CITATION: Sayward Investments Inc. v. Vilson Marciana Da Silva, 2022 ONSC 3559

COURT FILE NO.: CV-20-00001448

DATE: 20220614

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Sayward Investments Inc., Plaintiff

AND:

Vilson Marciana Da Silva, Daenn Monteiro Loureiro and Leblon Carpentry Inc., Defendants

BEFORE: J. Di Luca J.

COUNSEL: Stephen Schwartz, Counsel for the Plaintiff

Matthew Kersten, Counsel for the Defendants

HEARD: May 26, 2022

ENDORSEMENT

[1] This is an undertakings and refusals motion that has arisen in the context of two motions currently scheduled to be heard before me on August 5, 2022. The first motion is a motion by the defendants to discharge a mortgage registered on their property and the second motion is a motion by the plaintiff for summary judgement.

[2] By way of brief background, the litigation in this case arises from two construction financing loans advanced by the plaintiff to the defendants.[^1] The plaintiff alleges that both loans are in default and further alleges that both loans are secured by a single collateral mortgage that has been placed on the defendants’ property. The plaintiff also alleges that in order to obtain the second loan, the defendants agreed to pay a portion of profits from two construction projects (“Briarwood” and “5th Avenue”), but ultimately failed to honour this agreement. The plaintiff argues that a trial is not required to fairly determine these issues.

[3] The defendants argue that only the first loan was secured by the collateral mortgage. They argue that the principal on this loan has been paid off, and they further argue that the mortgage should be discharged upon payment into court of the balance of the interest owing on the loan. In relation to the second loan, the defendants’ position is that the loan is not secured by the initial collateral mortgage. In addition, they allege that the agreed upon profit sharing scheme related only to the Briarwood project and was not for the percentage claimed by the plaintiff. The defendants claim that the second amount advanced was essentially in furtherance of a joint venture on the Briarwood project. The defendants argue that a trial is required in order to fairly determine the issues.

[4] This motion arises from the cross-examination of the defendant Mr. Da Silva. In the notice of motion dated April 11, 2022, the plaintiff alleges that six questions were improperly refused. The plaintiff seeks an order directing that the questions be answered and directing re-attendance for further examination as necessary. The notice of motion does not specify which undertakings have not been fulfilled. The main issue raised in the refusals relates to the quantification of profits on the Briarwood and 5th Avenue projects.

[5] At the outset of the hearing of this motion, counsel advised that they had settled the bulk of the motion on a without prejudice basis. In other words, the defendants agreed to produce certain additional documents without conceding that the undertakings and/or refusals were either unfulfilled or improperly made. The resolution of the motion has addressed the outstanding undertakings and refusals issues as they related to the profits on the Briarwood project.

[6] The remaining live issue for my determination relates to undertakings and refusals in relation to the 5th Avenue project. In this regard, the plaintiff seeks production of documents relating to the 5th Avenue project as particularized at items #1-11 in his letter to defendants’ counsel dated March 24, 2022 (found in the Supplementary Motion Record at page A535 of Caselines).

[7] The plaintiff argues that these documents are relevant to establishing both the existence of the profit-sharing agreement and determining the specific quantum of the profit-sharing agreement, should one be found to exist.

[8] The defendants argue that the documents sought are not relevant as the profit-sharing agreement in relation to the 5th Avenue project, was at best based on agreed upon estimated profits and not actual profits.[^2] Secondly, they suggest that before the court weighs in on this issue, the plaintiff should first be required to establish an entitlement to a percentage of the actual profits on the 5th Avenue project. Lastly, they argue that the documents listed in the March 24, 2022 letter extend well beyond the undertakings and refusals at issue on the motion.

[9] In assessing the merits of these positions, I start with the pleadings. In the statement of claim at paras. 16 and 19, the plaintiff claims that the defendants agreed to pay the plaintiff a share of profits from two projects. The profit for the 5th Avenue project is alleged to be $186,650.10. It appears that this amount is based on a claim of 50% of the estimated profits on the project.

[10] In the statement of defence, the defendants acknowledge that a Notice of Sale delivered to them makes reference to the alleged profit share claim in relation to the 5th Avenue project. However, they deny ever including a profit share from the 5th Avenue project as part of the financing deal. They also plead that even if the plaintiff has “an equity interest in or advanced funds in connection with” the 5th Avenue project, the project is not complete and any claim for profit cannot be calculated.

[11] I turn next to the affidavit evidence filed to date on the summary judgment motion. In this regard, I note that in the affidavit of Raymond Nicolini, a director and officer of the plaintiff corporation, he asserts the profit share agreement was based on 50% of the anticipated profits of the two projects and that documents providing details of the estimated profits were provided to the plaintiff in support of the estimated figures.

[12] In his affidavit dated July 7, 2021, the defendant Mr. Da Silva asserts that the profit share agreement in relation to the Briarwood project was based on actual profits and not estimated profits. He further notes that the actual profits on the project are significantly less than the original estimated profits.

[13] In relation to the claim for profits from the 5th Avenue project, Mr. Da Silva asserts in various affidavits that neither the plaintiff nor Mr. Nicolini have any connection with the 5th Avenue project, and as such have no claim to a share of the profit for that project. That said, while maintaining the position that no profits are owed in relation to the 5th Avenue project, Mr. Da Silva also asserts in his July 7, 2021 affidavit that the estimated profits relied upon by the plaintiff is incorrect. He then provides a revised estimate of profits for the 5th Avenue project. He also raises issues with the provenance of the charts and spreadsheets relied on by Mr. Nicolini in support of his claim for profits on the projects.

[14] Against this backdrop I turn to my determination of the issue. In my view, the plaintiff has established that the issue of the profit in relation to the 5th Avenue project is relevant to the litigation as framed. In saying that, I am mindful that the test for establishing relevance is not overly onerous. To be clear, I am not deciding at this stage whether there is ultimate merit in the plaintiff’s claim to a share of the profits from the 5th Avenue project.

[15] The litigation as currently framed, includes a claim by the plaintiff for a 50% share of the estimated profits for the two projects. The defendants’ position is that the profit-sharing agreement was only in relation to the Briarwood project but not the 5th Avenue project. In addition, the defendants claim that the profit share agreement was for actual profits and not estimated profits. On this issue, I note that counsel have managed to resolve the undertakings and refusals issues relating to determining the profit on the Briarwood project, albeit it on a without prejudice basis.

[16] In relation to the 5th Avenue project, there is no issue that the defendants’ central position is that the plaintiff is entitled to no share of the profits. That said, Mr. Da Silva squarely raises the quantum of profit issue in his affidavit wherein he provides a revised estimate of the profits for the 5th Avenue project.

[17] I agree with Mr. Schwartz that the quantum of the profits on the 5th Avenue project is at issue. If the court decides that the plaintiff is entitled to a share of the 5th Avenue profits, it will need to determine what that share will be. While not specifically pleaded in the statement of defence, it is implicit in the position taken regarding the profit-sharing on the Briarwood project, that the defendants contest the basis on which the profit is to be calculated in relation to the 5th Avenue project. This implicit position is made explicit in Mr. Da Silva’s affidavit, where he provides a revised estimate of profits for the 5th Avenue project.

[18] I further agree with Mr. Schwartz’s argument that the actual amount of the profit on the 5th Avenue project is relevant to determining whether an agreement to share in the profits actually existed in the first place. The existence of actual profit matching the alleged estimated profit may serve as a piece of circumstantial evidence supporting the existence of the alleged profit-sharing scheme. In other words, the fact that the 5th Avenue project makes the profit alleged by the plaintiffs is some evidence supporting the existence of the agreement to share in the profits for that specific project. Of course, the converse will also be true, and to be clear, I am not determining the ultimate relevance or weight of the evidence on this issue.

[19] I decline to bifurcate the determination of this issue as suggested by the defendants. While I accept that in some cases, it may be appropriate for the court to order the party seeking production to establish entitlement first, see Reichmann v. Vered, 1995 CarswellOnt. 2826 (Ont. Ct. (Gen.Div.)), this bifurcation of production usually only arises where there is a clearly severable threshold issue, see 20/20 Management Limited v. Concord Adex Inc., 2022 ONSC 3119 at para. 29 and Imperial Oil v. Noonan Fuels Ltd., 2006 PESCAD 15 at para. 12. That is not the case here.

[20] In terms of proportionality, while I accept that the defendants will be put through some efforts in order to produce the documents sought, I am not satisfied that the amount of production sought is disproportionate, and therefore unwarranted, when considered in the context of the litigation as a whole. On this issue, I note that no issue has been raised in relation to the fairness of the production sought and any prejudice that might result. This is a feature that further distinguishes this case from Reichmann v. Vered, supra.

[21] I turn lastly to the scope of the sought-after production. On this issue, I agree with the defendants that I am limited to ordering production of the documents mentioned at the examination for discovery. I am advised that the focal point for this request is Question 378 at p. 86 of the transcript of the examination for discovery of Mr. Da Silva. I am further advised that the documents referenced in that question translate to items #5, 6, 7, 8 and 9 in the March 24, 2022 letter by plaintiff’s counsel.

[22] Mr. Schwartz acknowledges that this is an issue, but argues that a dose of pragmatism is appropriate. On further cross-examination, he plans on asking for the additional documents and seeks to avoid having to return on a further undertakings and refusals motion.

[23] Mr. Schwartz’s pragmatism is appropriate. Nonetheless, I restrict my ruling to the specific undertakings and refusals given at the examination for discovery. As such, I order that items #5, 6, 7, 8, and 9 be produced.

[24] In view of my findings on relevance, I urge counsel to avoid the unnecessary costs and delay of a further undertakings and refusals motion on the balance of the documents requested.

[25] In terms of costs, I urge the parties to either settle the issue or agree that I should reserve costs to the summary judgment motion. If the parties are unable to agree, they may submit written submissions no longer than three pages in length. The plaintiff’s submissions will be due within 7 days of the release of this Endorsement. The defendants’ submissions will be due within 14 days. The submissions may be sent to my assistant via email at Diane.Massey@ontario.ca.

J. Di Luca J.

Date: June 14, 2022

[^1]: There is a dispute as to precise nature of the loans. The plaintiff suggests that there were two advances essentially under a single loan agreement secured by the mortgage. The defendants argue that the loans are completely distinct.

[^2]: To be clear, the defendants’ main position is that the profit-sharing agreement never included the 5th Avenue project.