Court File and Parties
COURT FILE NO.: CV-17-573847 DATE: 20230221 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Bruce Maltby, Plaintiff AND: Allan Morrow and Debra Morrow also known as Deborah Morrow, Defendants
BEFORE: W.D. Black J.
COUNSEL: Bryan McPhadden for the Plaintiff Adam Lifshitz, for the Defendants
HEARD: January 27, 2023
Endorsement
Overview
1This is the plaintiff’s motion for summary judgment.
2The claim concerns a loan and a promissory note relative to a transaction in 2004. The Defendants do not deny that the plaintiff made the loan at issue, but dispute various important terms of the deal. They also raise a limitations defence relative to an alleged demand for payment that the plaintiff made in 2012.
The Parties and the Loan
3As of 2004, the Plaintiff, Bruce Maltby and the defendant Allan Morrow were friends. The defendant Debra Morrow was and is the spouse of Mr. Morrow and had also known Mr. Maltby for some time as a friend.
4As at 2004, Mr. Morrow had conceived and developed the idea of opening a self-storage facility north of Barrie, Ontario (the “Project”). However, Mr. Morrow had no funds at that time to invest in the Project.
5In the circumstances, Mr. Morrow approached his friend Mr. Maltby, to ask Mr. Maltby to invest $100,000 in the Project and to loan Mr. Morrow a further $100,000 to fund Mr. Morrow’s investment therein.
6Mr. Maltby agreed, invested $100,000, and loaned Mr. Morrow an amount which Mr. Maltby says was $100,000 as requested, and the defendants say was $90,000 (albeit the defendants concede that the amount to be repaid was intended to be $100,000).
The Project, and Other Investors
7Mr. Morrow incorporated a company called Bayfield Storage Corp. (“Bayfield Storage”) to own and operate the Project.
8Later in 2004, three other investor groups/individuals invested $100,000 each in the Project. Ultimately there were six investors, each of whom put in that same $100,000 amount.
9The $100,000 investments are said now to be worth in excess of $500,000 each.
10With the exception of the $10,000 difference between them concerning the principal amount of the loan, the broad strokes set out above are agreed between the parties, as is the fact that to evidence and secure the loan from Mr. Maltby, a demand promissory note (the “Note”) was prepared. It is also clear that, be it $90,000 or $100,000, the loaned funds were used to invest in the Project.
The Note is Missing
11The Note, however, has gone missing. Mr. Maltby has misplaced it, and apparently cannot locate it, despite ongoing efforts. As such, the Note was not in evidence before me, and is not expected to be in evidence if the matter goes beyond this motion.
12Unfortunately, and in the absence of the Note, the parties’ respective recollections diverge on certain additional key points.
Disagreement on Certain Key Points
13First, there is a disagreement between the parties about what was the interest rate set out in and applicable to the Note. Mr. Maltby believes the rate was 8% per year. Interestingly, Mr. Morrow believes that the rate was higher (and he maintains that the rate was in fact 12%).
14There is also a difference between the parties as to who signed the Note. Mr. Maltby insists that both Mr. Morrow and Ms. Morrow signed the Note and are bound by it. The defendants say that only Mr. Morrow, and not Ms. Morrow, signed the Note.
Promissory Note Produced by Defendants
15Although Mr. Maltby cannot locate the Note, Mr. Morrow has produced what he says is a draft of the subject Note. The draft, which Mr. Maltby disputes is identical to the ultimate form of the Note, was produced at some point in the litigation by the defendants.
16It is dated September 14, 2004, and appears to be signed by Mr. Morrow that day.
17It shows Mr. Morrow as the sole borrower, and shows the principal amount of the loan as $100,000.
18It recites an interest rate of 12% and is stated to be repayable within 45 days following “written notice of demand”. Pending such demand, it appears that only interest is payable.
19While Mr. Maltby denies that this document reflects the final form of the Note, he does observe that the principal amount referred to in the document is in fact $100,000, contrary to the defendants’ allegation that the actual amount advanced was $90,000.
Evidence Regarding the Principal Amount of the Loan
20The basis for the defendants suggesting that the principal amount of the loan was $90,000 rather than $100,000 is that they found a deposit slip showing a deposit of $90,000 on September 16, 2004.
21I note, on this score, that there is in the record before me a transcript of an examination of a non‑party named Paul Daffern, who, the evidence confirms, is a lawyer who assisted in putting together the investments in the Project, and himself invested $100,000 in the Project. The plaintiff was obliged to bring a motion to obtain an Order allowing him to examine Mr. Daffern, over the objection of the defendants. Despite this opposition to the motion, the defendants then failed to examine Mr. Daffern nor even to attend at his examination.
22Mr. Daffern’s evidence is that the amount invested by each of the total of six investor/investor groups was $100,000, and that in each case the investments were in two tranches, of $10,000 initially followed by an additional amount of $90,000 on closing. It strikes me as highly likely that the $90,000 shown on the deposit slip was the $90,000 tranche only, and that the total investment in each case was $100,000 as various other pieces of evidence confirm.
23To that end, I note that the same deposit ledger as reflects $90,000 coming from Mr. Morrow also shows $90,000 coming from Mr. Maltby, and $90,000 each from Mr. Daffern and Antonio Ciccocioppo, another investor in the Project. There appears to be no dispute that all such investors (subject to the defendants’ suggestion that their investment amount was $90,000) in fact invested $100,000. In my view, there is no reason to think that the defendants’ (or Mr. Morrow)’s investment was limited to $90,000. Rather, as confirmed by Mr. Daffern’s evidence it is much more likely that the amount for the defendants (or Mr. Morrow) was $100,000, as in the case of all other investors, and that the $90,000 shown on the deposit slip was one of two tranches ultimately totaling $100,000.
Mr. Daffern’s Evidence on Other Aspects of the Loan
24Mr. Daffern also confirmed other aspects of the relevant arrangements in 2004, including that Mr. Morrow had told him that Mr. Maltby was the source of the $100,000 that Mr. Morrow (and/or Ms. Morrow – Mr. Daffern did not know) invested in the Project, that he had been told about the Note by both Mr. Maltby and Mr. Morrow, that the amount secured by the Note was $100,000 and that the applicable interest rate was 8%.
25Finally, Mr. Daffern’s evidence was that Mr. Morrow (and/or Ms. Morrow) was refusing to repay the loan and interest owing to Mr. Maltby not because the amount is not owing, but because Mr. Morrow was upset with Mr. Maltby for using a contractor other than Mr. Morrow to undertake a construction/renovation project (unrelated to the Project).
Evidence Concerning Ms. Morrow as a Party to the Loan and Note
26Mr. Maltby’s evidence is that at the time the funding for the Project was being assembled, he was an experienced businessman, and was aware of a common practice pursuant to which married couples often sheltered family assets in the name of one spouse and liabilities in the name of the other spouse. He therefore asked, and says the defendants agreed, that the loan and Note would be in both of their names.
27Mr. Maltby also notes that Ms. Morrow, during the course of examinations in this matter, refused to answer questions about whether she was an officer, director or shareholder of Bayfield Storage, and then refused to be examined relative to her undertakings and refusals (requiring the plaintiff to obtain a certificate of non-attendance). She was aware of the establishment of Bayfield Storage in 2004, and aware that Mr. Maltby had provided $100,000 at that time, but denied that she had signed any promissory note in favour of Mr. Maltby, or that she herself was a recipient of the loan from him.
28Following the loan from Mr. Maltby, some payments were made to him. These payments were for interest only and were discontinued after a few such payments were made.
The May 15, 2012 Email
29A critical event took place in 2012.
30On May 15, 2012, Mr. Maltby sent an email to Mr. Morrow and Ms. Morrow.
31The email was sent to a joint email address for the Defendants, and read as follows:
“Hi Deb and Al. Hope all is well with both of you & the family. Sorry I have not been in touch but have been very busy with work & family and recently my health is starting to act up. Guys, I need to ask the question of when we might settle our accounts as it will be 7 years as of Sept. 1/12. I am looking for $125k if paid by year end and a larger figure if not. Please talk it over and let me know what can be done. I retire at the end of the year and need to put my house in order as I probably will be leaving the area as I do not want my daughter to have to live my name down. I am still working Monday thru Thursdays and still available at the same work & cell #s.”
32The defendants argue that this email “constitutes a clear and unequivocal demand” and that it therefore triggers the running of a limitation relative to the loan, and that the relevant limitation period expired well before a further and formal demand was sent to the defendants by counsel for the plaintiff in March of 2017.
33Given the running and expiration of the limitation period, the defendants assert, notwithstanding their acknowledgement that at least Mr. Morrow borrowed funds from Mr. Maltby and would otherwise be obliged to repay $100,000 with interest (be it 8% or 12 % per annum), the claim should be dismissed.
Issues to be Determined
34Accordingly, there are two sets of issues that I must determine.
35First, given the absence of the Note, and the dispute about the principal amount of the note, the interest rate on the Note, and whether or not Ms. Morrow was a party to the Note, is the matter appropriate for summary judgment?
36Second, even if the plaintiff can surmount those hurdles, does the May 15, 2012 email start the limitation clock running, such that the claim is outside the relevant limitation period (of two years)?
37I will deal with those issues in turn.
Findings re the Loan and the Note
38In my view, despite the unfortunate absence of the final signed version of the Note, there is little actually in dispute here, and no utility in sending the matter for trial and further occupying the parties’ resources and the scarce resources of the Court.
39With respect to the matters in dispute relative to the loan and the note, I find as follows:
a. The principal amount of the loan, for the reasons discussed above, was $100,000.
b. The version of the promissory note produced by the defendants was a draft, and not the final version of the Note. I make this finding based on clear and consistent evidence in the record, including in particular from Mr. Daffern, that the interest rate for the loan was 8% (and not 12 % as the promissory note produced by the defendants shows);
c. Ms. Morrow was a party to the loan and the Note. Although she denies that this is the case, and although regrettably the final version of the Note is not in evidence, I find it troubling that Ms. Morrow has refused to answer questions about her involvement in Bayfield Storage and the Project. In particular, she refused to answer the question about whether or not she was and is a shareholder. If she had no such involvement, it would be a simple matter for her to provide affirmative evidence to that effect and her failure to do so leads me to draw an adverse inference. In addition, although it appears clear that Ms. Morrow received the May 15, 2012 email (together with Mr. Morrow) she made no suggestion at that time that the email was misdirected or misconceived by including her. She only took this position once the litigation commenced. Mr. Maltby’s evidence is clear and unequivocal that Ms. Morrow was a signatory to the Note (and a recipient of the loan) and his stated rationale for his certainty about her inclusion makes common sense. I note in this regard that the defendants did not examine Mr. Maltby for discovery nor cross-examine him on either of the two affidavits he filed in support of his motion for summary judgment, and as such his evidence about the parties to the Note was not challenged in that setting.
The Limitations Issue
40Turning to the limitations issue, the May 15, 2012 email did not, in my view, constitute a clear and unequivocal demand for payment sufficient to trigger the running of a limitation period. On its face, it asks the question of “when we might settle our accounts.” It suggests a proposed payment by the end of that year, but expressly leaves open the possibility that the payment can be made later, in an unspecified “larger” amount. It then invites the defendants to “talk it over” and to get back to Mr. Maltby to “let [him] know what can be done.” It is hardly a clear and unequivocal demand as authoritative cases confirm is required (see Bank of Nova Scotia v. Williamson, 2009 ONCA 754, and Campbell v. Campbell, 2021 ONSC 3162). Rather, it is an invitation to discuss timing and terms for repayment. As such, I find that the May 15, 2012 email did not trigger the running of the limitation period, and that the defendants’ limitation defence is not made out.
Additional Considerations on Applicability of Summary Judgment
41The only issue that gave me pause here was the question of whether, in particular in the absence of the Note, I could find that there is no genuine issue requiring a trial.
42In my view, the record here, as discussed above, allowed me to make a fair and informed determination of the merits.
43As can be seen above, for example where I concluded that it is appropriate to draw an adverse inference against Ms. Morrow, I did resort to weighing evidence to a modest extent. Where I did so, I found that the available evidence was ample, and allowed me to make the necessary findings of fact and to evaluate credibility issues and draw reasonable inferences.
44Moreover, while a trial judge would have the advantage of hearing viva voce evidence, for example from Ms. Morrow, Ms. Morrow would presumably be precluded, by operation of Rule 31.07, from leading evidence on the questions she refused as to her involvement in Bayfield Storage (or at least would require leave of the trial judge to provide any such testimony).
45On that same point, given a party’s well-familiar obligation to put her “best foot forward” in responding to a summary judgment motion, arguably Ms. Morrow has foregone the opportunity to later attempt to lead any such evidence, and must be taken to have provided the best version of her case into the fray before me.
46As such, given my ability to draw conclusions from the evidence in the record before me, I see no utility in sending the matter on for further adjudication. The essential facts are largely agreed or easily determined on the record before me, and there is no need to expend further resources.
Conclusions
47In conclusion, I find in favour of the plaintiff, and order the defendant to pay:
a. The principal amount of the loan, of $100,000;
b. Interest on that amount, running from September 1, 2004 to the date hereof (and I note that in Schedule “C” to the plaintiff’s factum the interest is calculated to January 27, 2023, net of payments received, so that the calculation requires only a modest update).
Costs
48The plaintiff is entitled to his costs of the motion. Neither party appears to have filed a costs outline as required.
49I direct the parties to discuss and attempt to agree on costs within 20 days from the date of the release of this decision.
50If the parties are unable to agree on costs, then within a further 10 days, the plaintiff may serve and file a costs outline together with submissions not to exceed three pages in length.
51The defendants will then have a period of 10 further days within which to serve and file a response, which response should include submissions not to exceed three pages in length, and which may include, at the option of the defendants, the defendants’ costs outline.
W.D Black J.
Date: February 21, 2023