Heliotrope Investment Corporation v. 1324789 Ontario Inc., 2021 ONSC 7688

Court File No.: CV-18-167-0000 Date: 2021/11/25

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Heliotrope Investment Corporation Plaintiff

– and –

1324789 Ontario Inc., Jonathan Gary Beach, and Martha Lorraine Beach Defendants

Counsel: Denise Sayer and Adam Stikuts for the Plaintiff Bruce Marks for the Defendants

Heard: October 7, 2021

Amended REASONS FOR DECISION – plaintiff’s motion

The text of the original decision was amended on November 25, 2021 and the description of the amendment is appended.

O’Bonsawin J.

Background

[1] The Plaintiff, Heliotrope Investment Corporation, seeks a Summary Judgment on 34 promissory notes signed by the Defendants, 1324789 Ontario Inc. (“132 Inc.”) and Johnathan Gray Beach and Martha Lorraine Beach (“Beaches”) (collectively “Defendants”), for the principal in the amount of $998,181.23 plus pre-judgment and post-judgment interest thereon at the contractual rate to be calculated at the date of the Order. In addition, the Plaintiff seeks an Order striking the entirety of the Defendants’ Counterclaim or a Summary Judgment dismissing the entirety of the Defendants’ Counterclaim.

[2] Overall, the Defendants signed 61 promissory notes (“Demand Loans”) to Heliotrope. According to the Plaintiff, 34 of the notes represent the principal of $950,009.96 and remain outstanding.

Facts

[3] The parties disagree on many facts. According to the Plaintiff, Heliotrope is a private holding company that loaned funds between July 6, 2016 and April 6, 2018 to the Defendants on 61 promissory notes. The Plaintiff advanced the loans to the Defendants and documented each of them with a separate written promissory note. Thirty-four of the notes remain outstanding. Most of the notes bear interest at 10 percent per annum, while a few bear interest at 10.75 percent per annum.

[4] The Beaches are spouses who operate 132 Inc. Ms. Beach owns all of 132 Inc.’s shares and is its only director. The Plaintiff alleges that Mr. Beach is really the directing mind of the corporation. 132 Inc. was the borrower on the promissory notes and the Beaches personally guaranteed them.

[5] The parties also disagree about who were partners in the two Joint Venture Agreements. It is the Plaintiff’s position that Gavin Marshall controls Heliotrope and is its president and secretary, and controls a non-party company, Magenta Waterfront Development Corporation (“Magenta”). Magenta entered into the two Joint Venture Agreements with 132 Inc.

[6] The joint ventures were for the development and sale of residential building lots in Frontenac County. The joint venture projects are known as Applewood Lane, Johnston’s Point, and Pine Point Road. There is another project called Cranberry Cove in which the Beaches claim an interest, however, Magenta disputes their ownership. The Plaintiff submits Magenta owns 100 percent of Cranberry Cove, funded 100 percent of the land acquisition and development costs, and is now selling lots there after successfully completing the project.

[7] The Defendants argue both parties to this litigation were partners in the two Joint Venture Agreements. There is a dispute about who has control over the development projects including the control over the sale of the land and the handling of the finances.

[8] The Plaintiff demanded payment on the Demand Loans on May 10, 2018. The Defendants have not made payment and take the position that no payment is owing.

[9] In the fall of 2020, Mr. Beach put forward that he had not received independent legal advice on the Joint Venture Agreements’ terms before signing them.

Issues

[10] I must determine if a Summary Judgment should be granted to the Plaintiff and whether the Defendants’ Counterclaim should be dismissed.

Position of the Parties

[11] The Plaintiff submits a Summary Judgment is suitable in this case. It provides the evidence required to fairly and justly adjudicate this dispute, and is a timely, affordable, and proportionate procedure.

[12] In addition, it is the Plaintiff’s position that there are very few, if any, material facts in dispute: the Defendants admit that the Demand Loans are valid and that the funds were advanced but not repaid. Those facts are sufficient to grant judgment to the Plaintiff under the law governing bills of exchange.

[13] With regard to the Defendants’ Counterclaim, the Plaintiff argues it is an abuse of process since their claims in this matter are identical to their claims in other proceedings. Furthermore, the Defendants’ have not taken any steps to advance any of those claims, all of which remain at the pleadings stage. In the alternative, the court should dismiss the Counterclaim by Summary Judgment.

[14] Overall, the Plaintiff argues there is no genuine issue requiring a trial.

[15] For their part, the Defendants argue there exists a genuine issue for trial. It is questionable whether anything is due under the promissory notes. The Plaintiff has already admitted that certain promissory notes have been cancelled or paid directly through proceeds of sale. There have been in excess of $12.5 million of lot sales to be allocated between the parties and towards the Defendants’ debts including the promissory notes.

Analysis

[16] As per Rule 20.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (Rules), after a Defendant has delivered a Statement of Defence or served a Notice of Motion, a Plaintiff may move for Summary Judgment on all or part of the claim in the Statement of Claim. As per Rule 20.04(1), the court shall grant a Summary Judgment if it is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence. The framework for granting Summary Judgments is stated by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87. At paras. 47-49, the Court states:

Summary judgment motions must be granted whenever there is no genuine issue requiring a trial.

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[17] Furthermore, Hryniak sets out the obligations of a judge on a Motion for Summary Judgment. In order for a judge to first determine if there is a genuine issue requiring a trial, he/she must decide based only on the evidence before him/her without using the new fact-finding powers. The new powers can be used by a judge if there appears to be a genuine issue requiring a trial. The new powers under Rule 20.04(2.1) include the weighing of evidence, evaluating the credibility of a deponent, and drawing any reasonable inference from the evidence. In addition, as per Rule 20.04(2.2), a judge may order that oral evidence be presented by one or more parties, with or without time limits on its presentation. As per Ray J. in Ali v. Toyota Canada Inc, 2016 ONSC 5909, at para. 8, when a Defendant brings a motion for Summary Judgment, the Plaintiff must put his/her best foot forward. The parties must “lead trump or risk losing”: see Da Silva v. Gomes, 2018 ONCA 610, para. 18.

[18] The burden of proof on a motion for Summary Judgment rests with the moving party. The burden only shifts to the responding party after the moving party has discharged its evidentiary burden of establishing that there is no genuine issue for trial: Clearway Construction Inc. v. City of Toronto, 2018 ONSC 1736, 89 C.L.R. (4th) 222, at para. 5.

[19] I will start off by reviewing the documents filed in this matter. The record is voluminous. When I downloaded the document bundle from Caselines, there were 2028 pages.

[20] The Plaintiff’s evidence includes the following:

• a Motion Record containing the Affidavit of Gavin Marshall sworn on May 19, 2021 with 41 exhibits (from A to OO) and the Affidavit of William Gavin Marshall sworn June 8, 2018 with 33 exhibits (A to GG);
• a Supplementary Motion Record containing the Affidavit of Catherine Dennis sworn on September 25, 2021 with 11 exhibits (A to K);
• a Second Supplementary Motion Record containing the Affidavit of Catherine Dennis sworn on September 30, 2021 with 3 exhibits (A to D);
• a Third Supplementary Motion Record containing the Affidavit of Zach Parrott sworn on October 6, 2021 with 1 exhibit (A);
• a Fourth Supplementary Motion Record containing the Affidavit of Zach Parrott sworn on October 6, 2021 with 1 exhibit (A); and
• the cross-examination of Gary Beach on July 24, 2019.

[21] The Defendants’ evidence includes the following:

• a Motion Record containing the Affidavit of Gary Beach sworn on September 26, 2021 with 30 exhibits (A to DD);
• a Supplementary Motion Record containing the Affidavit of Gary Beach sworn on October 1, 2021 with 20 exhibits (A to T); and
• a Third Supplementary Motion Record containing the Affidavit of Irina Marks with 2 exhibits (A to B);

[22] I echo Justice Audet’s reasoning in Children’s Aid Society of Ottawa v. K.D., 2021 ONSC 6092 at para. 25. I am aware this was a child protection matter; however, her reasoning applies in this case since it was a general comment regarding Summary Judgment Motions. Justice Audet stated:

This motion was scheduled for two hours. The work required for this Court to go through the voluminous affidavit material filed in an attempt to decipher whether there might be a genuine issue requiring a trial on the matter of disposition would take at least a week. If a matter requires this much evidence to determine whether the outcome is clear and inevitable, then it is probably not suitable to a “summary” judgment motion.

[23] Given the nature of the claim, the monetary amount of the claim, and the evidence provided by way of eight Motion Records, etc., a Summary Judgment is an entirely inappropriate avenue to pursue. It is also not possible to determine if the Defendants’ Counterclaim should be dismissed at this stage in the process. The documents filed are so voluminous, it is impossible to determine if there is a genuine issue for trial. The evidence presented by the parties for the purpose of this Summary Judgment completely defeats the purpose of a Motion for Summary Judgment.

[24] This Motion was scheduled for two and half hours. In order for me to determine if there is a genuine issue for trial, it would take me close to a week to sift through the lengthy documents. If a matter requires this much evidence to determine whether the outcome is clear and inevitable, it should go to a trial and is not suitable for a Summary Judgment Motion.

[25] The parties must return in front of Justice Hurley for another Case Conference since he is responsible for the case management of this file.

Conclusion

[26] For the reasons noted above, I dismiss the Plaintiff’s Motion.

Costs

[27] I encourage the parties to agree with regard to the issue of costs. If the parties cannot agree as to costs, they may provide my office via Trial Management with brief written submissions on costs not exceeding three pages, exclusive of the Bill of Costs. The Defendants will have 10 days from the date of this decision to provide their submissions and the Plaintiff will have 10 days thereafter to do the same. The Defendants will be allowed a brief reply if deemed necessary, of no more than one page which shall be provided within the next 5 days.

Justice M. O’Bonsawin

Released: November 25, 2021

APPENDIX

November 25, 2021: In paragraph [1] the previous company number has been replaced by 1324789 Ontario Inc. (“132 Inc.”).

November 25, 2021: In paragraph [4] the previous company number has been replaced by 132 Inc.

November 25, 2021: In paragraph [5] the previous company number has been replaced by 132 Inc.