SUPERIOR COURT OF JUSTICE - ONTARIO
RE: BASKARAN KANDIAH and KARAN HOLDING BV Plaintiffs
AND:
TEKNO MEDIA INC., MTEK SECURITY INC. and MATHAN SHANMUGARASA Defendants
BEFORE: Mr. Justice Chalmers
COUNSEL: R. Lachmansingh and K. Lee, for the Plaintiffs
D. Freudman, for the Defendants
HEARD: May 18, September 15, and October 5, 2021, by videoconference
ENDORSEMENT
OVERVIEW
1The Plaintiffs bring this motion for summary judgment against the Defendant, Mathan Shanmugarasa.
2The Plaintiffs state that on March 15, 2018 the parties executed a loan agreement (the Loan Agreement) between the Plaintiff, Baskaran Kandiah on his own behalf and on behalf of the Plaintiff, Karan Holding BV and the Defendants, MTEK Security Inc. and Tekno Media Inc. Mr. Shanmugarasa executed the Loan Agreement as a guarantor of the obligations of Tekno Media and MTEK. Pursuant to the terms of the Loan Agreement, the Plaintiffs deposited $1,000,000 in MTEK’s bank account by March 15, 2018. The Defendants agreed to repay the loan by paying the loan amount plus interest of $300,000 by March 14, 2019. The Defendants failed to repay the loan and interest. On September 10, 2020, the Plaintiffs, through their counsel, sent a demand letter to the Defendants.
3The Defendants acknowledge that they received the sum of $1,000,000. However, they deny they borrowed any money from the Plaintiffs. They state that the Loan Agreement is a forgery. The Defendants state that they agreed to hold the money for the Plaintiffs and to disburse the funds to individuals identified in a promissory note dated March 3, 2019 (the Promissory Note). The Defendants state that the money was disbursed in cash payments in accordance with Mr. Kandiah’s instructions. Mr. Kandiah states that the Promissory Note is a forgery.
4For the reasons set out below, I am not satisfied that the evidence on the motion is sufficient to allow me to make the necessary findings with the certainty required pursuant to Hryniak v. Maudlin, 2014 SCC 7. I dismiss the motion for summary judgment.
BACKGROUND FACTS
5The motion for summary judgment was initially argued on May 18, 2021. I made an order pursuant to R. 20.04 (2.2) that for the purpose of determining whether there is a genuine issue requiring a trial, oral evidence will be presented by Mr. Kandiah and Mr. Shanmugarasa. The parties provided their testimony on September 15, 2021. The parties made their oral submissions with respect to the summary judgment motion on October 5, 2021.
Evidence of Baskaran Kandiah
6Mr. Kandiah testified that in the spring of 2018, he was approached by Mr. Shanmugarasa for a loan. He was told that the loan was required for Tekno Media’s sponsorship of the IBC Tamil event. The Loan Agreement was signed at Mr. Kandiah’s office on March 3, 2018. Mr. Kandiah specifically denied forging Mr. Shanmugarasa’s signature.
7Mr. Kandiah admitted in cross-examination that there is no correspondence between the parties with respect to the loan. Mr. Kandiah did not conduct any due diligence to determine if the Defendants could repay. He conceded in cross-examination that he loaned the money without looking at the Defendants’ financial statements. He testified he did not need to look at the financials because he knew MTEK had had good results, and he trusted Mr. Shanmugarasa. He conceded he had only met with Mr. Shanmugarasa on two or three occasions before agreeing to loan the funds.
8The Loan Agreement provides that the loan is repayable in one year at 30% interest. At the time the loan was allegedly entered into, the Bank rates were between 3.45% to 3.95%. If in fact the Defendants were having good results, it is surprising that they would take out a loan at 30% rather than going to a bank for a standard loan.
9The Plaintiffs state that the Loan Agreement was prepared in draft by Mr. Shanmugarasa and e-mailed to the Plaintiffs. This evidence is critical. It would establish that Mr. Shanmugarasa was aware of the Loan Agreement and that it is not a forged agreement. The Plaintiffs did not include in the motion materials the e-mail that attached the draft Loan Agreement. No explanation was provided for not including the e-mail.
10The signature of Mr. Shanmugarasa on the Loan Agreement appears identical to the signature on the Promissory Note. The Plaintiff takes the position that after signing the Loan Agreement, Mr. Shanmugarasa cut the signature from the Loan Agreement and pasted it into the Promissory Note. As noted by the Defendants’ counsel, the allegation is that the Defendants prepared and signed the Promissory Note. The Defendants argue that there is no reason Mr. Shanmugarasa would have been required to cut and paste the signature when he could have simply signed the Promissory Note himself.
11The loan came due on March 14, 2019. A total of $1,300,000 was owed. The Plaintiffs did not immediately send a demand letter. The formal demand letter was not sent until about 18 months later on September 10, 2020. Mr. Kandiah testified that he made about 30 telephone calls and sent an additional 10-15 text messages to Mr. Shanmugarasa in which he demanded repayment. The Plaintiff, Kandiah testified that in the text messages, Mr. Shanmugarasa admitted he owed the money. The Plaintiff’s phone records, and the text messages were not introduced into evidence. As argued by the Defendants’ counsel, the phone and text records would support the Plaintiffs’ position if the text messages included an admission by the Defendants that there was a loan and the amount owing had not been paid. No reasonable explanation was provided by the Plaintiffs for the failure to produce the text messages or phone records.
12Mr. Kandiah testified that he did not see the Promissory Note until after the commencement of the litigation. He denied preparing the document. The Promissory Note refers to five individuals and companies who were to receive the $1,000,000 paid to MTEK. Mr. Kandiah testified that the Promissory Note is a fraudulent document. He does not believe any of the individuals listed in the Promissory Note received any money from the Defendants.
13One of the individuals listed in the Promissory Note is Kailan Ariyarajah. Mr. Kandiah spoke to him and asked if he received money from the Defendants. Mr. Ariyarajah denied receiving any money. Mr. Ariyarajah swore an affidavit on March 26, 2021 in which he deposed that neither he nor his company, Millennium Leisure Travel Inc. received any payment from the Defendants.
Evidence of Mathan Shanmugarasa
14Mr. Shanmugarasa was the President and CEO of Tekno Media between 2018-2020. He was also President and CEO of MTEK. He testified that he met Mr. Kandiah on March 2, 2018 at Mr. Kandiah’s office in Woodbridge. The purpose of the meeting was for Mr. Shanmugarasa to watch a presentation regarding the Tamil 100 Artists Event. Mr. Kandiah was a Director of IBC Tamil, the organization that was putting on the event.
15According to Mr. Shanmugarasa, Mr. Kandiah intended to pay $1,000,000 to sponsor the event. Mr. Kandiah allegedly asked Mr. Shanmugarasa if he had a bank account he could use to deposit the money and then pay out the expenses. Apparently, Mr. Kandiah told Mr. Shanmugarasa that he did not have an available bank account in Canada. According to Mr. Shanmugarasa, he agreed that Mr. Kandiah could use an account that had been used by MTEK. Mr. Kandiah deposited $1,000,000 into the account.
16Mr. Shanmugarasa denied seeing the Loan Agreement before the litigation was commenced. He denied signing the agreement. He noted that the agreement does not have his initials on all the pages although the pages were initialed by Mr. Kandiah and the person who allegedly signed on behalf of MTEK. Mr. Shanmugarasa testified that his signature on the Loan Agreement was forged. He also noted that he is a Director of MTEK and there is no reason that anyone other than himself would have executed the agreement on behalf of MTEK.
17Mr. Shanmugarasa denies there was any discussion with Mr. Kandiah about a loan. He states that he did not require a loan. He also states that even if he required a loan, he could have obtained regular bank financing at a lower interest rate rather than 30% per annum. He stated that his company was successful at that time and had no significant debts. The Defendants did not provide any evidence from a financial institution to confirm that a loan was available for $1,000,000 at a lower interest rate. No financial records for the company were provided on the motion.
18According to Mr. Shanmugarasa, Mr. Kandiah asked him to sign a Promissory Note with respect to the disbursement of the funds. He testified that the note was prepared by Mr. Kandiah and that he signed the note on March 7, 2018. Mr. Shanmugarasa testified that the money paid into the Defendant’s account was disbursed to the five beneficiaries listed in the Promissory Note. The money was paid in cash. According to Mr. Shanmugarasa, the Defendants frequently had up to $35,000 in cash on hand from their grocery and restaurant businesses, which was used to make the payments.
19Mr. Shanmugarasa testified that as money was needed for the event, the individuals listed on the Promissory Note would attend at his business. They did not identify themselves. Mr. Shanmugarasa stated that if they were driving one of his cars and had the remote control to enter the garage, he was satisfied that they were entitled to receive a payment. According to Mr. Shanmugarasa, the two managers of his restaurant and grocery business disbursed the funds. No affidavit from either manager was filed on the motion.
20There are no bank statements showing any withdrawals of the money to pay the individuals listed on the Promissory Note. Mr. Shanmugarasa testified that he had prepared an Excel spreadsheet that shows all the disbursements. He did not obtain receipts when the cash was paid out to the individuals listed on the Promissory Note. The spreadsheet was not produced by the Defendants. Also, the Defendants did not provide evidence from any of the individuals listed on the Promissory Note confirming that they received the funds for the event. Mr. Ariyarajah swore an affidavit that he did not receive any of the funds. The Defendant chose to not cross-examine Mr. Ariyarajah on his affidavit. Mr. Shanmugarasa takes the position that Mr. Ariyarajah is a friend of Mr. Kandiah and that he swore a false affidavit.
21Mr. Kandiah stated that the loan was due on March 14, 2018. He testified that he called Mr. Shanmugarasa 30-50 times with respect to the repayment. Mr. Shanmugarasa denies that there were any calls or demands from Mr. Kandiah. He specifically denies that he sent a text message to Mr. Kandiah in which he admitted he owed $1,000,000 to the Plaintiffs.
ANALYSIS
Test for Summary Judgment
22A court may grant summary judgment if satisfied, on the written record that there is no genuine issue requiring a trial: R. 20.04 of the Rules of Civil Procedure. A trial will not be required if the summary judgment process:
allows the judge to make the necessary findings of facts, including any necessary findings of credibility;
allows the judge to apply the law to those facts; and,
is a proportionate, more expeditious and less expensive means to achieve a just result: Hryniak v. Mauldin, at para. 49.
23In Hryniak, the court set out a two-part test for summary judgment. First the motion judge must determine whether there is a genuine issue requiring a trial based on the evidence contained in the motion record. There will be no genuine issue requiring a trial where the evidentiary record provides the judge with the evidence necessary to reach a fair and just determination, in a process that is timely, proportionate and affordable: Hryniak, at para. 24.
24The second step is activated when the judge finds that there is a genuine issue requiring a trial. The judge must then determine whether the issues can be decided using the additional powers set out in Rules 20.04 (2.1) and (2.2) of the Rules of Civil Procedure. These powers may be used if they will lead to a fair and just result. The question of whether it is in the interest of justice to use the expanded fact-finding powers depends on the nature and complexity of the litigation, a comparison of the evidence that will be available at trial and on the motion, the proportional procedure considering the nature of the issues, as well as the size, complexity and cost of the dispute along with other contextual factors: Hryniak, at paras. 68 and 82.
25In matters in which credibility is an issue, summary judgment may not be the more proportionate, expeditious or less expensive means to achieve a just result: Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, at para. 44. The Court of Appeal provided the following direction with respect to the use of the summary judgment procedure:
With respect, the cultural shift referenced in Hryniak is not as dramatic or as radical as the motion judge would have it. The shift recommended by Hryniak was away from the very restrictive use of summary judgment, that had developed, to a more expansive application of the summary judgment procedure. However, nothing in Hryniak detracts from the overriding principle that summary judgment is only appropriate where it leads to “a fair process and just adjudication”: Hryniak at para. 33. Certainly there is nothing in Hryniak that suggests that trials are now to be viewed as the resolution option of last resort. Put simply, summary judgment remains the exception, not the rule: Mason v. Perras Mongenais, 2018 ONCA 978, at para. 44.
Evidence on the Summary Judgment Motion
26I find that the evidence presented by both parties on the motion is deficient and as a result, I am unable to make the necessary findings with the certainty required pursuant to Hryniak v. Maudlin.
27Mr. Shanmugarasa denies that he prepared or signed the Loan Agreement. Mr. Kandiah testified that Mr. Shanmugarasa e-mailed the draft Loan Agreement to him. The Plaintiffs failed to produce the e-mail from Mr. Shanmugarasa attaching the draft agreement. No explanation was provided for the failure to produce the e-mail. An e-mail from Mr. Shanmugarasa enclosing the draft Loan Agreement would be conclusive proof that Mr. Shanmugarasa signed the Loan Agreement and that it was not forged by the Plaintiff. In argument, Plaintiffs’ counsel suggested, without evidence that the e-mail may no longer be available. I find it difficult to believe that the Plaintiff would have deleted such an important message.
28Mr. Kandiah also testified that once the loan became due in March 2019, he made about 30 phone calls and sent 10-15 text messages demanding payment. He also testified that in one of the texts from Mr. Shanmugarasa he confirmed that he was required to repay the loan. The phone calls and text messages were not produced by the Plaintiffs. If, in fact, there is an e-mail in which Mr. Shanmugarasa confirmed he was required to repay the loan, it is difficult to understand why the text was not included in the Motion Record or the two Supplementary Records. As noted by the Defendants’ counsel, if there was a text message with an admission of liability from the Defendant, why would the Plaintiffs incur thousands of dollars to retain a handwriting expert.
29Plaintiffs’ counsel states that his client gave him the phone and text messages after my endorsement dated May 18, 2021 was released. In that endorsement, I stated that no further material was to be filed on the motion. It is for that reason that the phone and text messages were not filed when argument on the motion resumed on October 5, 2021. He did not have an explanation for why the phone and text messages were not produced when the motion was originally filed.
30I draw an adverse inference from the Plaintiffs’ failure to produce the e-mail from Mr. Shanmugarasa that Mr. Kandiah says enclosed the draft Loan Agreement. I also draw an adverse inference from the Plaintiffs’ failure to produce the phone and text messages demanding payment of the loan and in particular the text message from Mr. Shanmugarasa in which he allegedly admitted he is required to repay the loan. As noted by counsel for the Defendant, the Plaintiff had multiple opportunities to put forward conclusive evidence of Mr. Shanmugarasa’s liability but failed to do so.
31I also find that the evidence put forward by the Defendants is not credible or consistent with common sense. Mr. Shanmugarasa confirmed that he received $1,000,000 from the Plaintiffs but states that this was because the Plaintiffs did not have a Canadian bank account. According to Mr. Shanmugarasa, he agreed to use a bank account in the name of MTEK to allow the funds to be disbursed to individuals involved in the IBC Tamil event.
32Mr. Shanmugarasa testified that the managers of his grocery and restaurant businesses would disburse the funds to persons identified on the Promissory Note. The individuals would attend at the Defendants’ premises. The identity of the individuals would not be confirmed. Money would be paid as long as they had the remote control to enter the garage. The payments were made in cash. No receipts were obtained.
33Mr. Shanmugarasa testified that the payments were recorded on an Excel spreadsheet. The spreadsheet was not produced on the motion. He later testified that the payments were also recorded on the Manager’s Daily Progress report which recorded all payments made by the managers each day. The Daily Progress reports were not produced. Although the payments were made by his two managers, no affidavit from them were filed on this motion. Mr. Shanmugarasa was asked why this material was not produced. His explanation was that he did not expect the documents to be persuasive because they were prepared by his employees. He said he did not file affidavits from his managers because he did not want to bring them to court. I find his explanations to be without merit.
34The $1,000,000 was deposited into the MTEK bank account. Mr. Shanmugarasa testified that the payments to the individuals listed in the Promissory Note were in cash from the grocery store and restaurant. He was unable to explain how the money was transferred from the MTEK account to the restaurant and grocery store. He stated that MTEK transferred money to the grocery store and restaurant by paying expenses on their behalf. Mr. Shanmugarasa stated that the financial records of his companies would confirm the payments. No financial records for any of the Defendants’ companies were produced.
35Mr. Shanmugarasa testified that the person who picked up most of the money was Mr. Ariyarajah. Mr. Ariyarajah filed an affidavit in support of the Plaintiffs’ motion in which he states that he did not receive any money. Mr. Shanmugarasa takes the position that Mr. Ariyarajah swore a false affidavit. He states that Mr. Ariyarajah owes him money and that is why he is helping the Plaintiff. Mr. Shanmugarasa did not cross-examine Mr. Ariyarajah on his affidavit. Although Mr. Shanmugarasa states that he provided money to the individuals and companies listed on the Promissory Note, he did not file any evidence from the individuals who allegedly received payments. Mr. Shanmugarasa stated that he contacted these people and they confirmed they picked up the money but refused to provide an affidavit.
36The Defendants’ evidence in response to the Plaintiffs’ handwriting expert is also not credible. The Plaintiffs’ handwriting expert, Diane Kruger prepared a report in which she provides the opinion that the signature on the Loan Agreement and the Promissory Note are identical. She concluded that it was “highly probable” that the signature of Mr. Shanmugarasa in the Loan Agreement was the original. She could not make a definitive determination without an original signature from Mr. Shanmugarasa. He was asked to provide an original signature, but he declined to do so. He did not provide an explanation for not providing a handwriting sample.
37Mr. Shanmugarasa admits he signed the Promissory Note. He states that the Plaintiff must have taken his original signature from the Promissory Note and pasted the signature onto the forged Loan Agreement. The signature from the forged Loan Agreement was pasted onto a new Promissory Note. I find Mr. Shanmugarasa’s explanation to be inconsistent with common sense. Ms. Kruger’s evidence is unchallenged. She was not cross-examined on her affidavit which attached her report. The Defendants did not deliver a report from a handwriting expert.
Conclusions
38The evidentiary record from both parties on this motion is shockingly deficient. According to Mr. Kandiah, he received the draft Loan Agreement from Mr. Shanmugarasa by e-mail however, the e-mail enclosing the draft agreement was not produced. He also states that there were multiple phone calls and text messages in which he demanded payment of the loan, but the phone record and text messages were not produced. Most remarkably, Mr. Kandiah states that in one of the text messages, Mr. Shanmugarasa admitted that he owes the amount of the loan to Mr. Kandiah. Although this admission would be fatal to the Defendants’ position, the text messages were not put into evidence by the Plaintiffs. I draw adverse inferences from the failure of the Plaintiffs to produce this documentation.
39The evidence on behalf of the Defendants is not credible. Although it is the Defendants’ position that money was disbursed to the five individuals or companies listed in the Promissory Note, the Defendants did not introduce any evidence from the individuals confirming the payments were made. The only evidence from any of the individuals listed on the Promissory Note is from Mr. Ariyarajah who stated that he did not receive the funds. Mr. Shanmugarasa takes the position that this is a false affidavit but did not cross-examine Mr. Ariyarajah. The Defendants state that the funds were disbursed in cash. He did not obtain any receipts. There are no withdrawals from the bank account. Although Mr. Shanmugarasa stated that he prepared a spreadsheet setting out the payments, the spreadsheet was not produced on the motion. The Daily Progress reports were not produced. Although the money was allegedly paid by the managers, there is no affidavit evidence from the managers.
40On a summary judgment motion, the parties are expected to put their best foot forward and put before the court all the evidence that would be available at trial. Clearly this has not been done by either party in this case.
41There are significant issues with respect to the credibility of both Mr. Kandiah and Mr. Shanmugarasa. Mr. Shanmugarasa denies signing the Loan Agreement and states that it is a forgery. Mr. Kandiah states that the Promissory Note is a forgery. I was hopeful that the oral testimony from Mr. Kandiah and Mr. Shanmugarasa would allow me to make findings of credibility, and may assist me in making the determination of whether there is a genuine issue requiring a trial: Consolidated Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764. Unfortunately, the oral evidence raised additional issues and exposed the lack of documentary evidence on both sides. The testimony did not allow me to resolve the disputed facts or make the necessary findings of credibility.
42The evidentiary record does not allow me to make the findings of fact with the certainty required of Hryniak. I am not satisfied, on the record before me that summary judgment will result in a fair process or a just adjudication: Mason v. Perras Mongenais, at para. 44.
DISPOSITION
43I dismiss the Plaintiffs’ motion for summary judgment and order the action to proceed to trial. I direct that the affidavits and the oral testimony on the summary judgment motion be used at trial in the same manner as an Examination for Discovery.
44Section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides that the costs of a step in the proceeding are in the discretion of the court. Rule 57.03 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, provides that the court shall fix the costs of the motion and order them paid within 30 days, “unless the court is satisfied that a different order would be more just”.
45In this case, I am of the view that it would be “more just” to reserve the issue of costs to the trial judge. Although the Plaintiffs’ motion was dismissed, I found that there are genuine issues that require a trial. This is not a case in which the moving party advanced a claim that lacked merit or brought the motion as a mere tactic. Instead the Plaintiffs have put before the court an arguable case that will require serious consideration by the trial judge: Optech Inc. v. Sharma, 2011 ONSC 1081, at para. 24. Although the Defendants resisted summary judgment, I found that much of the Defendants’ evidence lacked credibility. I conclude that it would not be just to grant costs of the motion to the Defendants in the circumstances.
DATE: December 20, 2021