



COURT OF APPEAL FOR ONTARIO

CITATION: Heliotrope Investment Corporation
    v. 1324789 Ontario Inc., 2021 ONCA 23

DATE: 20210113

DOCKET:
M51825 (C68121,
    C68122, C68123)

Thorburn
    J.A. (Motions Judge)

BETWEEN

DOCKET:
    C68121

Heliotrope
    Investment Corporation

Plaintiff

(Respondent/Responding Party)

and

1324789 Ontario Inc., Martha Lorraine Beach, Johnathan Gary

Beach
    and 1073650 Ontario Inc.

Defendants

(Appellants/Moving Parties)

and

1324789 Ontario Inc., Martha Lorraine Beach, Johnathan Gary

Beach
    and 1073650 Ontario Inc.

Plaintiffs by Counterclaim

(Appellants/Moving Parties)

and

Canadian Western Trust Company (In Trust for RRSP Plan

Number #10084752 and Plan #10084190), Heliotrope Investment

Corporation, Magenta Capital Corporation and Magenta

Mortgage
    Investment Corporation

Defendants by Counterclaim

(Respondents/Responding Parties)


AND BETWEEN

DOCKET:
    C68122

Canadian Western Trust Company

(In
    Trust for RRSP Plan Number #10084752 and Plan #10084190)

Plaintiff

(Respondent/Responding Party)

and

1324789 Ontario Inc., Martha Lorraine Beach, Johnathan Gary

Beach and 1073650 Ontario Inc.

Defendants

(Appellants/Moving Parties)

and

1324789 Ontario Inc., Martha Lorraine Beach, Johnathan Gary

Beach and
    1073650 Ontario Inc.

Plaintiffs by Counterclaim

(Appellants/Moving Parties)

and

Canadian Western Trust Company (In Trust for RRSP Plan

#10084752 and Plan #10084190), Heliotrope Investment

Corporation, Magenta Capital Corporation and Magenta

Mortgage
    Investment Corporation

Defendants by Counterclaim

(Respondents/Responding Parties)

AND BETWEEN

DOCKET:
    C68123

Canadian Western Trust Company (Incorporation No. A46845),

In
    Trust for RRSP Plan Number #10084752 and Plan #10084190

Plaintiff/Defendant by Counterclaim

(Respondent/Responding Party)

and

1324789 Ontario Inc., 1073650 Ontario Inc., Johnathan Gary

Beach and
    Martha Lorraine Beach

Defendants/Plaintiffs by
    Counterclaim

(Appellants/Moving Parties)

Bruce D.
    Marks,
for the moving parties

Charles L. Merovitz
    and Eric Lay, for the responding parties

Heard:
    January 5, 2021 by video conference

REASONS FOR DECISION

OVERVIEW

[1]

The moving party appellants (the Appellants) seek two orders: (a)
    an order to extend the time to file a Supplementary Notice of Appeal, and (b)
    an order to permit them to file fresh evidence.

[2]

The appellants have appealed an order for summary judgment and
    that there be no stay of the order pending appeal. The Appellants resisted the summary
    judgment motion on two grounds: that the Respondents made representations that
    the loans would not have to be repaid before development of the properties was
    completed, and that in any event, judgment should be stayed pending appeal as there
    was related litigation that, if successful, would reduce the amounts owing by
    the Appellants. The motion judge rejected both arguments.

[3]

The Appellants claim their lawyers filed a Notice of Appeal that focuses
    on the order denying a stay. The Appellants claim however that they understood the
    merits of the underlying judgment were being appealed.
They
    wish to file a Supplementary Notice of Appeal to clarify this. Secondly, the Appellants
    seek to file fresh evidence. They claim that this evidence
supports
    their argument that they did not have independent legal advice when they signed
    the Joint Venture Agreement, and that they signed the Agreement under duress.

[4]

The Respondents claim that the request to file a Supplementary
    Notice of Appeal is just another delay tactic to prevent the Respondents from recovering
    monies owing pursuant to
simple mortgage collection actions
    and the request should be refused. Second, they claim the fresh evidence is
    not new as the Appellants knew about their own retainer with counsel and could
    have adduced this evidence earlier and, in any event, there is no evidence that
    the Appellants were without legal counsel when they signed the Joint Venture
    Agreement.

[5]

For the reasons that follow, the Supplementary
    Notice of Appeal may be filed to clarify that the appeal of the underlying
    decision is in respect of both issues raised by the Appellants on the summary
    judgment motion. However, the motion to permit fresh evidence is denied.

BACKGROUND

[6]

The parties principals, Gavin Marshall and Johnathan
    Beach, have been involved together in residential land development projects
    since 2013. Mr. Marshall provided the financing and Mr. Beach was the project
    manager.

[7]

Negotiations between Mr. Beach and Mr. Marshall
    culminated in agreements that Mr. Marshall and his spouse would lend money to 1324780
    Ontario Inc. (132) through Registered Retirement Savings Plans they held with
    Canadian Western, secured by mortgages on several properties under development
    pursuant to joint venture agreements. Mr. Beach would provide management
    services to the Joint Ventures and would be subject to a non‑competition
    proviso, and 132 would complete the projects.

[8]

The
Appellants
claim
    they were financially dependent on the Respondents, and, as such, the Respondents
    owed them a fiduciary duty to act in their best interest.

[9]

Cost overruns and delays resulted in financial
    losses and the mortgages are now in default.

THE DECISION BELOW

[10]

The Respondents brought motions for summary
    judgment for payment of monies owing in respect of three mortgages with the Appellants.

[11]

The parties agreed that the Respondents had
    advanced monies secured by mortgages, and that the Appellants had been in
    default for some time. As noted by the motion judge, there was also no dispute
    regarding the arithmetical calculation of principal and accrued interest.

[12]

The Respondents took the position that these
    were two experienced commercial parties, the Respondents lent the Appellants money
    secured by mortgages, and the mortgages are in default. Absent redemption of
    the mortgages, the Respondents are entitled to enforce their rights, which include
    possession of the mortgaged lands and judgment for the amount due and owing on
    the loans. Joint Venture Agreements signed in 2014 affirmed those rights.

[13]

As set out in the motion judges Reasons for
    Decision at paragraph 33, the
Appellants
disputed the
    enforceability of the mortgages on two grounds:


i.

Mr. Marshall represented to Mr. Beach before
    they entered into the JVAs that he would not enforce the mortgages and that the
    loans would only have to be repaid from the sale of lots once the development
    was completed. He also subsequently agreed to proceed in this manner after the
    agreements were executed.


ii.

If the mortgages are enforceable, a trial is
    required in order to determine the amount due and owing under them because
    there have been 11 lot sales and the proceeds, if allocated in accordance with
    the JVAs, would significantly reduce the amounts owed on the mortgages.

[14]

The motion judge held that:

[T]he debt instruments and the JVAs were
    negotiated at arms length with the benefit of independent legal counsel. Both
    sides could be described as legally sophisticated....

The defendants did not adduce any evidence in
    these motions that would cause me to change my opinion. Despite the passage of
    almost two years, the defendants have still not provided any evidence that
    there was third party financing available at lower interest rates. ... The
    lawsuit rests on alleged breaches of fiduciary duty which, as I noted before,
    is a steep road to climb in this type of commercial dispute and an amorphous
    bad faith allegation.

There is also no evidence that Mr. Marshall
    engaged in a fraudulent scheme aimed at depriving the defendants of their
    potential profit from the joint venture. ...

Both parties expected things to work out much
    better than they did. Unfortunately, as can happen in commercial land
    development, the project was beset by cost overruns and unexpected delays. The
    business relationship deteriorated, Mr. Marshall invoked his rights under the
    debt instruments and the [joint venture agreements] and this litigation ensued.
    The parties had the good sense to retain lawyers at the outset and negotiate
    agreements that govern their rights and obligations. There is nothing unfair in
    holding them to the bargain they made. This is especially the case where, as
    here, the debtors greatly benefited from the loans when they were made.

[15]

The motion judge therefore granted summary judgment
    in favour of the Respondents in the amounts set out below:

a.

on action CV-18-201-000, $1,876.239.68 at the
    greater of T.D. Banks prime rate plus 7% and 10%;

b.

on action CV-19-239-000, $501,356.67 at 10%
    interest; and

c.

on action CV-19-240-000, $796,919.60 at 9.99% interest.

[16]

He also ordered that there should be no stay on
    the enforcement of the judgments as he held that lifting the stay would not
    prevent the Appellants from proceeding with their other litigation between the
    parties.

THE NOTICES OF APPEAL

A.

The Existing Notice of
    Appeal

[17]

In the Notice of Appeal,
the Appellants
seek an order that the judgment be stayed pending the determination
    of other related claims. The order sought in the Notice of Appeal does not
    refer to the second argument raised before the motion judge: the allegation
    that representations were made by the Respondents about the timing of
    enforcement of the mortgages.

[18]

The grounds of appeal are framed more broadly.
    The first paragraphs in the grounds to appeal address the refusal to stay the
    judgment as summarized below:

1.

There are seven separate proceedings with common
    parties, facts and issues relating to a common business undertaking between the
    parties and debt related to that undertaking. The motion for summary judgment comprises
    only three of the six enforcement actions on mortgages. Enforcement should be
    stayed pending determination of related claims as they are significantly
    interrelated.

2.

The motion judge failed to properly apply the
    test, weigh the evidence, or consider relevant evidence regarding the strength
    of the Appellants other claims and counterclaims in other proceedings when
    refusing to stay enforcement of the judgment.

[19]

However, paragraphs 23 to 25 of the grounds to
    appeal reproduced below, clearly address the merits of the decision to grant
    summary judgment:

23. The Motion Judge erred by considering
    only one aspect of the [Appellants] claim in the Joint Venture Action in his
    analysis of whether the [Appellants] claims were meritorious and failed to
    consider other claims made by the [Appellants] that are meritorious and were
    supported by ample evidence
on the summary judgment
    motions most of which was uncontested by the [Respondents];

24. The Motion Judge erred in finding that the
    [Appellants] did
not present any new evidence
in the Summary Judgment
    Motions
when in fact there was a considerable amount of new evidence
    filed...
;

25. The Motion Judge erred by
discounting
    the [Appellants] evidence on the valuation
of the underlying lands beside
    despite the fact that no evidence was filed by the [Respondents] in opposition
    to this evidence and the fact that the [Respondents] chose not to cross examine
    the [Appellants] on this evidence. [Emphasis added.]

[20]

Under the heading The Basis of the Appellate Courts
    Jurisdiction the Appellants include the following provision:

Alternatively the Appellants seek leave to
    appeal any portion of the Motion Judges decision if it is so required.

B.

The Supplementary
    Notice of Motion

[21]

In the proposed Supplementary Notice of Appeal,
    the Appellants appeal the judgments of Mr. Justice Hurley
in toto
,
    including that the order granting summary judgments be reversed and the relief
    sought by the Appellants in the Motion before Justice Hurley be awarded and
    substituted in their stead.

[22]

The grounds for appeal articulated are that the
    motion judge erred on the evidence and the weight of the evidence; erred in
    law and the application of the law; erred on the facts and the weight of the
    facts; andorders granting summary judgment and the payment of money are final
    orders and are subject to an automatic stay pending the hearing of this appeal.

ANALYSIS AND CONCLUSION

A.

The First Issue:
    Granting an Extension To File a Notice of Appeal

[23]

Rule
    61.04(1)
of the
Rules of Civil Procedure
,
    R.R.O. 1990, Reg. 194

requires
    that an appeal to this court be commenced

within
30
days
    after the making
of
the order appealed from

.
The court may, however,
    exercise its discretion pursuant to r. 3.02(1) to extend the time for service
of
a Notice of Appeal that was not served within the time stipulated
    by r. 61.04(1).

[24]

The test for granting an extension of time to
    file a Notice of Appeal is well-settled. The factors to be considered are the
    following:

a.

whether the appellant formed an intention to
    appeal within the relevant period;

b.

the length of the delay and explanation for the
    delay;

c.

prejudice to the respondent;

d.

the merits of the appeal; and

e.

whether the justice of the case requires it:
Rizzi
    v. Mavros
, 2007 ONCA 350, 85 O.R. (3d) 401, at para. 16.

[25]

As this court held in
Bratti v. Wabco
    Standard Trane Inc.
, 1994 CanLII 1261 (Ont. C.A.), at p. 3: While
    appellate courts have considered a number of different factors in determining
    whether to grant leave to extend the time to appeal, the governing principle is
    simply whether the justice of the case requires that an extension be given. See
    also
Chandra v. Canadian Broadcasting Corporation
, 2016 ONCA 448
    (CanLII) 26.

[26]

The two issues raised by
the Appellants
on the summary judgment motion were that:

1.

notwithstanding the terms in the written Joint
    Venture Agreements, Mr. Marshall represented to Mr. Beach both before and after
    signing the Agreements that he would not enforce the mortgages until the
    development was completed and the lots sold; and

2.

judgment should be stayed pending final
    determination of related litigation.

[27]

The question is whether the Appellants intended
    appeal both issues or only the second.

[28]

First, in email exchanges with counsel before
    the Notice of Appeal was filed, there is evidence that Mr. Beach intended to
    appeal the summary judgment decision, not just the refusal of a stay of enforcement
    pending the outcome of companion litigation.

[29]

On February 18, 2020, Mr. Beach asked his counsel,

We assume the Summary Judgement Motion
    Decision, including 3 Judgements in the amount of ~ $3million, will be Stayed
    by appeal.

Appeal of the SJM Motion. We think there are a
    couple of significant arguments that are quite powerful regarding the appeal 
    dont know if any substance goes into the Notice of Appeal  or only into the
    Appeal materials itself.?

[30]

On March 1, 2020, in an email to his counsel, Mr.
    Beach said that,

Both Martha & I feel there is one,
    possibly two omissions in the appealbut do think - as is - it provides a
    pretty compelling argument to justify the appeal.. 1) something keeps nagging
    on me that
we should also appeal the Summary Judgement Decision itself
as well? - this outcome was also a sought in your Affidavit/Factum and oral
    arguments at the Hearing? - it's almost gut - that between JH 2 decisions -
    there is ample data that can be provided under appeal to justify this also as
    part of the appeal? [Emphasis added.]

[31]

On March 2, 2020, Mr. Beach again asked his counsel:

Do you feel this Notice is more than adequate?
    Does the real detail go into the actual appeal materials? Just wanting to know
    how to spend my time now or later on additional points?

[32]

In response, the Appellants counsel advised
    that,

Hi Gary, Ill respond to your emails in due
    course but we need to get the notice of appeal served today. Aside from your
    comments below, let me if there is any other issues you have with the Notice.

[33]

Second, paragraphs 23-25 of the Notice of Appeal
    demonstrate that the motion judges treatment of both issues raised by the
    Appellants on the motion for summary judgment are being challenged. In
    particular, the Appellants claim that:

23. The Motion Judge erred by considering only
    one aspect of the [Appellants] claim in the Joint Venture Action in his
    analysis of whether the [Appellants] claims were meritorious and failed to
    consider other claims made by the [Appellants] that are meritorious and were
    supported by ample evidence ;

24. The Motion Judge erred in finding that the
    [Appellants] did not present any new evidence in the Summary Judgment Motions 
    when in fact there was a considerable amount of new evidence filed...;

25. The Motion Judge erred by discounting the
    [Appellants] evidence on the valuation of the underlying lands beside despite
    the fact that no evidence was filed by the [Respondents] in opposition to this
    evidence and the fact that the [Respondents] chose not to cross examine the [Appellants]
    on this evidence.

[34]

The new evidence at paragraph 24 of the
    grounds for appeal above, refers to the alleged representations by the Respondents
    that differ from the written provisions in the Joint Venture Agreement and
    mortgage terms as that was the only new evidence that had not been adduced
    before the motion judge on the prior attendance before him.

[35]

As such, these grounds of appeal relate to the
    first issue not the second issue raised by the Appellants on the motion and
    confirm an intention to address both grounds raised by the Appellants before
    the motion judge both of which were rejected by him.

[36]

Third, shortly after receiving a letter from the
    Senior Legal Officer of this court in July 2020, advising that the aspect of
    judgment under appeal may be interlocutory,
the Appellants
sought to file a Supplementary Notice of Appeal, which states that [t]he
    Appellants appeal the judgments of Mr. Justice Hurley
in toto
,
    including that the order granting summary judgments be reversed and the relief
    sought by the Appellants in the Motion before Justice Hurley be awarded and
    substituted in their stead.

[37]

While the Supplementary Notice of Appeal is
    overly broad and does not clearly articulate the supplementary grounds, when
    looking at the evidence as a whole and bearing in mind that it is the Appellants
    intention and the interest of justice that matters, I accept that the
    Appellants intended to challenge both:

1.

the motion judges refusal to accept that the Respondents made
    representations that the loans would not have to be repaid before development
    of the properties was completed, and

2.

the motion judges refusal to stay the judgment pending appeal

and it is in the interest of justice
    to permit them to do so. Any resulting prejudice may be compensated in costs.

[38]

I do not accept the Respondents concern that the
    Supplementary Notice of Appeal would allow the Appellants to appeal the
    monetary amounts. The motion judge noted that there were only two grounds
    raised by the Appellants on the motion and that there was no dispute regarding
    the arithmetical calculation of principal and accrued interest pursuant to
    the mortgages that were in default.

[39]

I also reject the Respondents claim that even if
    the Appellants intended to appeal both issues, the interests of justice favour
    dismissal of this motion to include the second issue, as this case has no
    precedential value, and is of interest only to the parties:
Enbridge Gas
    Distribution Inc. v. Froese
, 2013 ONCA 131, 114 O.R. (3d) 636, at para. 24.

[40]

Given my finding that there was an intention to appeal
    the motion for summary judgment on both grounds raised by the Appellants on the
    motion and that the motion for leave to appeal would proceed in any event, whether
    or not the appeal as a whole has merit is something that should be left to the
    panel hearing the application for leave to appeal.

[41]

For these reasons, the Supplementary Notice of
    Appeal may be filed to confirm that the judgment is appealed on both issues
    raised by
the Appellants
on the motion.

B.

The Second Issue:
    The Request to File Fresh Evidence

[42]

The
Appellants
seek to
    adduce fresh evidence on appeal. In his affidavit, Mr. Beach claims that
the
    Appellants
signed the Joint Venture Agreements under duress
    and without the benefit of legal advice. They claim that as a result, the Appellants
    purchased a share in the property of the joint ventures and were unable to meet
    the payments due. The
Appellants
seek to adduce fresh
    evidence that they had no legal representation and therefore did not know the
    disadvantages of signing the agreement and that they were under duress then
    they signed the Agreement as Mr. Beach had no other source of income. The
    Appellants say the Respondents breached their fiduciary duty to the Appellants.

[43]

The
Appellants
knew
    whether they did or did not have legal representation at the time they signed
    the agreement. There is nothing fresh about this evidence. The communications
    they seek to adduce were all available at the time of the hearing before the
    motion judge. They could and should have been adduced before the motion judge.

[44]

Moreover, there is no issue that both before and
    after December 2013,
the Appellants
were represented by
    the same counsel and there is no evidence that the retainer had been terminated.
    This issue was squarely before the motion judge and he found as fact that the
    JVAs were negotiated at arms length with the benefit of independent legal
    counsel.

[45]

There is therefore no basis for allowing fresh
    evidence that could and should have been adduced before the motion judge.

[46]

As such, the request to adduce fresh evidence is
    dismissed.

[47]

If the parties are unable to agree on costs,
    each of the two parties is to provide a bill of costs and cost submissions of
    no more than three pages within 15 days of this order.

J.A.
    Thorburn J.A.


