



COURT OF APPEAL FOR ONTARIO

CITATION: Oxygen Working Capital Corp. v.
    Mouzakitis, 2022 ONCA 90

DATE: 20220128

DOCKET: C69293

MacPherson, van Rensburg and Roberts
    JJ.A.

BETWEEN

Oxygen Working Capital Corp.

Plaintiff
(Respondent)

and

Mike Mouzakitis and Angela
    Mouzakitis

Defendants
(Appellants)

John S. Contini, for the appellants

Sam Rappos, for the respondent

Heard: January 24, 2022 by
    video conference

On appeal
    from the judgment of Justice Frederick L. Myers of the Superior Court of
    Justice dated March 15, 2021, with reasons reported at 2021 ONSC 1907.

REASONS FOR DECISION

[1]

This appeal turns principally on the
    reasonableness of the motion judges exercise of his enhanced powers under r.
    20 of the
Rules of Civil Procedure
,
    R.R.O. 1990, Reg. 194
. The appellants argue that the motion judge
    erred in finding that there were no genuine issues requiring a trial concerning
    the enforcement of their guarantees.

[2]

At the conclusion of the appellants
    submissions, we dismissed the appeal with reasons to follow. These are those
    reasons.

[3]

The appellant, Mike Mouzakitis, is the
    directing mind and will of Scoby Kombucha Inc. (Scoby). The other appellant,
    Angela Mouzakitis, is his sister. On November 20, 2019, Scoby and the respondent
    entered into a master factoring agreement (MFA). In connection with the MFA, the
    appellants, with the benefit of independent legal advice, entered into separate
    guarantees of the indebtedness of Scoby. Mr. Mouzakitiss guarantee was dated
    November 20, 2019, and Ms. Mouzakitiss guarantee was dated November 26,
    2019. The guarantees were continuing, unlimited in scope and time, and were not
    tethered to any particular transaction. Each guarantor promised to guarantee
    all indebtedness, liabilities and obligations of any kind whatsoever that
    Scoby has incurred or may incur or be under to the respondent.

[4]

Under the MFA, Scoby could borrow funds from
    the respondent based on the security of its accounts receivable. The loans were
    a percentage of the accounts receivable tendered by Scoby for factoring by the
    respondent. There was no fixed percentage stipulated under the MFA. It was
    intended that the loans would be repaid from Scobys collected accounts
    receivable. If the accounts receivable remained unsatisfied, Scoby was required
    to repay the loans. If Scoby failed to do so, the appellants were required to
    repay them under the guarantees. Scoby factored its accounts receivable with the
    respondent and received funds in about November 2019 and June 2020. Scobys
    indebtedness under the November 2019 loan was satisfied. The June 2020 loan
    went into default.

[5]

After making a demand, the respondent
    commenced an action against the appellants under their guarantees to recover
    the amounts outstanding under the June 2020 invoices and brought a motion for
    summary judgment. The motion judge granted summary judgment in favour of the
    respondent in the amount of $289,190.59, including prejudgment interest at 27%
    per annum. He awarded the respondent $16,000 in costs on a substantial
    indemnity basis in accordance with the guarantees provisions. The judgment
    bears interest at the rate of 27% per annum on the amount of $289,190.59 and 2%
    per annum on costs.

[6]

The appellants raise several issues.

[7]

The first four issues relate to the motion
    judges application of the requisite analytical framework on a motion for
    summary judgment set out by the Supreme Court in
Hryniak v. Mauldin
,
    2014 SCC 7, [2014] 1 S.C.R. 87. In particular, the appellants take issue with
    the motion judges treatment of Mr. Mouzakitiss evidence on the
    cross-examination on his affidavit that they say gives rise to a genuine issue
    of credibility requiring a trial. The motion judge noted that Mr. Mouzakitis
    volunteered for the first time on cross-examination that the respondents President,
    Sab Ravalli, represented to him prior to factoring the June 2020 accounts
    receivable that the guarantees would not apply to that transaction. Mr.
    Mouzakitis claimed that Mr. Ravalli told him this was because unlike the prior
    advance for 80% of the invoice amount, the respondent would only advance 50%
    and 70% of the respective invoices being factored. The allegations were not
    pleaded nor were they contained in Mr. Mouzakitiss affidavit filed on the
    motion, notwithstanding the respondents Chief Financial Officers affidavit
    that stated there were no representations made to the appellants. The
    appellant, Ms. Mouzakitis, did not file an affidavit on the motion. As the
    motion judge further noted, the respondent did not seek leave to file an
    additional, late affidavit to respond to Mr. Mouzakitiss evidence. However,
    there was a hearsay denial of any representation about the limitation of the
    guarantees in the respondents original affidavit material that is expressly
    based on inquiries from Mr. Ravalli and others. The appellants argue that the
    motion judge also erred in relying on the respondents hearsay denial of any
    representation.

[8]

We start our consideration of these issues
    with the standard of review. With respect to the motion judges
Hryniak
analysis, this court recently reiterated in
Royal Bank of Canada v. 1643937
    Ontario Inc.
, 2021 ONCA 98, 154 O.R. (3d) 561, at para. 23, that [a]bsent
    an error of law, a misdirection, or the creation of an injustice through a
    decision that is clearly wrong, a motion judges determination of these
    questions is generally entitled to considerable deference on appeal.

[9]

We see no error with the motion judges
    careful and detailed analysis that comprised both steps of the
Hryniak
framework.

[10]

The motion judge first considered whether there was a
    genuine issue requiring a trial based on the record alone and without utilizing
    the enhanced fact-finding powers under r. 20.04. His interpretation of the MFA
    and guarantees based on their plain wording is unassailable. We agree with his
    conclusion that the appellants subjective, unilateral understanding that their
    guarantees only applied to the November 2019 transaction is inconsistent with
    the plain wording of the MFA and the guarantees that contain no such
    restriction, and is in any event irrelevant to the objective factual matrix
    that may assist with the interpretation of an agreement. As the Supreme Court
    instructed in
Sattva Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53,
    [2014] 2 S.C.R. 633, at para. 58, while [t]he nature of the evidence that can
    be relied upon under the rubric of surrounding circumstances will vary, it should
    consist only of objective evidence of the background facts at the time of the
    execution of the contract and not the parties unilateral subjective
    intentions.

[11]

As the motion judge concluded, correctly in our view, but
    for Mr. Mouzakitiss new evidence, he did not see a credibility issue
    requiring resolution, nor any conflict in the evidence, to undermine the
    interpretation of the scope of the guarantees on the plain meaning of their
    words as at the date they were signed. However, as he properly concluded, if
    Mr. Mouzakitiss evidence were believed and capable of amounting to a defence
    to the applicability of the guarantees to the June 2020 advance, he would not
    be able to decide the motion on the record without resolving the apparent
    conflict as to whether the respondent said or agreed it would limit the reach
    of the guarantees. He then turned to analyze Mr.

Mouzakitiss
    new evidence.

[12]

The motion judge determined that he could fairly make the
    necessary findings of fact and credibility under r. 20.04(2) and that a trial
    or a mini-trial was not necessary nor an affordable, efficient and proportional
    process. He explained:

In my view this is a case in which utilizing the enhanced
    powers will lead to a fair result. It seems to me that an inference is safely
    available that had Mr. Mouzakitis ever mentioned this evidence before his
    cross-examination, it would have been pleaded front and centre. In addition,
    the evidence as adduced is uncertain as to time and unsupported despite an indication
    that there is documentary support. There is no evidence or reliance,
    inducement, or a written amendment or waiver. Finally, the notion that a lender
    whose first advance was not repaid on time as required, would agree to forgo
    its security in a simple, unrecorded, undocumented conversation, does not
    accord with my understanding of business common sense or lending logic.

[13]

There is no basis to interfere with the motion judges
    findings.

[14]

Respectfully, the appellants reliance on this courts
    decision in
Royal Bank
is misplaced. In
Royal Bank
, the
    motion judge erred by failing to engage with the entire
Hyrniak
analysis, consider all the evidence, and determine whether there was a genuine
    issue requiring a trial. Her reasons were conclusory; while she recited some of
    the evidence, she did not weigh it, evaluate it, or make findings of
    credibility as she was required to do in that case. Moreover, she ignored corroborating
    evidence of the allegations of misrepresentation in the examinations for
    discovery and affidavits that were before her on the motion.

[15]

In contrast, as indicated above, the motion judge in the
    present case fully and meaningfully applied the
Hyrniak
framework and reasonably
    determined that he could resolve the credibility issues raised by Mr.
    Mouzakitiss new evidence using the enhanced powers under r. 20.04.

[16]

We are not persuaded by the appellants submission that the
    motion judge impermissibly relied on a hearsay denial of the allegations of
    misrepresentation. Rather, it is clear from his reasons that the motion judge did
    no more than accept the fact of the respondents blanket denial of the
    allegations as reflected in the supporting affidavit, which he was entitled to
    do. The motion judge was well aware that there was no additional affidavit
    filed to challenge Mr. Mouzakatiss new evidence. However, that Mr. Mouzakatiss
    allegations were unchallenged by specific affidavit evidence did not require
    the motion judge to accept them. As we have already noted, following the
Hyrniak
framework, the motion judge gave clear and detailed reasons as to why he found
    Mr. Mouzakatiss uncorroborated evidence to be incredible. We see no error.

[17]

Turning to the appellants fifth issue raised on appeal, we
    are not persuaded that the motion judge erred in his consideration of the
    appellants allegations that the respondents interference led to their
    customer refusing to pay the factored June 2020 accounts receivable. While he
    was correct in describing Mr. Mouzakitiss repetition in his affidavit of
    his customers alleged statements as inadmissible hearsay, the motion judges
    primary reason for rejecting the appellants evidence was because the evidence
    was bald and unsupported. The motion judge stated: The evidence is a simple
    adoption of the statement of defence. There is no basis in the bald and
    unsupported allegations on which to find a genuine issue requiring a trial that
    anything done by the [respondent] so seriously enhanced the guarantors risk as
    to release the guarantees. Again, these findings were open to the motion judge
    and are free of error.

[18]

Finally, with respect to the appellants sixth issue, the question
    of interest, we do not accept that a trial was required to determine which rate
    of interest should apply. It was open to the motion judge on the record before
    him to interpret the MFA and determine that the interest rate was 27%. Again,
    we see no error.

[19]

For these reasons, we dismissed the appeal.

[20]

The appellants shall pay the respondents costs of the
    appeal in the all‑inclusive amount of $15,000, on a substantial indemnity
    basis as provided for in the guarantees.

J.C.
    MacPherson J.A.

K.
    van Rensburg J.A.

L.B.
    Roberts J.A.


