Court File and Parties

Court File No.: CV-21-1276 Date: 2023-02-24 Ontario Superior Court of Justice

Between: Sheela Duraisami, Plaintiff And: Stephan Yaworski 9327959 Canada Inc., Defendants

Counsel: Timothy Law, for the Plaintiff Michael Jaeger, for the Defendant

Heard: January 11, 2023

The Honourable Mr. Justice M.J. Valente

Reasons for Judgment on Motion for Summary Judgment

Introduction

[1] The plaintiff brings this motion for judgment within the context of this simplified procedure action for payment of the principal sum of $120,000 plus interest. The plaintiff’s claim is founded on a Joint Venture Agreement with an effective date of July 22, 2019 (the ‘JVA’) and a Personal Guarantee, dated July 23, 2019 (the ‘Guarantee’). The plaintiff asserts that pursuant to the JVA, she advanced to the defendant, 9327959 Canada Inc (‘932’), the sum of $100,000 in consideration for which the defendant, Stephan Yaworski (‘Stephan’), agreed both by the terms of the JVA and Guarantee to repay her the sum of $120,000 upon the sale of the property subject to the JVA. Otherwise, the plaintiff asserts that 932 is also liable to repay her $120,000 on the basis that it was unjustly enriched. For their part, the defendants take the position that because the joint venture did not realize a profit, there is no liability on Stephan to repay anything, 932 was not been unjustly enriched and otherwise a motion for summary judgment is not otherwise appropriate in an action commenced pursuant to Rule 76 of the Rules of Civil Procedure, R.R.O. 1990, Reg 194 (the ‘Rules’).

The Facts

[2] The plaintiff is a lead pastor at Church on the Rock International Ministries. Stephan is a mortgage broker. The plaintiff was introduced to Stephan by a church elder and lawyer.

[3] The plaintiff and Stephan entered into the JVA for purposes of purchasing, redeveloping and selling certain lands located in the City of Cambridge (the ‘Project’). By the terms of the agreement between the plaintiff and Stephan, the plaintiff contributed a capital investment of $100,000 to the Project. Pursuant to the direction of Stephan, on July 29, 2019, the plaintiff transferred the agreed $100,000 from her personal line of credit into the account of 932, as the owner of the subject lands. The record confirms that Stephan is both an officer and director of 932 but it is unclear as to the corporation’s shareholder composition.

[4] Article 4 of the JVA provides that the joint venture will be terminated upon the earlier of: (i) the completion of the Project and the sale of the subject lands and “payment of all laborers and material men employed by the Venture in connection with the project”, agreed to occur no later than February 28, 2020; (ii) the agreement of the parties to the JVA; or (iii) order of the Court.

[5] The salient provisions of Article 5 of the JVA provide as follows:

5. PERCENTAGE OF PARTICIPATION

1. Description Except as otherwise provided herein, the interest of the Parties in any gross profits and their respective shares in any losses and/or liabilities that may result from the performance of the Venture, and their interests in all property and equipment acquired and all money received in connection with the performance of the Contract shall be as follows:

In addition to the return of the capital invested ($100,00), the SECOND Joint Venturer shall receive $20,000.00, and the FIRST Joint Venturer shall retain the balance of the net proceeds free from any additional claims.

3. Return of capital contributions (c) The Second Joint Venturer shall be intitled to the return of her capital contribution ($100,000.00) at the termination of the Venture as described in clause 4 of this Agreement.

4. Allocations of net profits and losses Subject to the provisions of this Article, the Net Profits of the Venture (including any net “books” gains of the Venture resulting from the sale of 1433 River Road West shall be allocated to the Venturers in the following priority:

In addition to the return of the capital invested ($100,000.00) the SECOND Joint Venturer shall receive $20,000.00, and the FIRST Joint Venturer shall retain the balance of the net proceeds free from any additional claims

[6] The JVA defines Stephan as the “First Joint Venturer” and the plaintiff as the “Second Joint Venturer”.

[7] Although the JVA has an effective date of July 22, 2019 and was signed by Stephan on that date, it was executed by the plaintiff on July 24, 2019.

[8] On July 23, 2019, Stephan signed the Guarantee. In the Guarantee, Stephan:

(i) personally guarantees the performance of the JVA;

(ii) agrees to pay to the plaintiff the return of her $100,000 capital investment and a minimum further payment of $20,000 by May 31, 2020, should she not receive the agreed aggregate sum of $120,000 upon the sale of the subject land or by February 28, 2020; and

(iii) consents to judgment in favour of the plaintiff in the amount of $120,000 plus interest and costs.

[9] The plaintiff was not prepared to advance the $100,000 capital contribution and enter into the JVA without Stephan having signed the Guarantee on July 23, 2019.

[10] Both the JVC and Guarantee are poorly drafted. The author of the two agreements is unknown but both counsel agree the drafter was likely not a competent lawyer. I also agree.

[11] The subject lands were sold by 932 on May 19, 2020. Stephan executed the transfer on behalf of 932 in his capacity as president of the corporation. The sale price was $900,800.

[12] Stephan did not advise the plaintiff of the sale; rather and to the contrary, on July 9, 2020, Stephan advised by email that the sale had been delayed due to the Pandemic.

[13] When the plaintiff and her spouse pressed Stephan for payment of the $120,000 which was due no later than May 31, 2020 pursuant to the Guarantee, Stephan confirmed by text dated November 2, 2020 that he would repay the $120,000 in two installments and by email dated May 21, 2021 that he would repay the plaintiffs “investment” after refinancing some of his rental properties. Notwithstanding Stephan’s assurances, no monies have been paid to the plaintiff.

[14] On the record before me, none of the above cited facts are in dispute.

Guiding Legal Principles

[15] Rule 20.01(3) of the Rules provides that a “plaintiff may, after the defendant has delivered a statement of defence… move with supporting affidavit material or other evidence for summary judgment on all or part of the claim in the statement of claim”. Rule 20.04(2)a provides that the Court shall grant summary judgment if it is “satisfied that there is no genuine issue requiring a trial with respect to a claim or defence”. The issue to be determined under this Rule is not whether a trial is possible, but whether a trial is necessary (see Hryniak v Mauldin, 2014 SCC 7 (‘Hryniak’) at paras. 43 and 68).

[16] To facilitate the determination of that question, the Court is empowered by Rule 20.04(2.1) to weigh evidence, evaluate credibility and draw any reasonable inference from the evidence, save only if it is “in the interest of justice for such power to be exercised only at trial” (see Hryniak at paragraphs 44-46).

[17] The Court of Appeal made it clear in Combined Air Mechanical Services Inc v Flesch, 2011 ONCA 764 (reversed on other grounds, 2014 SCC), that while summary judgment could be appropriate in some Rule 76 proceedings, such cases would be exceptional for two reasons. First, because the Simplified Procedure Rules are designed to get to trial with a minimum of delay and expense, it may often be more efficient to proceed to a summary trial. Second, while the simplified procedure rules are designed to allow a matter to proceed to trial expeditiously, they also constrain a party’s ability to marshal evidence on a summary judgment motion and meet its obligation to put its best foot forward (see Manthadi v. ASCO Manufacturing, 2020 ONCA 485 (‘Manthadi’) at paragraphs 11-13).

[18] As noted by the Court of Appeal in Manthadi, and as Justice Mulligan observed in Commander Construction v. Sovereign General Insurance Co., 2012 ONSC 1075, a motion for summary judgment in Rule 76 proceedings is appropriate where the case is document-driven or where any contested evidence is limited in nature.

The Position of the Parties and Analysis

[19] The defendants raise a number of defences, all of which I address below.

(a) The Guarantee

[20] The defendants submit that the Guarantee is invalid because Stephan received no consideration for personally guaranteeing the payments, if any, due under the JVA. The defendants also assert that the Guarantee is invalidated by its reference to the date of September 27, 2018 (which the plaintiff admits has no relevance to the facts) and the failure to attach the JVA to the Guarantee notwithstanding by its terms, the Guarantee requires it be attached. The defendants further assert that because the plaintiff signed the JVA one day after Stephan executed the Guarantee and the JVA includes a boilerplate “entire agreement” clause, she is precluded from looking outside of the JVA to the Guarantee as a basis for attributing personal liability to Stephan. Finally, the defendants rely on the doctrine of non est factum to avoid liability for Stephan under both the Guarantee and JVA.

[21] I reject each of the defences raised by the defendants. First, the unchallenged evidence is that the plaintiff would not have advanced her capital contribution to the Project without the Guarantee in place. As the plaintiff’s joint venture partner in the Project, Stephan received the benefit of that seed capital money that was necessary for both the completion of the Project and to realize a potential profit for Stephan.

[22] In my opinion, the failure to attach the JVA to the Guarantee as otherwise stated in the Guarantee is of no significance. There is no disagreement as between the parties with respect the operative JVA. Additionally, the salient terms of the JVA are accurately summarized in the Guarantee. For the same reasons, the inadvertent insertion of the September 27, 2018 date is of no consequence to the otherwise clear terms of Stephan’s obligation and agreement as stipulated by the Guarantee.

[23] Article 10 of the JVA provides in part:

1.10.1 Entire agreement This agreement constitutes the entire agreement of the parties and may not be altered, unless the same is agreed upon in writing signed and acknowledged by the parties.

[24] Counsel for the plaintiff has referred me to the decision of the Court of Appeal in Soboczynski v. Beauchamps et al, 2015 ONCA 282, 125 O.R. (3d) 241. Writing for the Court, Justice Epstein adopts the united opinion of the legal commentators that entire agreement clauses operate retrospectively, not prospectively. Specifically, Justice Epstein quotes with approval Angela Swan who states: “An ‘entire agreement’ clause deals only with what was done or said before the agreement was made and seeks to exclude those statements and acts from muddying the interpretation of the agreement; it is a contractual invocation of the parol evidence rule”: Canadian Contract Law, 3rd ed. (Markham, Ont: LexisNexis Canada, 2012), at 600. Justice Perell agrees. He states that “[t]he parol evidence rule … directs that the written contract may not be contradicted by evidence of the oral and written statements made by the parties before the signing of the contract. The entire agreement clause is essentially a codification of the parol evidence rule”: “A Riddle Inside an Enigma: The Entire Agreement Clause” (1998), 20 Advoc. Q. 287, at 290-291. Finally, Professor M. H. Ogilvie concludes that entire agreement clauses are “patently not applicable…where the representation postdates the contract”: “Entire Agreement Clauses: Neither Riddle Nor Enigma” (2009), 87 Can. Bar Rev. at 642.

[25] Given the purpose of an entire agreement clause, it is my view that this provision in the JVA is of no assistance to the defendants in blocking the plaintiff from relying on the Guarantee. The plaintiff is not looking to some representation made prior to the signing of the JVA to interpret it in favour of her position.

[26] The test for non est factum is set out in the 1982 decision of the Supreme Court in Marvco Color Research Ltd. v. Hanes, [1982], 2 S.C.R. 774. The defence is available to an individual who, as a result of misrepresentation, signs a document mistaken as to its nature and character and who was not otherwise careless in doing so. Based on the record before me, there is no evidence of misrepresentation. The absence of a misrepresentation is, in my view, fatal to Stephan’s defence of non est factum.

(b) The JVA

[27] The defendants submit that pursuant to the terms of the JVA, should no profit be realized from the sale of the subject lands, no monies are due and owing to the plaintiff. Without providing any detail, Stephan asserts that the Project “was an overall loss after expenses” and once his accountant completes an audit of the Project the full extent of those losses will be known. In the interim, however, because the Project was a financial failure, no money is due under the JVA, and by extension, the Guarantee.

[28] In particular, the defendants rely on Article 5.3(c) and 5.4 of the JVA quoted above. Article 5.4 provides the manner in which “Net Profits” are to be allocated from the sale of the subject lands. According to the defendants, it stipulates that any net proceeds are to be allocated firstly to pay the plaintiff the agreed $120,000, and secondly, to Stephan free and clear of any claim by the plaintiff.

[29] For her part, the plaintiff submits that Article 5.4 addresses only how the Project’s net proceeds, if any, are to be distributed once the $120,000 due to her are paid. In other words, her $120,000 payment is guaranteed without any contractual right to deduct the Project’s losses, if any, from the funds due to her. In advancing this argument, the plaintiff submits that by its own terms, Article 5.4 is subject to the provisions of Article 5.1 which provides in part that her interest in “all money received in connection with the performance of the Contact” is the repayment of the agreed $120,000 with any net proceeds to be allocated to Stephan without recourse by her.

[30] In my view, the defendants’ interpretation of Article 5.4 is tortured. It clearly provides for the manner in which “Net Profits” are to be shared. Net profits can only reasonably be interpreted to mean in this instance the residual sale proceeds after payment of all liabilities.

[31] On the other hand, while I accept the plaintiff’s interpretation of Article 5.1, it is subject to the balance of the provisions in Article 5, and specifically Article 5.4. As a result, the JVA creates confusion to the extent that the provisions of Article 5 conflict.

[32] Because of this contradiction, the defendants argue that the parties’ intention and reasonable expectations need to be clarified by means of a summary trial. I would agree with the defendants’ position but for Stephan’s response in the fall of 2020 and the spring of 2021 to the plaintiff’s requests for payment of the $120,000. In the first instances he agreed to repay the $120,000 in two installments, and on the second occasion, he promised to repay the plaintiff’s investment from certain refinancing proceeds. Never did Stephan state that the $120,000 would be paid only from the net profits or net sale proceeds, nor did Stephan state that no monies would be paid because the Project had suffered a loss or was likely to suffer in a loss when he knew as the project manager that: (a) the sale price was “slightly more than $900,000” and (b) he had “put in over $350,000 into the [P]roject”.

[33] In the circumstances of Stephan’s response to the request for payment, I conclude that the parties intended by the terms of the JVA that the plaintiff would receive the agreed $120,000 from the sale proceeds without deduction for any losses that the Project might sustain.

[34] The defendants raise a second defence with respect to the JVA. They rely on Article 5.3(b) to submit that no personal liability can be attributed to Stephan for repayment of the plaintiff’s $100,000 capital contribution. That provision provides in part that “the Venturers shall not be personally liable for the return of capital contributions or any part thereof”.

[35] As the plaintiff correctly points out, however, pursuant to the same provision personal liability may be attributed to the Venturers if “otherwise provided in [the] Agreement”. The plaintiff submits, and I accept, that by the terms of the Agreement read as a whole with the triggering of the obligation to pay the $120,000 on the sale of the subject lands by no later than February 28, 2020, Stephan’s personal liability is engaged as the only other party to the JVA who benefited from the plaintiff’s capital contribution.

[36] In the event, however, that I have incorrectly concluded that the JVA attributes personal liability to Stephan, certainly the Guarantee, which I have found to be valid, imposes this obligation. It requires Stephan to pay the $120,000 to the plaintiff by no later than February 28, 2020 whether the subject lands are sold or not.

(c) The Liability of 932

[37] The plaintiff relies on the doctrine of unjust enrichment to impose liability on 932.

[38] The defendants submit that the doctrine of unjust enrichment has no application because the Project did not realize a profit.

[39] For her part, the plaintiff asserts that this cause of action has three elements, all of which have been made out on the facts before me. The three elements are as articulated by the Supreme Court in Garland v. Consumer’s Gas Co., 2004 SCC 25. They are: (1) an enrichment by the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason for the enrichment (at para. 30). I am satisfied that 932 has been unjustly enriched and is liable to the plaintiff. 932 secured the benefit of the plaintiff’s capital investment of $100,000 and subsequently the sale proceeds of $900,800 while the plaintiff was deprived of the agreed repayment of $120,000 from the sale proceeds. Additionally, the defendants have not offered any juridical reason for 932’s retention of the $120,000 in circumstances where Stephan, as the corporation’s director and president, knew that the agreed amount was to be paid to the plaintiff from the sale proceeds by 932.

(d) Summary Judgment not appropriate

[40] The final argument raised by the defendants is that summary judgment is not appropriate in this Rule 76 proceeding. The defendants rely on the decision of the Court of Appeal in Manthadi in support of their position. The defendants’ argument is that because there are material facts in dispute, live issues of credibility (with respect to whether the parties had discussions subsequent to the execution of the JVA as to whether the Project may suffer a loss) and no ability to undertake cross-examinations in any simplified procedure action, the plaintiff’s summary judgment motion is ill-suited to determine the issues. Instead, the plaintiff ought to have taken advantage of the Simplified Procedure Rules that are designed to expedite the trial process and minimize costs.

[41] The defendants also argue that these same procedural rules, designed to fast track the process, constrain the parties’ ability to marshal evidence on a summary judgment motion. The experience of the defendants is no exception in this instance. In particular, the defendants submit the timing of the plaintiff’s summary judgment motion has prevented them from completing and tendering into evidence their accountant’s audit of the Project which will confirm the losses from the joint undertaking.

[42] I am unable to accept the defendants’ submissions regarding the inappropriateness of the plaintiff’s summary judgment motion in this Simplified Procedure action. Firstly, this action is very much document driven. Secondly, all of the relevant facts are undisputed. Where there is a conflict in the documents, any conflicting interpretation is resolved by the uncontested evidence of the plaintiff. Otherwise apart from the fact that the sale closed in mid-May 2020 and the plaintiff’s motion was served some five months ago, the defendants’ alleged inability to produce the Project’s profit and loss statement is immaterial based on my findings.

[43] In conclusion, based on the record I am satisfied that there is no genuine issue requiring a trial. Finally, in my view, the plaintiff’s motion did not prejudice the defendants in putting their best foot forward and nor did it cause them to expend time and resources that would have been better spent in proceeding to a summary trial.

Disposition

[44] For all of the above-noted reasons, I reject all of the defendants’ defences and grant summary judgment in favour of the plaintiff against the defendants jointly and severally in the principal amount of $120,000 plus prejudgment interest from May 31, 2020, being the payment date as prescribed by the Guarantee.

Costs

[45] As the successful party on this motion, the plaintiff seeks her partial indemnity costs in the amount of $8,398.80 inclusive of HST and disbursements. The defendant submits that the plaintiff’s costs are excessive, and a more appropriate amount would be $6,100 all inclusive.

[46] In assessing costs, I am guided by section 131(1) of the Courts of Justice Act, RSO 1996, c.C.43, as amended, and the factors set out in Rule 57.01(1). The usual rule in civil litigation is that costs follow the event and the rule should not be departed from except for good reason (see: Gonawati v. Teitsson, [2002] CarswellOnt 1007 (C.A.).

[47] It is well known that the overall objective in dealing with costs is to fix an amount that is both fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful party. The expectation of the parties concerning the quantum of costs is a relevant factor to consider. The Court is required to consider what is “fair and reasonable” having regard to what the losing party could have expected the costs to be (see Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC. Cost awards must also reflect proportionality to the actual issues argued, rather than an unchecked reliance on billable hours (see: Mason v. Smissen [2013] O.J. No.4229).

[48] Having reviewed the Amended Bill of Costs of plaintiff’s counsel, including counsel’s hourly rates (which I find to be reasonable) together with the Bill of Costs of defence counsel and after considering the above noted principles, in particular the principle of proportionality and the unsuccessful party’s cost expectations, I assess the plaintiff counsel’s fees on a partial indemnity basis as submitted at $6,667.50 plus taxable and non-taxable disbursements of $795.89 together with applicable HST for a total cost award of $8,398.80.

[49] I would ask counsel to prepare an approved draft judgment in accordance with my decision for my review and signature. The approved draft can be sent to my assistant, Kelly Flanders at Kelly.Flanders@ontario.ca.

M.J. Valente J. Released: February 24, 2023