yet and were first setting things up to see if CWB could approve Mr. Alghouti for financing. Ms. Ciutat described the MSA and CWB’s financing as working in parallel. She emphasized that, before Medview would send the equipment to Mr. Alghouti’s pharmacy, he would have had to sign the MSA with Medview. This also accords with Mr. Ashton’s evidence.

[93] Ms. Ciutat indicated that no one at CWB asked her about the status of the equipment and no one at CWB expressed concern that the delivery date had been left blank. She had no dealings with the equipment suppliers and had no idea how long it would take to obtain the equipment.

[94] She also had no idea if Mr. Alghouti ultimately received the equipment. All she knew was that he had not received it by the time she left her employment with Medview.

[95] Mr. Alghouti's Ms. Ciutat's, and Mr. Ashton’s evidence are also consistent with the terms of the Medview invoice, which I will describe below.

[96] If matters had proceeded in accordance with Mr. Alghouti, Ms. Ciutat, and Mr. Ashton’s understanding, this action would not be necessary. However, matters did not proceed in that fashion. I will describe this next.

What created the circumstances leading to this action - the Medview invoice dated June 1, 2016

[97] As previously noted, Medview had prepared an invoice dated June 1, 2016, reflecting that equipment was to be shipped to Mr. Alghouti’s pharmacy. Medview specified CWB as the “bill to”.

[98] The equipment was described as an examination table, a camera, telephonic stethoscope, other telemedicine equipment, and a patient pod, but also a license fee, server hardware, the half-day installation cost for the studio equipment, a two-day training session for up to six people, described as a “train the trainer,” and training on installation. These latter items totalled $15,913.10, just over 20% of the price Medview charged for the equipment. Together with HST, the total invoice was $85,358.64.

[99] This invoice specified that the “Payment Terms” were as follows:

Amounts to be transferred immediately to MedviewMD Inc. on execution of the Managed Services Agreement.

Amounts outstanding beyond 7 days will incur a late processing charge of 12 per cent per annum, calculated on a monthly basis until received.

[100] This prerequisite to invoice payment makes sense: the equipment has no value and is unusable without the services to be provided by Medview pursuant to the MSA.

[101] The invoice outlined wire-transfer instructions pursuant to which monies advanced would be paid into Medview’s account.

[102] CWB wire-transferred $85,358.64 to Medview on June 13, 2016.

[103] Mr. Alghouti was not aware that these monies were transferred.

[104] Just as CWB did not inquire about the omission of the delivery date on the front page of the lease and did not request a Delivery and Acceptance Certificate, CWB did not inquire whether the Payment Terms of the invoice were satisfied – that is, whether Mr. Alghouti had signed the MSA.

[105] That notwithstanding, CWB completed a “Final Credit Condition Checklist” and 3 individuals confirmed that the final credit conditions were satisfied: Ms. Kelly Cappadocia; Mr. Ron Spriet, CWB’s Senior Credit Manager; and Ms. Anna Cappadocia, CWB’s Vice-President of Administration and signatory on the lease and related documents (no relation to Ms. Kelly Cappadocia). The checklist made no reference to Mr. Alghouti executing the MSA or Medview delivering the equipment to Mr. Alghouti.

[106] Mr. Gilchrist testified that CWB was “ready to fund” the project on July 13, 2016 because, after the credit approval process, it had received all the documentation it required.

What occurred on June 16, 2016

[107] Mr. Alghouti testified that, while he was at work at the pharmacy, someone he was acquainted with visited him and indicated that he was developing a telemedicine system which was similar to what Medview had developed. The price for this system would be significantly less than what Medview was charging. As a result, Mr. Alghouti emailed Ms. Ciutat on June 16, stating the following:

With regards to our project, we would like to put it on hold for the next 2-3 weeks since we are reviewing another proposal from a different telemedicine company. We shall look at both (pros/cons) and then we will decide. Thank you for your understanding.

[108] Ms. Ciutat testified that, on receipt of this e-mail, she called Mr. Alghouti and tried to figure out why he was looking at another company. She testified that she was “stressed out” because it appeared to her that Mr. Alghouti was no longer interested in the deal with Medview. She testified that she spoke to Mr. Nead about this development and that he was upset because this was a very important deal to Medview.

[109] Ms. Ciutat called Mr. Alghouti the next day and told him that it was “too late” to put the project on hold because Medview already had the money. She then sent Mr. Alghouti the telephone number for the “finance contact person” who was specified as “Kelly” (i.e., Ms. Cappadocia).

[110] Mr. Alghouti called Ms. Cappadocia, who advised him that CWB had paid money to Medview. Mr. Alghouti testified that he was annoyed, angry, upset, and confused. He couldn’t believe what had happened and thought that this system “must be a scam.”

[111] Mr. Alghouti conveyed his upset and discontent to Ms. Cappadocia and, in response, she indicated that she was not the boss. She informed Mr. Alghouti that Mr. Gilchrist was the boss and, as a result, Mr. Alghouti called Mr. Gilchrist. I discuss this next.

What transpired thereafter during June, July, and August 2016

[112] Mr. Alghouti spoke to Mr. Gilchrist on June 17, 2016 and asked him why and how CBW had sent money to Medview. According to Mr. Alghouti, Mr. Gilchrist indicated that he only required a lease agreement signed by Mr. Alghouti in favour of CWB for money to be advanced to Medview.

[113] Mr. Alghouti testified that, during this call with Mr. Gilchrist, he made it clear that he was angry, that he had no agreement with Medview, that he might not even enter into an agreement with Medview, and that he was considering another option. According to Mr. Alghouti, Mr. Gilchrist assured him that he could take his time and that, if he decided to pursue arrangements with another company, Medview would return the money and CWB would finance the equipment Mr. Alghouti purchased from the other company.

[114] Mr. Alghouti testified that, in July and August 2016, he called Mr. Gilchrist again and confirmed that he still had not signed a MSA and had no agreement with Medview, that he had no details from the other start-up, and that he needed more time. According to Mr. Alghouti, Mr. Gilchrist reassured him that he could take his time.

[115] Mr. Alghouti indicated that, during his calls, he told Mr. Gilchrist that Medview had not delivered the equipment to him and that he was upset that CBW had transferred money to Medview despite the fact he had no agreement with Medview.

[116] Mr. Gilchrist recalled that, around mid-June 2016, Mr. Alghouti informed him that Medview was not providing its services to him. He did not recall Mr. Alghouti telling him that Medview had not delivered the equipment to him. Mr. Gilchrist testified that CWB was not obligated to take action and that the contentious issues were between the plaintiffs and Medview. Mr. Gilchrist denied making any commitment that CWB would return the money to Mr. Alghouti if Mr. Alghouti did not finalize an agreement with Medview.

[117] It is clear, therefore, that, shortly after CBW funded Medview, CWB, at a minimum, was aware that Medview was not providing Mr. Alghouti with the services that would make the equipment useable.

What happened thereafter?

[118] In September 2016, the due date of the first payment under the lease agreement, Mr. Alghouti was surprised that such a payment was processed. It had been his understanding, based upon what Mr. Gilchrist had told him, that payments would be postponed. He called Mr. Nead, who responded that the payments being processed was “not his problem.”. Mr. Alghouti then called his bank and stopped further payments. As a result, the next payment, due October 2016, was not made.

[119] Mr. Gilchrist called Mr. Alghouti in relation to the non-payment in October and Mr. Alghouti again indicated that his potential arrangements with Medview were on hold and that he had no agreement with Medview. According to Mr. Alghouti, Mr. Gilchrist agreed to call Mr. Nead.

[120] Mr. Alghouti followed up with Mr. Gilchrist one or two weeks later, at which point Mr. Gilchrist advised him that he (Mr. Gilchrist) did not have any success contacting Mr. Nead. Mr. Gilchrist then advised Mr. Alghouti that he was “on the hook” for the payments: he had signed documentation making him responsible, he had no choice but to pay, and, if he didn’t, CWB would “go after” him. In an e-mail dated November 10, 2016, Ms. Cappadocia sent Mr. Alghouti a copy of the equipment lease, the Medview invoice, and the CWB’s proof of payment to Medview.

[121] Mr. Alghouti indicated that he was frightened by this conversation with Mr. Gilchrist. He was very concerned that CWB would “go after him” and he felt he had no choice but to make the payments CWB was demanding to protect his business.

[122] In November 2016, Mr. Alghouti called Mr. Nead and said, “You’ve got the money; let’s get this business up and running.” On November 8, 2016, Mr. Alghouti followed this up with a text. Around this period, Mr. Alghouti, with the assistance of a friend who was a lawyer, also looked at the MSA in more detail. This lawyer suggested some amendments to the MSA and forwarded these amendments to Medview. Mr. Nead promised to discuss them. That never happened.

[123] From November 2016 to May 2018, Mr. Alghouti contacted Mr. Nead numerous times. Mr. Nead continued to make promises. Mr. Alghouti informed Mr. Gilchrist of his discussions with Mr. Nead and the various proposals and amendments they were considering. For example, early on, there was a proposal that Medview pay down the amount owing to CWB by fifty percent and then a proposal that the plaintiffs and Medview each pay $10,000 to CWB to reduce the total debt. Mr. Alghouti also made a proposal that Medview buy out the lease in full. However, no proposal came to fruition.

[124] Mr. Gilchrist continued to advise Mr. Alghouti that he had to make payments pursuant to the lease. Mr. Alghouti made the payments. The plaintiffs’ insurance continued to list CWB as a loss payee.

[125] The plaintiffs never signed a MSA with Medview and never received the equipment.

[126] Medview discontinued operating in January or February 2017, but Mr. Nead continued to make promises to Mr. Alghouti, including that Medview would recommence operations in April 2017.

[127] By June 2017, arrangements between Medview and the plaintiffs were still on the table. Mr. Gilchrist asked Mr. Alghouti to sign a lease amending agreement to address the September 2016 payment, which remained outstanding. Mr. Gilchrist proposed that the parties add this payment to the end of the term “at least until it is determined what Medview will do.” The plaintiffs signed the amending agreement by the end of July 2017.

[128] As Mr. Alghouti testified, CWB told him he was still on the hook to make payments to CWB, Mr. Nead continued to make promises to Mr. Alghouti, and Mr. Alghouti still hoped Mr. Nead would come through on the promises he made. None of these hopes materialised.

[129] The plaintiffs made their last payment to CWB in August 2018. The plaintiffs retained counsel and the application was brought in October 2018.

[130] In the course of litigation, counsel drew Mr. Alghouti’s attention to the fact that CWB was listed as a co-insured on the plaintiffs’ insurance policies for four years. Mr. Alghouti testified that he had forgotten about requesting this coverage from his insurance agent in 2016 and that, once CBW’s coverage was drawn to his attention, he instructed his agent to remove CWB from coverage.

[131] The fact that the plaintiffs made payments pursuant to the lease, and that CWB was listed as a loss payee on the plaintiffs’ insurance, does not detract from Mr. Alghouti’s evidence that he could not believe what happened to him and that he thought the whole thing was a scam. As Mr. Alghouti put it, early on, he thought there must have been some “connection” between Mr. Nead and Mr. Gilchrist. He realized that there is no such “connection.” However, I understand why he wondered why CWB would advance money to Medview “on his behalf” when he had not signed a MSA with Medview, a point he made clear to CWB June 16, 2016, and when the equipment was never delivered.

[132] Nevertheless, it was not unreasonable for the plaintiffs to keep CWB at bay by making the payments CWB was demanding while Mr. Alghouti tried to finalize arrangements with Medview. The fact that payments were made does not amount to a ratification of the lease as CWB argued.

[133] Further, the efforts made by the plaintiffs to finalize a deal with Medcan were not inappropriate in these circumstances. I do not characterize those efforts as “stringing along” Mr. Gilchrist, as CWB argued.

Analysis of the competing claims in this action

[134] Mr. Gilchrist acknowledged that CWB had limited experience with Medview in June 2016. CWB’s main business is lending for real estate acquisitions and improvements such that it would typically only lend for equipment leasing if it was for large transactions.

[135] Mr. Gilchrist also acknowledged that CWB did not conduct any investigations with respect to Medview’s assets or operations. His position, on behalf of CWB, was that CWB had no requirement to do any diligence in relation to Medview.

[136] Mr. Gilchrist explained that, on the other hand, CWB would have committed approximately half a day to verifying the plaintiffs’ creditworthiness to ensure that their financial wherewithal was strong enough to secure credit approval. CWB confirmed that the pharmacy existed, that the pharmacy was operating, and that Mr. Alghouti was properly licensed. CWB also investigated the plaintiffs’ creditworthiness.

[137] Mr. Gilchrist’s justification for Medview’s creditworthiness not being important was that CWB was financing a pharmacy, the pharmacy chose the vendor of the equipment, and, in the event of default, rather than looking to repossess the equipment, CWB would look to its security over the pharmacy and the pharmacist.

[138] Mr. Gilchrist explained that the only safeguards in place to ensure that the equipment was in the possession of the pharmacy was the acknowledgement of delivery on the first page of the lease and CWB’s receipt of the insurance certificate.

[139] Mr. Gilchrist acknowledged that CWB simply sent their documents to the plaintiffs through Ms. Ciutat, with instructions as to where the plaintiffs were to sign but provided no highlighting or instructions to Ms. Ciutat to bring specific clauses to the plaintiffs’ attention. Mr. Gilchrist explained that Medview’s role was being “just a facilitator” for CWB.

[140] Mr. Gilchrist also acknowledged that, although the lease’s Effective Date referenced a Delivery and Acceptance Certificate, CWB did not utilize such a certificate and relied instead on the acknowledgment on the front page of the lease.

[141] When, in cross-examination, plaintiffs’ counsel suggested that CWB had no evidence that the equipment had been delivered, Mr. Gilchrist responded that no one had called to indicate that the equipment had not been delivered.

[142] When plaintiffs’ counsel asked Mr. Gilchrist whether CWB truly believed that the plaintiffs had received the equipment before CWB released funds to Medview, Mr. Gilchrist responded that the evidence of Medview’s delivery was the acknowledgement on the front page of the lease. He also said that, to his knowledge, no one at CWB noted the fact that the delivery date was blank and, in any event, the “missing date meant nothing.”

[143] When plaintiffs’ counsel questioned him about the fact that, according to the Medview invoice, CWB was not to send funds to Medview until the plaintiffs signed a MSA, Mr. Gilchrist responded that whether a MSA was signed had nothing to do with CWB, that “that was for Medview,” and “solely a condition Medview had with their clients.”

[144] As previously set out, with respect to his conversation with Mr. Alghouti on June 16, Mr. Gilchrist did not recall if Mr. Alghouti advised him that he did not have the equipment, but Mr. Gilchrist did recall Mr. Alghouti telling him that Medview was not offering any services. Mr. Gilchrist recalled that Mr. Alghouti asked him to demand that Medview return the money and Mr. Gilchrist informed Mr. Alghouti that the “solution was for him to sort out.” He also recalled Mr. Alghouti being upset and indicating he had not decided to proceed with Medview.

[145] Mr. Gilchrist’s recollections establish that he knew that there was clearly something amiss with respect to the transaction. The transaction had not been completed in accordance with its purpose, as noted by CWB in its credit analysis – that is, to allow the pharmacy to offer telemedicine services.

[146] Despite Mr. Alghouti raising red flags, CWB never undertook any inquiries or investigations. According to Mr. Gilchrist, CWB had no reason to. CWB had the signed acknowledgement and the insurance certificate. CWB was providing financing and Mr. Gilchrist only considered CWB to “technically” own the equipment throughout the lease, all of which suggests that, notwithstanding the lease agreement’s terms and conditions, CWB treated the financing as a loan to the plaintiffs based solely on their creditworthiness.

[147] As Mr. Gilchrist reiterated throughout his cross-examination, CWB was financing the pharmacy. CWB was not responsible to ensure the equipment was delivered and, in any event, based on the signatures on the lease and the receipt of the insurance certificate, CWB believed that the equipment had been delivered. Other pharmacists received equipment from Medview, and he did not understand why the plaintiffs did not. Mr. Gilchrist noted that, the last time he leased a car, his banker did not check to see if he received the car.

[148] When plaintiffs’ counsel asked Mr. Gilchrist about the Effective Date of the lease, in accordance with clause 3, being the date on which Medview delivered the equipment as indicated in the Delivery and Acceptance Certificate, Mr. Gilchrist asserted that the lease’s Effective Date was September 16, when the first payment was due, according to the front page of the lease. Mr. Gilchrist explained that this was because, according to Mr. Gilchrist, clause 26 of the lease states that the “lease schedule [the front page] trumps” the terms and conditions of the lease. He reiterated that the lease’s Effective Date, in accordance with the provisions in clause 3, were not applicable in these circumstances.

[149] Overall, I would describe Mr. Gilchrist as rather glib in response to questions on cross-examination.

[150] The plaintiffs received no value from CWB. Although CWB paid Medview, even if Medview had delivered the equipment, the equipment was not useable and of no value without Medview’s services, which Medview was to provide if the plaintiffs had entered into a MSA with Medview.

[151] I agree with plaintiffs’ counsel that it is disingenuous for CWB to advance its position that it believed that the plaintiffs were in possession of the equipment before they sent money to Medview for purchasing of same. CWB did not take any safeguards or do any due diligence in relation to the omission of the delivery date on the lease.

[152] As noted previously, it is not unreasonable that Mr. Alghouti did not expect CWB to advance funds to Medview on his behalf without more care and attention on CWB’s part.

[153] Also, as noted previously, although the lease defined its Effective Date as the date of delivery as indicated in the Delivery and Acceptance Certificate, no such certificate was requested. Further, there was no comparable evidence of delivery. To the contrary, the date of delivery of the equipment was left blank on the front page of the lease.

[154] In addition, CWB’s advance of funds to Medview was contrary to Medview’s invoice to CWB. Even if it was appropriate for CWB not to undertake due diligence in relation to Medview, CWB made no effort to confirm that the plaintiffs had entered into a MSA, which (i) was required to implement the purpose of the loan as stated by CWB; (ii) was in accordance with Medview’s lease financing proposal to CWB; and (iii) was required to render the equipment usable.

[155] According to the terms and conditions of its lease, CWB owned the equipment, yet it made no effort to ensure the equipment existed.

[156] CWB’s assertions that Mr. Alghouti was careless in signing the documents, that the plaintiffs are “stuck with the documents,” and that no reasonable businessman would believe that the documents “would not count” do not dissuade me from my findings. On the contrary, what reasonable businessman would believe that he was binding himself and his company to a five-year lease of equipment that was never delivered and, even if received would be unusable and of no value without a MSA – particularly when the documentation he signed and the blank invoice he saw, which was included in the credit application package and was the catalyst for the advance of funds, clearly contemplated equipment delivery and the execution of a MSA?

[157] CWB took the position that their arrangements with the plaintiffs were nothing more than a financing contract. If that were the case, CWB should have acted accordingly and provided funds directly to the plaintiffs and/or ensured it had a direction or authorization from the plaintiffs to advance the funds to Medview on their behalf.

[158] In addition, I note that in National Leasing Group v. Abbotsford Dental Group Inc., [2012] B.C.J. No. 1250 (S.C.), a case relied on by CWB, which I will discuss more fully below, the lessee was required to sign a Direction to Pay and an Indemnification and Authorization. Importantly, the conditions of the financing required the signing of these documents, which authorized National Leasing to advance money to a supplier for the purchase of the equipment. National Leasing would not advance funds unless all conditions were satisfied.

[159] I also do not accept CWB’s argument that the lease is not effective as of the Effective Date. CWB cannot resile from the terms and conditions of its document and take the position that the definition of the lease’s Effective Date, which is tied to a Delivery and Acceptance Certificate, is irrelevant and meaningless. Mr. Gilchrist referenced clause 26 of the lease, which included the statement that “in the event of any inconsistency between the terms of the attached lease schedule and the terms of this agreement, the terms of the attached lease schedule shall prevail.” The lease agreement’s front page, which is the attached lease schedule referenced in clause 26, indicates, under payment details, that the commencement date was June 16, 2016, there was a rent-free period until September 15, and that 57 payments were due thereafter. These details do not create an inconsistency that must be cured by clause 26. Pursuant to clause 3, rent is to be paid in the amounts and at the times specified in the attached lease schedule and “if the Effective Date is not the first day of a calendar month, rent shall commence and be payable on the first day of the next calendar month”. Further, the Term of the lease is defined in clause 2 as “the period commencing on the Effective Date, or if the Effective Date is not the first day of a calendar month, then from the first day of the next calendar month after the Effective Date, for the number of months specified in the attached Lease Schedule”.

[160] I note that there is no provision in the lease, or other document, addressing the potential non-delivery of the equipment. Clause 3 only states that the “obligation to pay rent and perform all your obligations hereunder shall be unconditional in all circumstances, and for greater certainty shall not be reduced or terminated if the equipment does not operate as expected or as specified”. This is different from the circumstances considered by the court in National Leasing, which I will discuss below.

[161] I am satisfied that CWB was obliged to be more diligent before advancing funds on behalf of the plaintiffs. I am also satisfied that CWB’s lack of diligence continued with – and was demonstrated by – CWB’s hands-off approach even after Mr. Alghouti alerted Mr. Gilchrist to red flags in June 2016.

[162] CWB retained title to the equipment. The documentation signed by the plaintiffs reflects an equipment lease arrangement. In these circumstances, CWB had to do more than it did before advancing monies to Medview. It is not too much to require that CWB act in accordance with the terms and conditions of its own agreement and ensure that a delivery date is included on the front page of their lease and/or a Delivery and Acceptance Certificate is completed. In addition, as previously noted, a direction to pay and authorization to purchase could have been required. In cases I will discuss below, delivery to the lessee was verified verbally by the lessor. These safeguards would have cost CWB little in terms of effort and time.

[163] I am, therefore, satisfied that, in these circumstances, the plaintiffs are not liable to CWB under the equipment lease.

[164] In Holmes v. Commit Leasing, 1989 O.J. No. 1027 [Holmes], the court concluded that a lessor’s failure to ensure delivery of the equipment, which was the subject matter of the lease agreement, constituted a fundamental breach of contract that made the lease agreement, a related claim under a promissory note, and a related guarantee unenforceable. The plaintiff in that case was granted judgment for the return of monies paid under the lease agreement and the defendant’s (lessor’s) counterclaim was dismissed.

[165] As previously stated, Ms. Ciutat was not an agent of CWB, and her knowledge of non-delivery does not represent CWB’s knowledge. However, I cannot accept CWB’s argument that the reasoning in Holmes is not applicable because there was no agency relationship between CWB and Ms. Ciutat or any other Medview representative

[166] In Holmes, the lessee had signed an acknowledgement of delivery but did not ever receive the equipment. The court found that notwithstanding the acknowledgment of possession of the equipment, the lessor knew that the equipment had not been delivered “since it had not yet been bound to provide the financing”. As in this case, the lease in Holmes provided that the lessee was renting the equipment, that title to the equipment remained with the lessor, and that the equipment would be delivered and be in the lessee’s possession. The court found that it was the lessor’s responsibility “to see that the equipment being the subject matter of the lease agreement are delivered to the lessee if it seeks to hold the plaintiff to the terms of the lease agreement.”

[167] Similarly, courts in Alberta Pacific Leasing Inc. v. Mak (1997), 1997 CanLII 24639 (AB KB), 208 A.R. 257 (Q.B.) [Alberta Pacific Leasing], Superior Leasing (a division of Superior Acceptance Corp.) v. Butland (1994), 1994 CanLII 8881 (NB QB), 156 N.B.R. (2d) 152 (Q.B.) [Superior Leasing], and Infotec Leasing Ltd. v. Lumac Holdings Ltd., 1994 Canlii 10242 (N.B. Q.B.) [Infotec] found fundamental breaches of equipment leases where equipment was never delivered and concluded that the leasing companies in those cases could not rely on delivery certificates.

[168] In Infotec, the court found that the leasing company could not rely on a signed delivery certificate when it knew the equipment had not been delivered.

[169] In Superior Leasing, the court found that the leasing company could not rely on a delivery and acceptance certificate in the absence of a phone call confirming delivery.

[170] In Alberta Pacific Leasing, the court found that the leasing company’s carelessness barred it from claiming that it was an innocent party entitled to rely on a false delivery and installation certificate. In Alberta Pacific Leasing, the court found that the leasing company was the party that was in the best position to make sure that the transaction proceeded smoothly, that it could have confirmed equipment delivery, and that it did not produce a commitment letter or anything in writing, which outlined and described how the lease transactions were to proceed.

[171] I do note that, in Alberta Pacific Leasing, the lessee did not provide an insurance certificate to the leasing company. However, I do not agree with CWB’s argument that the insurance coverage is independent corroboration from the insurer that the equipment had been delivered adding credence to CWB’s assertion that it believed that the equipment had been delivered to the plaintiffs.

[172] These circumstances are distinct from those before the court in Hefler Forest Products Ltd. v. MCAP Leasing Inc., 2011 NSSC 505, 314 N.S.R. (2d) 24 [Hefler], a decision that CWB relied on. In that case, the court found that the equipment lease was a valid and enforceable contract even though the equipment was never delivered to the lessee. The court found that both the lessor and the lessee were innocent parties but that the lessee was in a better position to detect non-delivery of the equipment and, as between the lessor and the lessee, ‘the lessee was responsible for the funds being released to the vendor. Although the court in Hefler found that there was no condition precedent requiring the equipment’s delivery and installation for the lessor to release funds, there was also evidence that the lessor’s standard operating procedure had been followed and there was documentary proof of same, which included the lessee verbally confirming equipment delivery. This verbal confirmation had been noted and was part of the documentary record.

[173] It is significant that, in Hefler, the lessee signed an acknowledgement of delivery in relation to the equipment which was the subject of the lease and also provided verbal confirmation that the equipment was in its possession. It is also significant that, in Hefler, there were no provisions in the lease analogous to the provisions in this lease, such as the definition of “Effective Date.”

[174] I also am satisfied that Mr. Alghouti is not liable to CWB under the guarantee. As set out above, the court in Holmes concluded that a lessor’s failure to ensure delivery of the equipment constituted a fundamental breach of contract that made the lease agreement and a related guarantee unenforceable.

[175] In asserting that Mr. Alghouti remained liable to CWB whether or not the lease agreement was enforceable, CWB relied on National Leasing. In that case, National Leasing paid a deposit to an equipment supplier that later defaulted on its obligations and failed to supply the equipment.

[176] In National Leasing, distinct from the circumstances here, the lessee signed a Direction to Pay, addressed to the supplier of the equipment and the lessor, that included a statement that the lessee authorized and directed the lessor to pay the supplier for the equipment described in the lease.

[177] At the same time as the Direction to Pay was signed, the lessee signed an Indemnification and Authorization, which the court noted was only five sentences in length. This document included a statement that “if we fail to lease the equipment from the lessor for any reason, including…the supplier’s failure to deliver or install, …. we indemnify the lessor of and from any and all liabilities and expenses incurred by the lessor in connection with the purchase of the equipment”. The Indemnification and Authorization also included an authorization and direction to the lessor to purchase the equipment from the supplier for the purpose of leasing the equipment to the lessee.

[178] National Leasing sought recovery of funds pursuant to the signed indemnity. As the court observed at para. 49, “whether or not the lease was enforceable at all times, the enforceability of the indemnity was not independent on the ongoing operation of the lease”. In those circumstances, where the indemnity specifically stated that the lessee would indemnify the lessee for its expenses even if the equipment was not delivered, the lessee was liable to the lessor.

[179] The reasoning in National Leasing does not persuade me to accept CWB’s arguments. There were no similar provisions in any of the documents signed by the plaintiffs in this case and the process engaged in by National Leasing was not followed. There is no consideration for Mr. Alghouti’s guarantee. The Effective Date of the lease did not occur. I am satisfied that Mr. Alghouti is not personally liable to CWB.

[180] I note also that these circumstances are distinct from those before the court in Canadian Imperial Bank of Commerce v. Toolmetrix Inc. et al., [2015] O.J. No. 1991 (S.C. J.), where a guarantor’s obligations were not diminished by changes to the principal debt, anything done by the plaintiff, or any alleged forgery of the guarantor’s signature which added to the principal debt.

[181] Another point of support for dismissing CWB’s claim is the Court of Appeal for Ontario’s decision in MacQuarie Equipment Finance Ltd. v. 2326695 Ontario Ltd. (Durham Drug Store), 2020 ONCA 139 [MacQuarie]. Interestingly, MacQuarie was a case that also involved Medview. However, the circumstances of that case are less egregious than what happened to the plaintiffs in this case.

[182] In MacQuarie, the pharmacist had signed the equipment lease on a day she was busy with customers in the pharmacy. She did not review the lease in detail, believing it to be a version of the MSA from Medview. She signed the paperwork to facilitate Medview’s delivery to her store. On the MacQuarie summary judgment motion, the court found that, while Medview delivered the telemedicine equipment to the pharmacist, “Medview had failed to disclose that its telemedicine services lacked the necessary regulatory approvals” such that the pharmacist had to cease offering telemedicine services and, as a result, had to discontinue payments under the equipment lease.

[183] A former Medview employee alleged fraud in an affidavit, stating that Medview and Mr. Nead had “allegedly defrauded several pharmacies by recruiting them to join its telemedicine business and to purchase related equipment. Medview allegedly advised pharmacies that its telemedicine services were approved by the Ontario Ministry of Health when this was false.” The motion judge found that the pharmacist and the leasing company were innocent parties and “did not participate in or have knowledge of any fraud allegedly committed by Medview and Nead, or fraudulently misrepresent anything” to the pharmacy.

[184] The Court of Appeal had to address the issue whether the financing company, which was not CWB in that case, was entitled to the full amount owing under the equipment lease.

[185] The similarity between this case and MacQuarie is that the equipment lease in MacQuarie also contained a no-cancellation clause prohibiting the lessee from cancelling the lease “for any reason, including equipment failure, damage or loss.” This lease and the MacQuarie lease contained other similar provisions – that the lessee had selected the equipment and the equipment supplier and that the leasing company had purchased the equipment at the lessee’s request and instruction only. As the Court of Appeal noted at para. 29, the effect of the no-cancellation clause was that the pharmacy “would have to keep paying for the equipment even if Medview and Mr. Nead defaulted in providing telemedicine services. Without those services, the equipment was of no use.” The Court of Appeal also noted, at para. 30, that this no-cancellation clause was “at odds with the early termination provision of the Medview MSA.”

[186] The important guidance from MacQuarie is outlined at paras. 31, 32, and 33 as follow:

We do not dispute the ability of contracting parties to agree to such a “no cancellation” provision in an adhesion contract such as the lease”…

Nor do we dispute the binding effect of a party’s assent to a contract’s terms by signing it, whether or not they read the contract with appropriate care or not at all…

However [referencing Professor John D. McCamus in the Law of Contracts, 2^nd edition (Toronto: Erwin Law, 2012) at page 194] even with a signed agreement, inadequate notice of a particularly unfair term may render that term unenforceable.

[187] The Court of Appeal went on to note that the leading Ontario case on this point remains the Court of Appeal’s decision in Clendenning (1976), 1978 CanLII 1446 (ON CA), 18 O.R. (2d) 601 (C.A.), in which an exclusion clause was found to be unenforceable.

[188] At para. 37 of MacQuarie, the Court of Appeal also found that “the highly unusual circumstances” of the case brought it within the Clendenning principle and that the lessor should have specifically brought the no-cancellation provision to the pharmacist’s attention prior to her executing the lease agreement: “It should have been explained to her that she would remain obligated to pay for the telemedicine equipment under the lease even if Medview defaulted on its obligations.”

[189] In their reasoning, the Court of Appeal referenced the fact that the no-cancellation provision of the lease was “at odds” with the termination provision in the MSA from Medview. Although no MSA was signed in this case, MacQuarie has other important similarities to this case. As is the case here, the lease was “signed in a hurried manner,” “with no opportunity to negotiate the terms,” and “without the benefit of legal advice.” Additionally, as is the case here, the entire lease in MacQuarie was “contained in two tightly packed pages in extremely small font. While technically legible, it can only be read with difficulty.” And, importantly, in this case and MacQuarie, the lessor did not draw any clauses in the lease agreement to the attention of the lessee, the lessor did not provide an executed copy of the lease to the lessee, and the lessor did not confirm to the lessee, on a timely basis, that the money had been advanced to the vendor. The Court of Appeal in MacQuarie found that the lessee pharmacy was therefore entitled to terminate the lease and return the lease equipment to the leasing company.

[190] Therefore, even if there was no fundamental breach of contract by virtue of the non-delivery of the equipment, I would find that, as in MacQuarie, the plaintiffs are entitled to terminate the lease. CWB took no measures to draw the no-cancellation provision term to the plaintiffs’ attention and Mr. Alghouti gave notice of termination of the lease in June 2016 when, at the very least, CWB was aware he had no contract with Medview.

Orders granted

[191] The equipment lease, a general security agreement, a guarantee, and an amending agreement between the plaintiffs and CWB are declared void.

[192] An order will go requiring CWB to return to the plaintiffs $42,175.10.

[193] The plaintiffs are presumptively entitled to costs as the successful party in this litigation. I urge counsel to endeavour to resolve the issue of costs. However, if necessary, counsel may make brief written submissions on costs within 60 days.

[194] CWB’s claim is dismissed.

“Justice L.C. Leitch”

Justice L.C. Leitch

Released: July 27, 2021