COURT FILE NO.: CV-21-662812 DATE: 2023 02 09
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: CONSOLIDATED FASTFRATE INC., Plaintiff - and - 2516295 ONTARIO LTD., GREAT LAKES MILLING COMPANY LTD. and GREAT LAKES MILLING COMPANY INC., Defendants
BEFORE: Associate Justice Todd Robinson
COUNSEL: A. Shaw, for the plaintiff (moving party) G. Smits, for the defendants (responding party)
HEARD: October 17, 2022
REASONS FOR DECISION (Summary Judgment)
[1] The plaintiff, Consolidated Fastfrate Inc. (“Fastfrate”), moves for summary judgment on its claim against the defendants for outstanding principal and interest allegedly owing under a credit agreement. The action was originally commenced against only 2516295 Ontario Ltd. (“251 Ltd.”) and Great Lakes Milling Company Ltd. (“GLM Ltd.”), which are the same corporation. Great Lakes Milling Company Inc. (“GLM Inc.”) was added as a defendant, on consent, at the first return of this motion.
[2] This motion was originally returnable on July 7, 2022, at which time the consent order adding GLM Inc. as a defendant was granted and the balance of the motion was adjourned sine die. By the time of the hearing before me, the only remaining disputed issues were which of the defendants are liable to the plaintiff, the applicable rate of interest, and the quantum of interest owing.
[3] This is an appropriate case for summary judgment. There are no genuine issues requiring a trial. The record before me supports that all three defendants are liable to Fastfrate, that the rate of interest set out in the credit agreement applies to GLM Ltd./251 Ltd., that the rate of interest set out in Fastfrate’s invoices applies to GLM Inc., and that Fastfrate was and is entitled to charge interest on all unpaid amounts, including accrued and unpaid interest.
Analysis
(a) Legal framework for summary judgment
[4] There is no dispute on the applicable framework for a summary judgment motion. It is now well-established. Subrule 20.04(2) of the Rules directs that summary judgment be granted if the court is satisfied that there is no genuine issue requiring a trial or if the parties agree to have all or part of the claim determined by summary judgment and the court is satisfied it is appropriate to grant it. There will be no genuine issue requiring a trial when the court is able to reach a fair and just determination on the merits. This will be the case when the process allows the court to make the necessary findings of fact, allows the court to apply the law to the facts, and is a proportionate, more expeditious, and less expensive means to achieve a just result: Hryniak v. Mauldin, 2014 SCC 7 at para. 49.
[5] The necessary two-stage assessment for deciding if summary judgment should be granted has been set out by the Supreme Court of Canada in Hryniak at para. 66.
[6] The first stage requires the court to determine if there is a genuine issue requiring trial based only on the evidence in the record. That is done without using the fact-finding powers provided in subrules 20.04(2.1) and (2.2), which provide for evidence to be weighed, credibility to be assessed, inferences to be drawn, and further oral evidence. If the evidence required to fairly and justly adjudicate the dispute is available on the record and summary judgment is a timely, affordable and proportionate procedure, then summary judgment may be granted.
[7] The second stage is triggered if there appears to be a genuine issue requiring a trial. The court should then determine if the need for a trial can be avoided by using the discretionary powers under subrules 20.04(2.1) and (2.2). Those may be used if doing so is not against the interest of justice. Use of the powers will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole. Those enhanced powers are not available to me as an associate judge. Both subrules expressly provide that they may only be exercised by a judge.
[8] In this case, when the parties originally attended Civil Practice Court to schedule this motion before a judge, Dunphy J. was of the view that there was little to no prospect of the expanded powers coming into play, so the motion was properly brought to an associate judge. I agree. This is not a case where use of the enhanced powers is necessary. In my view, the record before me is sufficient to resolve the disputed issues fairly and justly without needing to resort to the enhanced powers.
(b) Is there a genuine issue on liability of all three defendants?
[9] Fastfrate takes the position that all three defendants are liable to it under the credit agreement: GLM Ltd. because it is expressly named in the credit agreement, 251 Ltd. because it is the same entity as GLM Ltd., and GLM Inc. by admission of its liability.
[10] The defendants take the position that all of Fastfrate’s dealings were with GLM Inc. They argue that there were never any dealings with GLM Ltd. That has been the defendants’ position since delivering their statement of defence. There is evidence supporting that payments to Fastfrate were made by GLM Inc.
[11] Both parties on a summary judgment motion have a “best foot forward” evidentiary obligation to “lead trump or risk losing”: Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200 at paras. 26. With respect the responding party, it has an express evidentiary obligation by operation of subrule 20.02(2)(b) of the Rules. That subrule sets out that a responding party may not rest solely on the allegations or denials in its pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial.
[12] Because of the evidentiary obligations placed on both parties in a summary judgment motion, the court is generally entitled to assume (subject to case-specific exceptions) that the record on a motion for summary judgment contains all the evidence that the parties would present at trial: Sweda Farms, supra at para. 27.
[13] Nevertheless, the primary burden still rests with Fastfrate to demonstrate that there is no genuine issue for trial that judgment should issue against all three defendants. I accordingly address Fastfrate’s arguments for why all three defendants should be found liable under the credit agreement.
[14] I am satisfied that there is no genuine issue requiring a trial on the liability of GLM Inc. During oral submissions, the defendants conceded that GLM Inc. was liable for the unpaid invoices. Only the liability of GLM Ltd. and 251 Ltd. was disputed. Mr. Gatti’s evidence further supports the acknowledgement that GLM Inc. is directly liable to Fastfrate for the unpaid invoices.
[15] With respect to GLM Ltd. and 251 Ltd., they are the same entity. The corporate profile report for 251 Ltd. confirms that the company was incorporated on May 2, 2016 as GLM Ltd. Effective April 16, 2021, GLM Ltd. renamed itself to 251 Ltd. Since it is the same entity, if GLM Ltd. is a party to and liable under the credit agreement, then GLM Ltd.’s liability is the liability of 251 Ltd.
[16] The credit application with Fastfrate was filled out and signed by Raymond Bedessee, who identified himself as “President”. The “Company Information” portion of the credit application names GLM Ltd. as the “Company Legal Name” listing Raymond Bedessee beside “Owner/President” and Falak Patael beside “CFO/VP Finance”. The Fastfrate sales representative listed on the application is Joe Caza.
[17] Neither side has tendered evidence on the circumstances under which the credit agreement was filled out and signed, including who filled out the application. None of Raymond Bedessee, Falak Patael, or Joe Caza provided affidavits on the motion. Rather, affidavits were tendered from Franklin Wang, Fastfrate’s Vice President of Finance, and Joseph Gatti, a manager of GLM Ltd. Notably, Mr. Gatti does not address why the credit application was filled out naming GLM Ltd. if, in fact, the agreement was to be with GLM Inc.
[18] In addition to GLM Ltd. being specifically listed in the credit application, Fastfrate’s invoices were consistently issued to GLM Ltd. I was directed to no evidence supporting that anyone on behalf of GLM Ltd. or GLM Inc. advised Fastfrate that it was invoicing the wrong party.
[19] The defendants are correct that the waybills provided to Fastfrate indicate GLM Inc., not GLM Ltd. However, I am not convinced that there is any genuine issue that waybills dealing with shipments to non-parties has any bearing on deciding which party contracted with Fastfrate. The fact that GLM Inc. was shipping goods to non-parties and Fastfrate was used to deliver those goods does not preclude an arrangement between GLM Inc. and GLM Ltd. for delivery using GLM Ltd.’s account with Fastfrate. The defendants are in the best position to tender evidence and explain the discrepancy between GLM Ltd. being expressly named in the credit application and their defence position that GLM Ltd. had no dealings with Fastfrate. They have not done so. Absent other supporting evidence, I am not prepared to infer a contractual relationship from GLM Inc. being named on waybills.
[20] Joseph Gatti’s affidavit only serves to underscore the fact of an interrelationship between GLM Ltd. and GLM Inc. Mr. Gatti states that he has been involved in GLM Ltd. since its inception. Mr. Gatti asserts, essentially, that Fastfrate was always dealing with GLM Inc. His evidence addresses the state of accounts with Fastfrate, the impact of the pandemic, and acknowledges that “Great Lakes” has attempted at all times to deal with Fastfrate in good faith. Mr. Gatti’s affidavit concludes with the following statement:
Great Lakes remains committed to satisfying all bona fide obligations it has as it has committed to do throughout the entire process of this action and is confident it can do so by the hearing of this Motion.
[21] “Great Lakes” is defined in Mr. Gatti’s affidavit to refer to GLM Ltd. Nevertheless, it is used throughout the affidavit in a context seemingly referring to GLM Inc. Mr. Gatti has provided no evidence on what role, if any, he has in GLM Inc. Mr. Gatti has further failed to explain how, as a manager of GLM Ltd., which had nothing to do with the contract with Fastfrate, he has intimate knowledge of the financial dealings of a company in which he is not a director or officer and in which he has no stated role. He also does not explain his involvement in email exchanges and discussions with Fastfrate’s credit and collection manager about the unpaid amounts, and why he personally never raised that Fastfrate’s invoices were issued to an incorrect entity in the course of his own dealings.
[22] I am satisfied that there is no genuine issue requiring a trial. The signed credit application, which is undisputed, clearly identifies GLM Ltd. All of Fastfrate’s invoicing was issued to GLM Ltd. The fact that Fastfrate was transporting goods that may have been supplied by GLM Inc. does not change the contracting parties. The defendants have not argued an assignment or other transmission of GLM Ltd.’s interest in the agreement with Fastfrate.
[23] I accordingly find that GLM Ltd. is the party to the credit agreement and is thereby liable for the unpaid amounts owing for services provided by Fastfrate. It follows that 251 Ltd., being the current name of GLM Ltd., is a party to the credit agreement.
(c) Is there a genuine issue on the rate of interest?
[24] Fastfrate relies on the “Credit Terms & Conditions” in the signed credit application, which are listed on the signing page. In my view, term nos. 2-4 are pertinent to the dispute. They provide as follows (emphasis in original):
The Applicant will pay in full without any offset whatsoever all accounts, including all Freight and Accessorial charges, within thirty (30) days from the date of Invoice or as may otherwise be set out by Fastfrate in their accounts, For greater certainty. the Applicant agrees to pay in full the amount of each account issued by Fastfrate notwithstanding that the Applicant may have or make a claim against Fastfrate.
Terms and conditions of this credit application shall form part and be incorporated into any Contract of Carriage between Fastfrate and the Applicant.
Interest on any unpaid amounts will be charged at a rate of 2% compounded monthly (i.e., 26.82% per year). NSF fees of $50 will be applied where insufficient funds are available in the account on which the instrument was drawn (i.e., a dishonoured cheque).
[25] Fastfrate relies on the credit agreement in pursuing interest at the compounded interest rate of 26.82% per annum on each unpaid invoice.
[26] The defendants argue that Fastfrate is limited to the interest rate stated on its invoices, namely 1.5% per month. The invoices do not refer to the interest rate of 2% per month, compounded monthly, set out in term no. 4 of the credit agreement.
[27] I am unconvinced that the interest terms in the credit agreement were overridden by the variant interest rate on the invoices. As noted above, term no. 3 expressly provides that the terms and conditions of the credit application are incorporated into any contract of carriage. There is no evidence supporting that the parties agreed to a 1.5% per month interest rate when Fastfrate performed any specific carriage work. There is also no evidence of any course of conduct whereby Fastfrate was actually charging only 1.5% per month. Either may have supported an argument that the credit agreement terms were varied.
[28] Fastfrate points to W.O. Stinson & Son Ltd. v. 1146525 Ontario Inc., at paras. 21-22, as supporting that a unilateral variation of an interest rate must be accepted by the other party and must be supported by valid consideration. Although that case is factually dissimilar, in that it dealt with a unilaterally increased interest rate, the legal principle remains applicable. The defendants have tendered no case law supporting that an interest rate that has been stipulated and agreed in a contract may be overridden simply by stating a different interest rate on an invoice. There is no evidence here supporting any agreement to vary the interest term.
[29] The defendants further submit that, since GLM Inc. did not sign any contracts with Fastfrate and no invoice was rendered to it, GLM Inc. is not liable to pay anything more than interest pursuant to the Courts of Justice Act, RSO 1990, c C.43. I reject that argument. The defendants cannot take the position that GLM Inc. is the properly liable party, admitting its liability to pay the invoices, but then also take the position that GLM Inc. is not bound by any contractual interest terms.
[30] I am mindful, though, of my finding that GLM Ltd., not GLM Inc., was the contracting party under the credit agreement. GLM Inc. has admitted liability for Fastfrate’s unpaid invoices, but there is no evidence supporting that GLM Inc. agreed to be or acted as though it was bound by the terms of the credit agreement. In my view, while GLM Ltd./251 Ltd. is bound by the interest terms in the credit agreement, GLM Inc. is not.
[31] Nevertheless, GLM Inc. has admitted liability for the unpaid invoices. It has paid the outstanding balance under them. There is no evidence of anyone on behalf of the defendants, but particularly GLM Inc., challenging the payment terms and interest rate noted on the invoices prior to this litigation. Given GLM Inc.’s admission of liability to pay the invoices, I find that GLM Inc. is liable to pay those invoices in accordance with the payment and interest terms on them, namely payment being due in 30 days, with overdue accounts chargeable at 1.5% per month.
(d) Is there a genuine issue on the calculation of interest?
[32] Between Franklin Wang’s affidavit and reply affidavit, which provide a detailed review of Fastfrate’s accounting, I am satisfied that there is no genuine issue for trial on the invoice accounting and the unpaid amounts owing to Fastfrate, subject to from when and at what rate interest accrues. Mr. Wang’s evidence is substantiated and explains the discrepancies between Fastfrate’s accounting and that of the defendants.
[33] Although the defendants have put forward no case law supporting their position, they argue that I should consider the impact of the COVID-19 pandemic with respect to the doctrines of force majeure, frustration of contract, and impossibility. In particular, the defendants argue that, due to the pandemic, GLM Inc.’s customers were unable to make payments to GLM Inc. in a timely manner, which led to cash flow issues and a corresponding inability to make timely payments to Fastfrate. Joseph Gatti’s evidence is that non-payment was due to the pandemic, which was not expected to last long, but which became a significant intervening event that occurred through no fault of either Fastfrate or the defendants.
[34] I accept that the length and impact of the pandemic was not anticipated by the defendants. However, I reject their argument that it has any bearing on their payment obligation or accrual of interest.
[35] This action concerns unpaid amounts owing to Fastfrate for services rendered. The defendants have tendered no case law supporting any common law right to claim relief from payment obligations by reason of force majeure. Rather, case law supports that, since “force majeure” has no set or specialized meaning and is not a term of art, force majeure is a contractual remedy that turns on the specific wording of a contract: Windsor-Essex Catholic District School Board v. 231846 Ontario Limited, 2021 ONSC 3040 at paras. 18-19 and 21. The credit agreement includes no force majeure clause.
[36] Case law further supports that a contract cannot be frustrated if the supervening event was contemplated by the parties at the time of contracting and was either provided for or deliberately chosen not to be provided for in the contract: Bang v. Sebastian, 2018 ONSC 6226 at para. 29. The credit agreement was entered into during the pandemic. It includes nothing about payments being conditional on the defendants first receiving payment from their customers. To the contrary, term no. 2 in the credit agreement provides an unequivocal 30-day payment term, without set-off or withholding. Fastfrate’s invoice similar refer to a net 30 day term.
[37] There is no evidence that the parties expressly decided not to address the pandemic. However, a “pay-when-paid” type clause would clearly favour the defendants and contradicts the credit terms and conditions. In my view, the cannot raise a genuine issue for trial on frustration without tendering specific evidence on the extent to which the pandemic was considered and discussed at the time of signing the credit application.
[38] In any event, I am not prepared to take judicial notice that the pandemic caused any inability of the defendants to pay. The only evidence tendered to support the defendants’ position is Mr. Gatti’s bald statements, unsubstantiated by any supporting evidence, that cash flow problems resulted from customers not paying in a timely manner. That is juxtaposed with evidence that the pandemic was not raised as a reason for non-payment in any of the pre-litigation correspondence in the record. The evidence does not support a finding that the circumstances of the pandemic provide any genuine excuse for non-payment, rendered payment impossible, or should be a factor in deciding the quantum of accrued interest.
[39] The defendants argue that, since the principal debt under all invoices has now been paid, interest should not continue to accrue. They point to the term of the invoices, which states, “OVERDUE ACCOUNTS 1.5% PER MONTH.” Since the accounts are no longer overdue, having been paid in full, the defendants submit that there is no basis to award interest on interest. They further argue that doing so is excessive and that I should exercise my discretion in equity to deny further interest in the circumstances. These positions are unsupported by any case law.
[40] I reject the defendants’ arguments. Term no. 4 of the credit application terms specifically refers to interest being chargeable “on any unpaid amounts”. In my view, that reasonably includes all amounts owing under the credit agreement, including principal, interest, and NSF fees. The term on the invoices refers to “overdue accounts” not “overdue invoices”. In my view, accrued and unpaid interest is an amount owing on account.
[41] There is no genuine issue requiring a trial. I find that GLM Ltd./251 Ltd. and GLM Inc. are each liable to Fastfrate for interest on the unpaid balance of each invoice. Interest became chargeable 30 days after the date of each invoice and continued to accrue until the date of the invoice being paid in full, with credit for partial payments as they were made. I also find that Fastfrate is entitled to charge interest on the unpaid interest that had accrued to the date of full payment of the principal debt on an invoice. GLM Ltd./251 Ltd. is liable at the rate of 26.82% per annum and GLM Inc. is liable at the rate of 18% per annum (1.5% per month).
Costs
[42] Fastfrate seeks its partial indemnity costs of this motion and the action in the amount $17,350, including HST and disbursements, which is the amount claimed in its bill of costs filed at the return in July 2022. Although additional costs were incurred after that return, none are sought. That is both fair and appropriate given the circumstances of the required adjournment. Fastfrate argues that its comprehensive motion materials were required to address the positions taken by the defendants and that research was specifically required to address the defences of force majeure, frustration, and impossibility advanced by the defendants in their pleading, but not strenuously argued on this motion.
[43] The defendants argue that the bill of costs is excessive, with particularly excessive time claimed for reviewing the statement of defence, preparing for and attending Civil Practice Court, documentary production, and preparing the factum on this motion. The defendants also submit that I should consider their good faith in this process. They were willing to work with the plaintiff to resolve the dispute, but the plaintiff insisted on moving forward with this motion. They submit the motion was unnecessary, as evidenced by full payment of principal being made before the motion hearing.
[44] The defendants also point out that, in their own bill of costs, they claimed partial indemnity costs of only $9,129.53. They argue that costs should be no more than $10,000, but submit an award in the range of $7,500 is appropriate in all the circumstances.
[45] Deciding costs is not a mathematical exercise. Costs awards should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant: Davies v. Clarington (Municipality), 2009 ONCA 722 at para. 52. My discretion is to be guided by the factors outlined in subrule 57.01(1) of the Rules.
[46] This is an action commenced under the simplified procedure. Fastfrate claimed for unpaid invoices totalling $39,972.17 CAD and $68,506.65 USD. It has been successful in the action. Despite the defendants’ position that this motion was unnecessary, payment in full was only made in litigation after this summary judgment was brought. Fastfrate’s bill of costs reflects an appropriate allocation of work between lawyers. Overall, the rates claimed are reasonable. I agree that the time claimed for documentary production is not proportionate. I have no doubt that the time was spent, but that does not mean it is recoverable.
[47] Reasonable expectations is always a factor. I am not convinced that the amount claimed by Fastfrate is within reasonable expectations of a party in the position of the defendants. However, I do not accept that a costs award less than the amount that would have been claimed by the defendants makes sense. Having seen the materials, the defendants cannot reasonably have expected that their costs would be less than the moving party.
[48] In my view, a reduction is appropriate. I fix Fastfrate’s partial indemnity costs of the motion and action in the amount of $14,500.00, including HST, plus disbursements of $920.81, for a total of $15,420.81, payable within thirty (30) days.
Disposition
[49] For the above reasons, I am granting judgment against GLM Ltd./251 Ltd. and GLM Inc. on the terms set out above. The interest calculations before me do not fully reflect the decision that I have reached. Accordingly, two revised interest calculations will need to be prepared to reflect my decision: one for GLM Ltd./251 Ltd. and another for GLM Inc.
[50] I encourage the parties to agree on the interest calculations and form of judgment. If the parties are able to agree, then a draft judgment approved as to form and content and the agreed interest calculations may be submitted directly to my Assistant Trial Coordinator (ATC), by email, for my review and approval. If the parties cannot agree, then each side shall prepare and exchange their competing calculations and written submissions on the interest amount. Once exchanged, they shall be submitted directly to my ATC, by email, by no later than March 3, 2023, unless I approve a later date.
[51] If necessary, a case conference with me may be arranged through my ATC.
ASSOCIATE JUSTICE TODD ROBINSON DATE: February 9, 2023