



COURT OF APPEAL FOR ONTARIO

CITATION: Bulut v. Carter, 2014 ONCA 424

DATE: 20140523

DOCKET: C55507

Juriansz, Epstein and Pepall JJ.A.

BETWEEN

Nikolas (Nicholas) Bulut

Plaintiff

(Appellant/Respondent
    by way of cross-appeal)

and

William
    Russell Carter
, Marilyin Rose Carter, Kurt

Russell
    Carter and Amberlyn Miszcyzk

Defendants

(Respondents/
Appellant
    by way of cross-appeal
)

Sean C. Flaherty, for the appellant/respondent by way of
    cross-appeal

Howard W. Reininger, for the respondents/appellant by
    way of cross-appeal

Heard: April 14, 2014

On appeal from the judgment of Justice Johanne N.
    Morissette of the Superior Court of Justice, dated April 25, 2012.

ENDORSEMENT

[1]

The appellant, Nikolas Bulut, and the respondent, William Carter, were
    engaged in various business dealings together, many of which involved the
    Carter family company, Carters Printing of London Ltd.  The other respondents
    (the Carter family members) are members of Mr. Carters family and involved
    with Carters Printing. Marilyn Carter, Mr. Carters wife, is a director of the
    company.  Kurt Russell Carter and Amberlyn Miszcyzk, William and Marilyns
    children, are shareholders of Carters Printing.

[2]

In connection with their business dealings, in April 2006, Mr. Carter,
    on behalf of the company signed a promissory note in the amount of $300,000 in
    favour of Mr. Bulut which he also personally guaranteed.  The Carter family
    members also executed the guarantee.

[3]

Mr. Bulut made demand under the note and guarantees in October 2006.  In
    November of 2006, Carters Printing went bankrupt.

[4]

In this action, Mr. Bulut seeks payment of $300,000, plus interest, from
    all of the respondents, through the enforcement of their guarantees.

[5]

Mr. Carter and the Carter family members have defended the claim on two
    grounds - lack of consideration for the note and relying on the defence of
non
    est factum
.


[6]

The trial judge awarded judgment only against Mr. Carter in his capacity
    as guarantor of the note.  She also concluded that there was consideration for
    the promissory note.  However, she held that the Carter family members had
    satisfied the test for
non est factum
and therefore were not liable as
    guarantors.  She dismissed the action against them.

[7]

The appellant appeals the dismissal of the action against the Carter
    family members.  He submits that the trial judge erred in two respects: (1) the
    defence of
non est factum
had not been pleaded and, (2) even if it
    were, it was not supported by the evidence.

[8]

In his notice of appeal, the appellant also contested the post-judgment
    interest the trial judge awarded.  However, in argument, the appellant
    abandoned this issue.

[9]

In his cross-appeal, Mr. Carter seeks to set aside the judgment against
    him on the basis that the promissory note was given without consideration and the
    guarantee is therefore unenforceable.  In the event the appellant succeeds in
    his argument that the trial judge erred in accepting their defence of
non
    est factum
, the Carter family members also rely on lack of consideration.

[10]

At
    the conclusion of argument, we allowed the appeal and dismissed the
    cross-appeal with reasons to follow.  These are our reasons.

The Appeal

[11]

The
    appellant submits that
non est factum
was not pleaded and the trial
    judge therefore erred in allowing the respondents to rely on the defence.

[12]

Fairness
    dictates that lawsuits be decided within the boundaries of the pleadings. A
    party has the right to know the case it has to meet and to have the opportunity
    to meet it:
Rodaro v. Royal Bank of Canada
(2002), 59 O.R. (3d) 74
    (C.A.).

[13]

The
    defence of
non est factum
was not expressly identified in the
    respondents amended statement of defence and counterclaim.  However, in their pleading,
    the respondents did allege that they did not understand the nature of the
    document they signed.  On this basis the trial judge held that the respondents
    were entitled to rely on the defence, if proven.

[14]

We
    agree.  In their amended statement of defence and counterclaim the respondents
    asserted that they were unaware that they had personally guaranteed Carters
    Printings debt to the appellant and pleaded various circumstances surrounding
    that assertion.  They alleged that the lawyer did not explain the document and did
    not provide them with an opportunity to read it.  The respondents pleaded that
    they, in fact, signed the guarantee without reading it and it was only later
    that they learned that they had signed a document in which they personally
    guaranteed the companys indebtedness under the promissory note.

[15]

The
    defence was sufficiently set out to enable the appellant to respond and the
    record establishes that battle was joined on that issue.

[16]

We
    would therefore not interfere with the trial judges decision to allow the
    respondents to raise the defence of
non est factum
.

[17]

However,
    we agree with the appellant that the trial judge erred in concluding that the Carter
    family members established the defence.

[18]

The
    trial judge correctly set out the test for
non est factum
identified
    in the seminal case of
Marvco Colour Research Ltd. v. Harris
, [1982] 2
    S.C.R. 774.  The defence of
non est factum
is available to someone who,
    as a result of misrepresentation, has signed a document mistaken as to its
    nature and character and who has not been careless in doing so.

[19]

The
    Carter family members testified that they believed they were signing the guarantee
    in their capacity as shareholders of the company. They testified that Mr.
    Carter instructed them, on an urgent basis, to go to the office of the lawyer
    who represented all parties for the purpose of signing some documents.  They
    did so.  The evidence of the Carter family members was that they did not know
    what they were signing - they did not understand that they were personally
    guaranteeing the indebtedness of the company.

[20]

In
    our view, on their own evidence, the Carter family members were careless in
    signing the document that consisted of one page.  The Carter family members did
    not read it.  They did not ask any questions about it.  They did not ask for an
    opportunity to obtain independent legal advice.

[21]

With
    respect, the trial judges finding that the Carter family members were not
    careless is not supported by the evidence. See:
Saunders v. Anglia Building
    Society
, [1970] 3 All E.R. 961, [1970] 3 W.L.R. 1078, 114 Sol. Jo. 885
    (H.L.), affd [1969] 1 All E.R. 1062, sub nom
Gallie v. Lee
, [1971]
    A.C. 1004.

[22]

On
    this basis, the defence of
non est factum
was not open to them.

[23]

Furthermore,
    while the trial judge recognized that for
non est factum
to apply, the
    guarantee must have been signed as a result of misrepresentation as to its
    nature, she did not consider this part of the test.

[24]

Misrepresentation
    is essential to a plea of
non est factum
. See
Dorsch v.
    Freeholders Oil Co. Ltd
.,
[1965] S.C.R. 670.

[25]

The
    Carter family members are unable to demonstrate that they signed the guarantee
    due to any misrepresentation.  Indeed they testified that they were not told
    anything about the document other than to sign it.

[26]

Accordingly,
    the defence of
non est factum
was not open to the Carter family
    members on this basis as well.

The Cross-Appeal

[27]

Mr.
    Carter and the Carter family members took the position at trial, as they do
    before this court, that the promissory note was given by Carter Printing
    without consideration.  They argue that while Mr. Bulut advanced funds to the
    company in 2004 when the promissory note was agreed upon, this advance was pursuant
    to a previous contract. As such, the note was based on past performance and was
    not consideration for the 2006 promissory note.

[28]

We
    disagree.  There was ample evidence in support of a finding of consideration.  Among
    other things, Mr. Carter admitted, as found by the trial judge, that funds were
    advanced to Carters Printing. I refer also to the evidence of Mr. Bulut, Mr.
    Carter and the Carter family members that the promissory note was given in
    order to ensure that the company could continue to engage in business dealings
    with Mr. Bulut.

Disposition

[29]

For
    these reasons the appeal is allowed and the cross-appeal is dismissed.  The
    trial judges dismissal of the action against the Carter family members is set
    aside and judgment is granted against them. That judgment is stayed on the same
    basis as the trial judge stayed the judgment against William Russell Carter.

[30]

The
    appellant is entitled to his costs in this court fixed in the amount of $10,000
    inclusive of disbursements and applicable tax.  The appellant is also entitled
    to his costs at trial, the quantum of which is left to the judge hearing the
    counterclaim.

R. G. Juriansz J.A.

Gloria Epstein J.A.

S.E. Pepall J.A.


