



COURT OF APPEAL FOR ONTARIO

CITATION: MacQuarie Equipment Finance Ltd. v. 2326695 Ontario
    Ltd. (Durham Drug Store), 2020 ONCA 139

DATE: 20200220

DOCKET: C67478

MacPherson, Sharpe and Jamal JJ.A.

BETWEEN

MacQuarie Equipment
    Finance (Canada) Limited

Plaintiff (Respondent)

and

2326695 Ontario Ltd. operating as Durham Drug
    Store

Defendant (Appellant)

and

MedviewMD
    Inc.,
Leasecorp Capital Inc.
, and Daniel Nead

Third Parties (
Respondent
)

Amer Mushtaq, for the appellant

Ron Aisenberg, for the respondent, MacQuarie Equipment
    Finance (Canada) Limited

No one appearing for the respondent, Leasecorp Capital
    Inc.

Heard: February 3, 2020

On appeal from the judgment
    of Justice Lorne Sossin of the Superior Court of Justice, dated August 28, 2019,
    with reasons reported at 2019 ONSC 5019.

By the Court:

Introduction

[1]

The appellant, 2326695 Ontario Limited operating as Durham Drug Store
    (Durham Drug Store), appeals from the motion judges decision granting
    summary judgment to the respondent, Macquarie Equipment Finance (Canada)
    Limited (Macquarie), for $90,057.13 under a lease financing agreement dated
    February 19, 2016 (the Lease).

[2]

Macquarie cross-appeals the motion judges decision to award pre- and
    post-judgment interest at the rates prescribed under the
Courts of Justice
    Act
, R.S.O. 1990, c. C.43, rather than at the contractual rate under the
    Lease of up to 2.0% per month (24% per annum).

[3]

For the reasons that follow, the appeal is allowed. In the unusual
    circumstances of this case, Durham Drug Store had a right to terminate the
    Lease and return the leased equipment to Macquarie upon the default of the
    respondent, MedviewMD Inc. (Medview). The cross-appeal is dismissed as moot.

Background facts

[4]

Durham Drug Store operates a pharmacy in Pickering, Ontario, run by its
    principal, Ms. Zeinab Abdulaziz, a pharmacist.

[5]

In late 2015, Mr. Daniel Nead met with Ms. Abdulaziz to propose a
    business arrangement between Medview, of which he was a representative, and
    Durham Drug Store. Based on that proposal, Durham Drug Store engaged Medview to
    supply a telemedicine studio in the pharmacy to provide remote medical services
    to the public.

[6]

Medview then contacted Mr. Barry Johnston, a representative of the
    respondent, Leasecorp Capital Inc. (Leasecorp), an equipment lease broker, to
    lease Durham Drug Store the necessary telemedicine equipment.

[7]

Mr. Johnston met with Ms. Abdulaziz at Durham Drug Store on February 8,
    2016, where they completed a credit application. It was approved the next day.

[8]

Ms. Abdulazizs evidence was that she thought Mr. Johnston was a Medview
    representative and that he said he was sent by Nead/Medview. Mr. Johnstons
    evidence was that he identified Macquarie as the equipment lessor.

[9]

On February 11, 2016, Medview emailed Ms. Abdulaziz a copy of the written
    Master Service Agreement (Medview MSA) between Medview and Durham Drug Store,
    which set out the terms of Medviews proposed telemedicine services, for review
    and signing. Medviews cover email, copied to Mr. Johnston, stated: I believe
    Barry [i.e., Mr. Johnston] will be visiting you tomorrow for signing.

[10]

The Medview
    MSA emailed to Ms. Abdulaziz was to have the same termination date as the
    equipment lease. The Medview MSA also contained a broad early termination
    provision, which reads in relevant part:

10.

Early Termination
.
A Party shall
    be entitled, at its option, to terminate this Agreement immediately upon notice
    in writing to the other Party



(g) if the other Party shall be in
    breach of or default under any of the terms, conditions, covenants or
    agreements contained in this Agreement (other than a breach default [sic] of
    its payment obligations to the other Party under this Agreement) and shall fail
    to cure such breach or default within fifteen (15) calendar days after delivery
    to the other Party of written notice to that effect.

[11]

On
    February 19, 2016, Mr. Johnston visited Ms. Abdulaziz, but did not come with a
    copy of the proposed Medview MSA. Instead, he came with a proposed Lease
    between Macquarie and Durham Drug Store.

[12]

Ms.
    Abdulazizs evidence was that she was busy in the pharmacy with customers and
    did not review the Lease in detail, believing it to be a version of the Medview
    MSA. Although she noticed Macquaries name on the document, she believed it was
    another business name for Medview. Ms. Abdulazizs evidence was that Mr.
    Johnston asked her to sign the paperwork so that Medview could deliver the
    equipment to Durham Drug Store. She signed it and initialed each page. The
    whole meeting lasted just a few minutes.

[13]

Durham
    Drug Store then took possession of the telemedicine equipment. Under the Lease,
    Ms. Abdulaziz was to pay a total of $98,522.31, with monthly payments of $50
    for the first three months, and then $1,725.83 plus tax per month for the rest of
    the lease term. This tracked exactly the Equipment Fee she owed Medview under
    the Medview MSA, both in total amount and in payment instalments.

[14]

Durham
    Drug Store paid Macquarie under the Lease for almost a year, but then stopped
    in February 2017 because it learned that Medview had failed to disclose that its
    telemedicine services lacked the necessary regulatory approvals. As a result,
    Durham Drug Store ceased offering telemedicine services.

[15]

Macquarie
    then contacted Durham Drug Store. Ms. Abdulaziz advised Macquarie that she had
    contacted Medview and it had advised her that the telemedicine equipment would
    be picked up. Macquarie responded that it had nothing to do with any
    arrangement she had with Medview, and Durham Drug Store would be responsible
    for any shortfall if she sold the equipment to Medview.

[16]

At
    this point, Ms. Abdulaziz queried how she had become involved with Macquarie, separate
    and apart from Medview. She told Macquarie that it could pick up the equipment
    and sort out the issue with Medview and Mr. Nead.

[17]

It
    was not until then, as the motion judge found, that Macquarie provided Ms. Abdulaziz
    with a signed copy of the Lease.

[18]

Macquarie
    then sued Durham Drug Store, claiming $90,057.14 under the Lease and for possession
    of the leased equipment.

[19]

Durham
    Drug Store defended on the basis that it believed that its contract was with
    Medview and Mr. Nead, not Macquarie, and that it was the victim of a scam
    perpetrated by Medview and Mr. Nead. It claimed it was never advised that it
    was contracting with anyone other than Medview and Mr. Nead.

[20]

Durham
    Drug Store issued a third party claim against Leasecorp, Mr. Nead, and Medview.
    Mr. Nead and Medview did not defend and were noted in default.

[21]

On
    Macquaries motion for summary judgment to enforce the terms of the Lease, the motion
    judge found that although Ms. Abdulaziz appears to have been the victim of the
    fraud perpetrated by Medview and Nead, there is no evidence that either
    Macquarie or Leasecorp participated in or knew about the fraud. He concluded
    that because the Lease was signed by Ms. Abdulaziz, it was enforceable against
    Durham Drug Store:

The failure to provide Abdulaziz with a copy of the lease, and
    the apparent failure of communication between Johnston and Abdulaziz with
    respect to the various parties involved in the transaction, and their roles,
    led to Abdulazizs understandable confusion and consternation when eventually
    contacted by Macquarie in relation to the default under the lease agreement,
    but this confusion and consternation does not vitiate the enforceability of the
    agreement.

[22]

Durham
    Drug Store now appeals this determination to this court.

[23]

In
    advance of the oral hearing, the court wrote to the parties asking them to be
    prepared to address the potential application of
Tilden Rent-A-Car Co. v.
    Clendenning
(1976), 18 O.R. (2d) 601 (C.A.), and
Forest Hill Homes v.
    Ou
, 2019 ONSC 4332. These cases address how extremely onerous or unfair
    contract terms may be unenforceable if inadequate notice of those terms was provided
    to the other contracting party at the time of contract formation.

[24]

In
    response to the courts letter, the parties filed supplementary authorities and
    made oral submissions addressing the principles in these decisions.

Analysis

[25]

In
    our view, on the evidence before him, the motion judge was entitled to find
    that Macquarie and Leasecorp did not participate in or have knowledge of any
    fraud allegedly committed by Medview and Nead, or fraudulently misrepresent
    anything to Durham Drug Store.

[26]

The fraud
    alleged was outlined in an affidavit of a former Medview employee. Medview and
    Mr. Nead had allegedly defrauded several pharmacies by recruiting them to join its
    telemedicine business and to purchase related equipment. Medview allegedly advised
    pharmacies that its telemedicine services were approved by the Ontario Ministry
    of Health, when this was false. Several disputes involving these issues are or
    have been before the courts.

[27]

The
    motion judge was also entitled to find that the evidence was insufficient to
    establish that the Lease was an unconscionable agreement, because neither
    Macquarie nor Leasecorp knowingly took advantage of Ms. Abdulazizs
    vulnerability and the Lease was neither unfair nor improvident
per se
.

[28]

However,
    that does not resolve all issues as to the enforceability of the Lease. The
    Lease also contained a term that purported to eliminate Durham Drug Stores
    ability to terminate or cancel the Lease during its term for any reason,
    including equipment failure, damage or loss:

3.
Non-Cancellable:
Lessee cannot terminate
    or cancel this Lease during the Term for any reason, including equipment
    failure, damage or loss. Lessee acknowledges and agrees that it has selected
    the Equipment and the Equipment Supplier and such acceptance cannot be revoked
    at any time. Lessor has purchased the Equipment at Lessees request and
    instruction only.

[29]

The
    effect of this provision is that Durham Drug Store would have to keep paying
    for the equipment even if Medview and Mr. Nead defaulted in providing telemedicine
    services. Without those services, the equipment was of no use.

[30]

As
    is evident, this no cancellation provision in the Lease is at odds with the early
    termination provision of the Medview MSA.

[31]

We
    do not dispute the ability of the contracting parties to agree to such a no
    cancellation provision in an adhesion contract such as the Lease between Macquarie
    and Durham Drug Store.

[32]

Nor
    do we dispute the binding effect of a partys assent to a contracts terms by
    signing it, whether or not they read the contract with appropriate care or at
    all. As noted by Professor John D. McCamus in
The Law of Contracts
, 2nd ed.
(Toronto: Irwin Law, 2012), at
    p. 193: If an agreement is entered into on the basis of a document proffered
    by one party and signed by the other, it is clearly established that the
    agreement between the parties contains the terms expressed in the document,
    whether or not the signing party has read the documents.

[33]

However,
    Professor McCamus adds that sometimes, even with a signed agreement, inadequate
    notice of a particularly unfair term may render that term unenforceable, at p.
    194:

In many contractual settings, it will not be expected that a
    signing party will take time to read the agreement. Even if the document is
    read, it may well be, especially in the context of consumer transactions, the
    purport of particular provisions of the agreement will not be understood by the
    signing party. Under traditional doctrine, then, although the fact of the
    signature appears to dispense with the notice issue, the opportunities for
    imposing harsh and oppressive terms on an unsuspecting party are, as a
    practical matter, as present in the context of signed documents as they are in
    the context of unsigned documents. Accordingly, it is perhaps not surprising
    that the recent jurisprudence indicates that notice requirements are migrating
    into the context of signed agreements.

[34]

The
    leading Ontario case on this point remains this courts decision in
Clendenning
.
    There, Dubin J.A. (as he then was) for the majority refused to enforce a limitation
    of liability provision in a car rental agreement that purported to exclude the
    rental companys liability for a collision where the customer had driven the
    car after consuming alcohol. Before renting the car, the customer had chosen to
    pay an additional premium for collision damage waiver, which he had been led
    to understand provided comprehensive insurance for vehicle damage. He signed
    the rental agreement without reading it.

[35]

In
    finding the exclusion clause unenforceable, Dubin J.A. highlighted that such a rental
    transaction was typically concluded in a hurried, informal manner, and that the
    liability exclusion provision was [o]n the back of the contract in particularly
    small type and so faint in the customers copy as to be hardly legible: at pp.
    602, 606. The exclusion clause was also inconsistent with the over-all purpose
    for which the transaction is entered into by the hirer: at p. 606.

[36]

In
    these circumstances, Dubin J.A. concluded that something more should be done
    by the party submitting the contract for signature than merely handing it over
    to be signed (at p. 606)  namely, reasonable measures must be taken to draw
    harsh and oppressive terms to the attention of the other party, at p. 609:

In modern commercial practice,
    many standard form printed documents are signed without being read or
    understood. In many cases the parties seeking to rely on the terms of the
    contract know or ought to know that the signature of a party to the contract does
    not represent the true intention of the signer, and that the party signing is
    unaware of the stringent and onerous provisions which the standard form
    contains. Under such circumstances, I am of the opinion that the party seeking
    to rely on such terms should not be able to do so in the absence of first
    having taken reasonable measures to draw such terms to the attention of the
    other party, and, in the absence of such reasonable measures, it is not
    necessary for the party denying knowledge of such terms to prove either fraud,
    misrepresentation or
non est factum
.

[37]

In
    our view, the highly unusual circumstances of this case bring it within the principle
    in
Clendenning
. Without suggesting that there was any intention to
    mislead Ms. Abdulaziz, here, the no-cancellation provision should have been
    specifically brought to Ms. Abdulazizs attention. It should have been
    explained to her that she would remain obligated to pay for the telemedicine
    equipment under the Lease even if Medview defaulted on its obligations.

[38]

While
    on its face a no-cancellation clause is a commonplace provision that is neither
    harsh nor oppressive, here it became so when seen in the light of the
    interactions among the parties and when juxtaposed with the early-termination
    provision of the Medview MSA  the only agreement that Ms. Adbulaziz was sent
    and which Medview advised her, to Mr. Johnstons knowledge, that Mr. Johnston
    would bring to her for signature. The Lease was then signed in a hurried
    manner, with no opportunity to negotiate the terms, without Ms. Abdulaziz reading
    it with any care because Mr. Johnston came by when she was busy in the pharmacy,
    and without the benefit of legal advice. Moreover, the entire Lease is
    contained in two tightly-packed pages in extremely small font. While technically
    legible, it can only be read with difficulty.

[39]

Mr.
    Johnstons evidence was that it was his standard practice to bring certain
    clauses to the attention of the lessee  the payment terms, the lessors
    remedies, and lessees obligations upon default  but he did not appear to do
    so in this case with respect to the no-cancellation provision, nor did he explain
    that Durham Drug Store would have to keep paying for the equipment even if
    Medview defaulted.

[40]

In
    these circumstances, it was not reasonable for Mr. Johnston or Macquarrie to
    have believed that Ms. Abdulaziz really assented to the no-cancellation provision
    of the Lease, which was at odds with the termination provision in the Medview
    MSA, without having first taken reasonable measures to bring that clause to her
    attention.

[41]

As
    the motion judge found, the apparent failure of communication between Mr.
    Johnston and Ms. Abdulaziz and the failure to provide Ms. Abdulaziz with a copy
    of the Lease led to her understandable confusion and consternation when
    Macquarie ultimately contacted her about her default. In our view, in this case
    that failure of communication bears on the enforceability of the Lease.

[42]

In all
    the circumstances, the no-cancellation provision is unenforceable. Upon
    Medviews default, Durham Drug Store was entitled to terminate the Lease and
    return the leased equipment to Macquarie. This is in effect what it purported
    to do when Medview defaulted and it told Macquarie to pick up the equipment.

[43]

Given
    this conclusion, it is not necessary to address whether interest is payable at
    the contractual rate of 2% per month for the remainder of the term of the
    Lease. That issue is moot.


Disposition

[44]

The
    appeal is allowed. The cross-appeal is dismissed as moot. Costs of the appeal
    and cross-appeal are payable by Macquarie to Durham Drug Store in the agreed
    amount of $15,000, inclusive of disbursements and taxes.

Released: February 20, 2020 (J.C.M)

J.C. MacPherson J.A.

Robert J. Sharpe J.A.

M. Jamal J.A.


