Ever Fresh v. Jamia, 2013 ONSC 1558 (CanLII)

CITATION: Ever Fresh v. Jamia, 2013 ONSC 1558

COURT FILE NO.: CV-12-5705

DATE: 20130314

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Ever Fresh Direct Foods Inc. v. Jamia Islamia Canada Inc.

BEFORE: Justice André

COUNSEL: R. Birken, for the Applicant

A. Farooq, for the Respondent

ENDORSEMENT

[1] The respondent Jamia Islamia Canada Inc. (Jamia) brings a Motion seeking that the court convert an application brought by the applicant Ever Fresh Direct Foods Inc. (Ever Fresh) into an action under Rule 14.02. R.R.O. 1990 194. Jamia’s motion is in response to Ever Fresh’s Application requiring the registration of a second security mortgage against Jamia’s property on account of monies owed to it by Jamia and the filing of a Certificate of Pending Litigation against the said property. Jamia opposes this application on the grounds that there are material facts in dispute about the validity of the loan agreement and the amount it allegedly owes Ever Fresh. These contested issues, Jamia submits, warrant the conversion of Ever Fresh’s Application into an Action for a full adjudication of the issues.
Facts

[2] The applicant deposes that in August 2006, representatives of a mosque, Jamia, sought an interest free loan from Ever Fresh to pay off debts secured against its Mississauga property. In consideration for the loan, Jamia agreed to lease a unit in the building to Ever Fresh at a nominal rate. In May 2008, the parties signed a loan agreement in which Ever Fresh agreed to provide loans to a maximum of one million dollars to Jamia, in monthly amounts of $10,000.00. The loan was repayable on demand and was interest free. Jamia in return promised to sign promissory notes to cover the loan and to register a second collateral mortgage against the property on or before June 10, 2008.
[3] As of August 2012, the president of Jamia, who was one of the signatories to the May 2008 loan agreement refused to sign documents for the registration of a mortgage against its property.
[4] The applicant tendered a copy of the 2008 agreement signed by the President, Chairman and Treasurer of Jamia. It has also tendered a number of receipts from Jamia confirming receipt of varying amounts of money from the applicant, as a loan from the latter. The affidavit signed by Mr. Al Yousef, an officer of Ever Fresh, indicates that Ever Fresh had legal representation when the 2008 loan agreement was made. Mr. Patrick Di Monti, Jamia’s counsel, indicated in his examination that he was not involved in the drafting or signing of this agreement.
The Law

1) A proceeding may be commenced by an Application to the Superior Court of Justice or to a judge of that court, if a statute so authorizes. Rule 14.05(2) O. Reg. 292/99 0.1(2).

2) A proceeding may be brought by application where the rules provide or where the claimed relief is

a) the approval of an arrangement or compromise or the approval of a purchase, sale, mortgage, lease or variation of trust Reg. 14.05(3);

b) an injunction, mandatory order or declaration or the appointment of a receiver or other consequential relief when ancillary to relief claimed in a proceeding properly commenced by a notice of application.

[5] An application should be used where there is no matter in dispute and when the issues to be determined do not go beyond the interpretation of a document. Burlington v. Clairton (1979), 24 0.R. (2d) 586 (O.C.A.).
[6] Every proceeding in the court shall be by action except where a statute or these rules provide otherwise. Rule 14.02 R.R.O. 1990 194.
[7] An Application will not be converted into an action unless there is good reason to do so, such as when the judge who hears the matter cannot make a proper determination of the issues on the application record. Fort William Indian Band v. Canada (A.G.) 2005 Carswell Ont. 2228, paras. 28-29.
[8] A question of undue influence will always require viva voce evidence to determine what was said or done by whom. Scott v. Cockburn 2005 Carswell Ont. 2802 (S.C.J.) para. 8.
[9] The factors to be considered in converting an application into an action includes:
a) whether there are material facts in dispute;

b) the presence of complex issues requiring expert evidence and or a weighing of the evidence;

c) whether or not there is a need for pleadings and discoveries;

d) the importance and impact of the application and of the relief sought. Fort William, supra para. 5.

Analysis

[10] It appears that this is an uncomplicated manner that can easily be resolved by an Application rather than by an Action that would involve time consuming and costly pleadings and discoveries. After all, the May 2008 agreement was signed by three senior officers of Jamia, who were all, according to the corporation’s by-laws, directors. The contract indicates that at the time of signing, Jamia already owed Ever Fresh $250,000. The contract obligated Jamia to deliver promissory notes to Ever Fresh. It also stipulates that a second mortgage, in favour of Ever Fresh, should be registered against Jamia’s Mississauga property. This is clearly contrary to the submission of counsel for Jamia that the contract imposes no obligation for a securing of a second mortgage against the property in favour of Ever Fresh.
[11] Furthermore, the affidavit of Mr. Patrick Di Monti, counsel for the Respondent, Jamia, testified that two of Jamia’s signatories to the May 2008 contract, attended his office in April 2012 and signed promissory notes in the amount of $500,000 in favour of Ever Fresh. In so doing, they did not dispute that the quantum of loan payments Jamia received from Ever Fresh, pursuant to the 2008 agreement, was approximately $500,000. They did not question this amount; they merely wished to confirm it by looking at their own records. It is only when they returned to his office in July 2012 accompanied by Mr. Khan, the President of Jamia, that there were any reservations about the Promissory Notes and the second mortgage to be registered against the property in favour of Ever Fresh.
[12] Mr. Alwi, Treasurer of Jamia, has filed an affidavit with a number of allegations about the legitimacy of the May 2008 agreement including:
1) The signatories of the agreement lacked the authority to bind the respondent corporation.

2) There may have been fraudulent misrepresentations by Ever Fresh that induced the representatives of Jamia to sign the contract.

3) The representatives of Jamia who signed the 2008 contract may not have had independent legal advice when they signed the contract.

4) That there was a related oral contract, despite indications to the contrary in the 2008 agreement, that accounted for many of the loan payments made by Ever Fresh in favour of Jamia following the execution of the May 2008 agreement.

5) That Mr. Alwi had no recollection of discussing the terms of the 2008 contract in his first meeting with the representative of Ever Fresh.

6) That the signatories of the contract on behalf of Jamia may have been misled about the contents of the contract.

7) That Mr. Alwi never indicated to Mr. Di Monti, or meant to convey to him, in their 2012 meeting, that he agreed that Jamia was indebted to Ever Fresh in the amount of approximately $500,000.

[13] It may well be that Mr. Alwi’s statements regarding the validity of the May 2008 contract may amount to nothing more than a cynical attempt to have Jamia relieved of its contractual obligations to take out a second mortgage against its Mississauga building in favour of Ever Fresh. It may also be the case, as counsel for Ever Fresh contends, that Mr. Di Monti may ultimately be held to be a more credible witness than Mr. Alwi in terms of what happened in the former’s office in April and July 2012. Furthermore, even if the exact amount of loans paid by Ever Fresh to Jamia is unknown, it is clear that pursuant to the agreement, Jamia owed Ever Fresh at least $250,000 by May 2008.
[14] But in this case, there is affidavit evidence that is relevant to the central issue regarding the validity of the 2008 agreement. The conflict in the evidence cannot be resolved by merely preferring one version over the other; it can only be resolved by viva voce evidence. Secondly, there are no affidavits from two signatories to the agreement, the President and Chairman of Jamia. The record is therefore incomplete as it relates to the signing of the agreement.
[15] It is also incomplete about what transpired in Mr. Di Monti’s office in 2012. There is a suggestion that one of the directors of Jamia could not even understand the English language, let alone sign or understand a document that purported to encumber property of a company in which he was a director.
[16] All these representations made on behalf of Jamia may ultimately amount to nothing. On the other hand, there are material facts in dispute in this case and at the very minimum, the record is not complete regarding the legitimacy of the May 2008 contract and Jamia’s indebtedness to Ever Fresh.
[17] As a result, I conclude that this application should be converted into an action.

[18] Both parties are to submit written submissions about costs within fifteen (15) days of the date of this judgment.

___________________________

André J.

Released: March 14, 2013

CITATION: Ever Fresh v. Jamia, 2013 ONSC 1558

COURT FILE NO.: CV-12-5705

DATE: 20130314

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Ever Fresh Direct Foods Inc.

– and –

Jamia Islamia Canada Inc.

ENDORSEMENT

André, J.

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