



COURT OF APPEAL FOR ONTARIO

CITATION: 1652620 Ontario Inc. v. Cornerstone Builders Ltd.,
    2018 ONCA 973

DATE: 20181204

DOCKET: C65429

Feldman, van Rensburg and Nordheimer JJ.A.

BETWEEN

1652620 Ontario Inc.

Respondent (Plaintiff)

and

Cornerstone Builders Ltd.

Appellant (Defendant)

and

Cornerstone Builders Ltd.

Appellant (Plaintiff by Counterclaim)

and

1652620 Ontario Inc., Anthony Hanmer and Full
    Speed Builders Ltd.

Respondents (Plaintiff by Counterclaim)

Todd Storms and Charles Hammond, for the appellant,
    Cornerstone Builders Ltd.

R. Steven Baldwin, for the respondents, 1652620 Ontario Inc.,
    Anthony Hanmer and Full Speed Builders Ltd.

Heard and released
    orally: November 30, 2018

On appeal from the
    judgment of Justice Kershman, of the Superior Court of Justice, dated March 22,
    2018.

REASONS FOR DECISION

[1]

The defendant appeals from the partial summary judgment awarded by the motion
    judge that provided for payment of monies due under a promissory note in favour
    of the plaintiff and also struck out parts of the counterclaim.

[2]

Briefly stated, the respondent, 1652620 Ontario Inc. (165), was the
    personal corporation of Anthony Hanmer.  In 2006, 165 became a shareholder in
    the appellant and a shareholders agreement was signed.  That agreement
    provided that upon ceasing to be a shareholder, Mr. Hanmer would sign a
    non-competition agreement.  Mr. Hanmer had been employed by the appellant since
    1995.  In 2011, the appellant purchased the shares held by 165.  As part of the
    purchase, the appellant gave 165 a promissory note for $1,344,540.  The
    promissory note was to be paid in monthly installments of $10,000.  The
    promissory note did not bear interest and it was not a demand promissory note.

[3]

A falling out occurred between Mr. Hanmer and the owner of the
    appellant.  Mr. Hanmer left his employment and established his own business
    that is alleged to have competed with the appellant.  No non-competition
    agreement was signed.  Subsequently, the appellant ceased to make the monthly
    payments on the promissory note.  165 commenced this action seeking the payment
    of the remaining amount under the promissory note.  The appellant defended and
    counterclaimed.  The essence of the counterclaim is that Mr. Hanmer, through his
    new company, Full Speed, unfairly competed with the appellant in breach of an
    alleged non-competition agreement and in breach of Mr. Hanmers fiduciary duty.

[4]

165 brought a motion for summary judgment.  The motion judge granted the
    motion, finding there was no genuine issue for trial of the monies due under
    the promissory note.  However, since the promissory note was not a demand
    promissory note, and in the absence of any acceleration clause, the motion
    judge correctly concluded that he could only award judgment for the payments
    that were due but not paid, but not for the monthly payments that had yet to
    fall due.

[5]

The motion judge also struck out various allegations
    contained in the counterclaim that he concluded were untenable on the evidence
    before him.  Despite how the parties appear to have treated his decision in
    that regard, he did not grant summary judgment on these issues.  Rather, he
    struck out those portions of the appellants statement of defence and
    counterclaim, presumably either under r. 21.01 or r. 25.11 of the
Rules of
    Civil Procedure,
R.R.O. 1990, Reg. 194
.

[6]

The appellant takes issue with each
    of the decisions reached by the motion judge.  On the issue of the payments
    under the promissory note, the appellant says it claimed an equitable set-off
    for those amounts against the damages that it incurred as a result of the
    improper conduct of the defendants to the counterclaim.  The motion judge
    rejected the appellants position.  He found that equitable set-off was not
    available where a claim is made on a bill of exchange such as a promissory
    note.  In so concluding, the motion judge relied on the decision in
Iraco
    Ltd. et al. v. Staiman Steel Ltd.
(1986), 54 O.R. (2d) 488 (H.C.J.), affd
    (1987), 62 O.R. (2d) 129 (C.A.).

[7]

We do not see any error
    in the motion judges conclusion in this regard.

[8]

The appellant also
    complains that the motion judge did not stay execution on the judgment awarded
    pending prosecution of the counterclaim.  The motion judge did not give any
    reasons for his decision not to stay execution on the judgment, other than to
    make a general reference to the equities without more.  The failure to give
    reasons for his decision was an error in principle.

[9]

The conclusion regarding
    the defence of equitable set-off is not determinative of the issue whether a
    stay should be granted.  In this case, the two claims are interrelated.  They
    both arise out of the relationship between the parties, both as shareholder and
    employee.  It would seem in those circumstances that a stay ought to have been
    granted, as was done in
Jones Collombin Investment Counsel Inc.
    v. Fickel,
2016 ONSC 6536.

[10]

The appellant raises a
    further issue.  Because there was a question whether the appellant would make
    the future payments required by the promissory note, the motion judge acceded
    to the suggestion made by counsel for the respondents, that, after granting
    judgment for the amount owing to date, he adjourn the claim and the motion for
    summary judgment for a period of approximately six months to see if the future
    payments were being made.

[11]

We agree with the
    appellant that it was not open to the motion judge to proceed in this fashion. 
    The summary judgment motion on the statement of claim to enforce the promissory
    note, as it was due at the time of the judgment, had been determined.  While he
    could manage the progress of the remaining parts of the proceeding, he did not
    have jurisdiction to keep alive a summary judgment motion that had been finally
    determined.

[12]

The appellant also
    challenges the order, that the motion judge made, striking out portions of the counterclaim. 
    In our view, it was not open to the motion judge to strike out portions of the
    counterclaim on a motion for summary judgment in the absence of a motion to
    strike.  It is also not clear that some of the portions that the motion judge
    struck out cannot fairly be seen as particulars of the appellants breach of
    fiduciary duty claim that it would be entitled to explore on discovery.

[13]

At the hearing, the
    appellant only sought to have two of the allegations restored, that is, the
    derogatory comments and the telephone numbers.  Consequently, we allow the
    appeal to that extent.

[14]

The
appeal is allowed in part. The order
    below is set aside insofar as it has been amended by these reasons.  A stay of
    the judgment is also granted.  As agreed between the parties there will be no
    costs of the appeal.  As also agreed between the parties, the costs of the
    summary judgment motion that were awarded to the respondent are reduced to
    $5,000 inclusive of disbursements and HST.

K.
    Feldman J.A.

K.
    van Rensburg J.A.

I.V.B.
    Nordheimer J.A.


