Bordilak Canada Inc. v. Bayberry Solutions Inc. et al., 2017 ONSC 1371 (CanLII)

CITATION: Bordilak Canada Inc. v. Bayberry Solutions Inc. et al., 2017 ONSC 1371

                                                                                                 COURT FILE NO.: CV-16-553144

DATE: 20170301

SUPERIOR COURT OF JUSTICE – ONTARIO

RE:                 Bordilak Canada Inc.

AND:

Bayberry Solutions Inc., Abiodun C. Osobo, and Olusesan O. Osobo

BEFORE:      Madam Justice J. T. Akbarali

COUNSEL:   Pius L. Okoronkwo, for the Plaintiff/Moving Party

Anser Farooq, for the Defendants/Responding Parties

HEARD:         February 27, 2017

ENDORSEMENT

[1]               The plaintiff, Bordilak Canada Inc., moves for summary judgment arising out of an investment agreement it entered into with the defendant, BayBerry Solutions Inc. and a subsequent guarantee agreement it entered into with the individual defendants. The defendants argue summary judgment is not appropriate because I do not have enough evidence to make the necessary findings of fact.

[2]               At the outset of the summary judgment motion, I enquired of counsel whether this motion should be heard after the hearing of a pending motion to add Grace Okeke, the wife of the principal of the plaintiff, as a defendant in a third party claim. I also enquired whether counsel wished to proceed on the record that was before me. The parties indicated they wanted the motion to proceed, and on the basis of the record as it exists.

[3]               For purposes of this motion only, I find the facts set out below. I note that these facts come largely from the affidavit of the defendant Abiodun Osobo – an affidavit to which the plaintiff chose not to reply.

The Facts

[4]               Abiodun Osobo and Olusesan Osobo are a married couple. Mr. Osobo is a police officer. At the relevant time, Mrs. Osobo was a homemaker. Together they bought a property, hoping to renovate it and flip it. They had no experience in this kind of project. They invested their life savings into it.  To execute the project, they incorporated BayBerry Solutions.

[5]               They began making minor repairs to the property, but soon concluded it would be more profitable to demolish and rebuild the home. However, they needed investors to do so. They had already spent their money on the property, including its purchase and initial architectural drawings.

[6]               In September 2014, they met Bourdillon Okeke and his wife Grace Okeke. The Okekes were interested in the Osobos’ project. The Osobos understood the Okekes to be sophisticated business people who could provide guidance and funds. They understood the Okekes had experience in property investment. Mrs. Okeke is a lawyer.

[7]               Mr. Okeke agreed to invest in the project but on certain conditions, including that he would be the investor while Mrs. Okeke would act for all parties.

[8]               The Osobos had already invested $150,000. Mr. Okeke matched the investment, investing through the corporate plaintiff.

[9]               Mrs. Okeke prepared an “Investor Agreement” between Bordilak and BayBerry Solutions, dated November 10 2014. The recitals to the agreement include a list of representations made by the investee, BayBerry Solutions. Among these representations are the following:

1.   “[t]hat the home will be completed and sold within eight months”, and
2.   “[t]hat in the event the project is terminated for any reason, the investee shall make a full refund to the investor within eight weeks of termination date and shall show proof of how to raise the investment money had the investment fund already been put to use”.

[10]           Mrs. Osobo deposed that the Investment Agreement required BayBerry Solutions to split the profit evenly with Bordilak, but if there was a loss, BayBerry Solutions was required to bear it all.[1]  Mrs. Osobo deposed she was worried about this term, but Mrs. Okeke reassured her with some explanation.

[11]           At no time did anyone suggest to the Osobos that they should get their own lawyer or independent legal advice. Rather, Mr. Okeke had made it a condition of his investment that Mrs. Okeke would be counsel to all parties.

[12]           The funds were advanced pursuant to the Investor Agreement. However, the project did not go well. Demolition was delayed due to weather and holidays. The Osobos had not factored delay into their plans. Carrying the mortgage during the delay was burdensome.

[13]           When the demolition was finally able to proceed, in January 2015, the architect had a falling out with the general contractor and left the job, causing yet further delays and costs.  A new general contractor had ideas to get more value out of the project, but this required new architectural drawings. Permits were finally secured in May 2015.

[14]           The plaintiff claims that the project was terminated in April 2015. However, there is no evidence on the record that establishes a specific date by which the project was no longer viable. Mrs. Osobo deposes that by June 2015, the financial issues around the project had become critical because their first mortgage was coming to an end in July, and the Investor Agreement’s eight month term was expiring that same month. By July 2015, the Okekes wanted to get out of the project. The Osobos told them that the property was in critical need of funds, and if they pulled out at that stage, it would be devastating.

[15]           In July 2015, it appears the Osobos listed the house for sale. By August 2015, there were looming threats of a power of sale. They finally found a buyer in September 2015, but sold the property at a loss.

[16]           In August 2015, the Osobos were invited to the Okekes’ home “for privacy reasons” and without witnesses present. They were given a Guarantee Agreement to sign. Mrs. Osobo deposes they did not read it and were not afforded an opportunity to review it. Mrs. Okeke told them that it was in their best interest to sign the document, and that she was cognizant of their best interest and needs. She told them signing the document would give BayBerry Solutions more time to pay the debt.  The Osobos signed the agreement.

[17]           The Guarantee Agreement did provide an extension of time to pay the plaintiff back, and also provided that the plaintiff would not seek its 50% share of profits. Given that the house was for sale and the project had floundered, these terms were of questionable benefit to the Osobos. There were no profits to be made on the project.

[18]           The Guarantee Agreement also made the Osobos personally liable for the debt. Mrs. Osobo deposes that it was never their intention to be personally responsible for the debt, and had they understood the Guarantee Agreement made them responsible, they would not have signed it.

[19]           Beginning in November or December 2015, Mr. Okeke began demanding that the Osobos pay the debt. There are text messages and letters from the Osobos in the record wherein they acknowledge the debt is owing and express that they are trying their best to pay it down.  The Osobos made a $500 payment to Mr. Okeke and offered to make $500 monthly payments for three years. Much of the debt is still outstanding.

The Parties’ Positions

[20]           The plaintiff argues this case is appropriate for summary judgment. In its view, this is a simple matter of a debt owing under an Investment Agreement and guaranteed by the Guarantee Agreement. The plaintiff says the extension of time to pay and release of the interest in any profit from the project are sufficient consideration for the Guarantee Agreement. It argues that the admissions from the Osobos that they owed the debt are important. It argues that there is no challenge to the validity of the agreements, because there is no counterclaim seeking to set aside the agreements. It also argues that the third party claim against Mrs. Okeke can proceed independently, and has nothing to do with the plaintiff’s claim.

[21]           The defendants argue, in effect, that this motion is premature. They suggest the agreement is unconscionable due to Mrs. Okeke’s role as counsel to all parties. They suggest that they might amend their defence to allege civil fraud if the evidence uncovered on discoveries supports that theory. They argue this is not an appropriate case for summary judgment.

Is this an appropriate case for summary judgment?

[22]           Summary judgment must be granted when there is no genuine issue requiring a trial. That is the case when I am able to reach a fair and just determination on the merits. The process must allow me to make the necessary findings of fact and apply the law to the facts, and the process must be a proportionate, more expeditious and less expensive means to achieve a just result: Hryniak v. Mauldin, 2014 SCC 7 (CanLII), [2014] 1 S.C.R. 87 at p. 106.

[23]           However, summary judgment is not always appropriate. In Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 (CanLII) at para. 44, the Court of Appeal observed that:

[e]vidence by affidavit, prepared by a party’s legal counsel, which may include voluminous exhibits, can obscure the affiant’s authentic voice. This makes the motion judge’s task of assessing credibility and reliability especially difficult in a summary judgment and mini-trial context. Great care must be taken by the motion judge to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all.

[24]           The danger of decontextualized affidavit evidence is present in this case. The plaintiff’s evidence does not address at all the role that Mrs. Okeke played in the formation of the Investment Agreement and the Guarantee Agreement. Its affidavit evidence relates a narrative that is document-driven and ignores the serious concerns that Mrs. Osobo’s evidence raises about Mrs. Okeke’s role in the events at issue. I disagree with the plaintiff that Mrs. Okeke’s role is only a matter for an independent claim against her. It may affect the validity of the contracts at issue. I also disagree that these issues must be advanced by way of counterclaim rather than by way of defence.

[25]           I reject the plaintiff’s argument that the Osobos admissions of the debt owing are critical. The Osobos made these admissions before receiving legal advice. Once they retained a lawyer, they began to raise their concerns about Mrs. Okeke’s role. I infer that it was at that time that they appreciated the potential problems with the role Mrs. Okeke had played in connection with the agreements and the effect it may have on the agreements. I thus place no weight on the admissions.

[26]           I have no confidence that I can find the necessary facts on the record before me to make a fair and just determination on this motion. Nor could I find the necessary facts on this record by having resort to the expanded fact-finding powers granted to me in r. 20.04(2.1) and (2.2) of the Rules of Civil Procedure, R.R.) 1990, Reg. 194. These powers cannot remedy the absence of any evidence from Mrs. Okeke. I am concerned that substantive unfairness may result if this action is resolved on the basis of the paper record. The plaintiff has not met its burden to establish that there is no genuine issue requiring a trial. Accordingly, I dismiss the motion for summary judgment.

[27]           Although I am mindful of the Supreme Court of Canada’s guidance in Hryniak, at paras. 74-29, that a judge denying a summary judgment motion ought to seize herself of the trial, I decline to do so in this case. This action is at an early stage and much evidence remains to be developed. I do not possess the type of institutional knowledge about this action that warrants my seizing myself as the trial judge. Given the steps that remain, and thus the time required, to get this action ready for trial, were I to seize myself as the trial judge, the scheduling of the trial could become unduly complicated and cause unnecessary delay.

[28]           The parties each claimed costs of the motion in the event they were successful. The plaintiff claimed just over $10,000 on the motion, while the defendants claimed $15,000 in partial indemnity costs.  The plaintiff produced a costs outline but it did not break down counsel’s time; it disclosed only a flat fee. The defendants’ counsel did not have a costs outline, but from memory suggested that $15,000 was an appropriate figure. I thus have no breakdown by time of the steps taken by either counsel in the preparation and argument of this motion.

[29]           There is no reason to depart from the normal rule that costs should follow the event. Costs must be fair and reasonable in the circumstances. In my view, the amounts sought by the parties are too high for this motion, in which there were no cross-examinations.  Accordingly, I order costs payable to the defendants by the plaintiff in the amount of $7,500, inclusive of HST and disbursements.

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