SUPREME COURT OF NOVA SCOTIA Citation: Royal Bank of Canada v. 3255177 Nova Scotia Limited, 2018 NSSC 181 Date: 2018-07-26 Docket: Hfx No. 469037 Registry: Halifax Between: Royal Bank of Canada v. 3255177 Nova Scotia Limited, Gerald C. Boudreau, Chantal Cormier and Starria Devouge Plaintiff Defendants SUMMARY JUDGMENT DECISION Judge: The Honourable Justice M. Heather Robertson Heard: May 8, 2018, in Halifax, Nova Scotia Decision: July 26, 2018 Counsel: Sian G. Laing and Sara Espinal Henao, for the plaintiff Michael C. Moore, for the defendant (Chantal Cormier)
Page 2 By the Court: The Application: [1] The applicant, the Royal Bank of Canada (RBC), seeks an order for summary judgment on evidence pursuant to Nova Scotia Civil Procedure Rule 13. [2] The claim is against the defendant, 3255177 Nova Scotia Limited (the Debtor Company), for default of a Credit Facilities Agreement (CFA), and the guarantors to the CFA, the other defendants in their personal capacities, who agreed to jointly and severally guarantee the obligations of the Debtor Company to RBC. [3] In addition to the CFA, which had a limit of $350,000, the company also entered into a Visa Business Card Agreement with a limit of $10,000, also guaranteed by the individual defendants. [4] All the defendants have filed defences and pled a blanket denial of the indebtedness of the Debtor Company. Ms. Cormier and Ms. Devouge also pled in the alternative that if they did guarantee the debt of the company, they did so unknowingly and/or were subject to undue influence, that they had not received independent legal advice and had not understood the nature, quality and ramifications of the documents they signed. Mr. Boudreau in his defence made a blanket denial and did not make any substantive dispute of any material fact. [5] The details of the indebtedness and the demands made, are set out in the affidavits of Robert MacLeod, Commercial General Manager at RBC, Yarmouth Nova Scotia branch, sworn March 6, 2018, and April 24, 2018. In a third supplemental affidavit Mr. MacLeod also outlines his attendance and role in the execution of these documents by the corporate defendant and its officers and the guarantors. This last affidavit was sworn May 7, 2018, and is a reply to the affidavit filed by the defendant, Chantal Rose Marie Cormier, sworn April 24, 2018. [6] Ms. Cormier is represented by Mr. Michael C. Moore and was the only defendant who appeared at the hearing. [7] Mr. Moore informed the court that he was instructed by the Debtor Company not to oppose the RBC motion.
Page 3 [8] He further advised the Court that the defendant Starria Devonge had made an assignment in bankruptcy on March 6, 2018, and that the trustee had issued a stay of proceedings in relation to this creditor. [9] The amount of the claim against the defendants is for the sum of $356,922.25 and per diem interest calculated from September 1, 2017, at RBC s prime rate plus 2.8% as of September 1, 2017. Further the Visa agreement debt was in the amount of $10,000 at RBC s prime rate plus 5%. The Issue Before the Court [10] The issue before the Court is whether there is a genuine issue of material fact or any question of law requiring trial. Law Argument and Finding [11] Under Rule 13.04, where a judge is satisfied that there is no genuine issue of material fact, and where the claim or defence does not require determination of a question of law, then the judge must grant summary judgment. There is no discretion provided under Rule 13.014. Rule 13.04, as recently amended, states: 13.04 (1) A judge who is satisfied on both of the following must grant summary judgment on a claim or a defence in an action: (a) (b) there is no genuine issue of material fact, whether on its own or mixed with a question of law, for trial of the claim or defence; the claim or defence does not require determination of a question of law, whether on its own or mixed with a question of fact, or the claim or defence requires determination only of a question of law and the judge exercises the discretion provided in this Rule 13.04 to determine the question. (2) When the absence of a genuine issue of material fact for trial and the absence of a question of law requiring determination are established, summary judgment must be granted without distinction between a claim and a defence and without further inquiry into chances of success. (3) The judge may grant judgment, dismiss the proceeding, allow a claim, dismiss a claim, or dismiss a defence. (4) On a motion for summary judgment on evidence, the pleadings serve only to indicate the issues, and the subjects of a genuine issue of material fact and a question of law depend on the evidence presented.
(5) A party who wishes to contest the motion must provide evidence in favour of the party s claim or defence by affidavit filed by the contesting party, affidavit filed by another party, cross-examination, or other means permitted by a judge. (6) A judge who hears a motion for summary judgment on evidence has discretion to do either of the following: (a) (b) determine a question of law, if there is no genuine issue of material fact for trial; adjourn the hearing of the motion for any just purpose including to permit necessary disclosure, production, discovery, presentation of expert evidence, or collection of other evidence. [12] Counsel agree that the law relating to this Rule is now well settled. [13] Prior to the recent amendment to Rule 13, the leading case on summary judgment was Saunders J.A. s decision in Coady v. Burton Canada Co., 2013 NSCA 95 (Burton). Burton, supra, confirmed a two-part test for summary judgement and provided significant guidance on the application of Rule 13. Page 4 [14] The amended Rule 13 was then considered by Chipman J. in Quadrangle Holdings Ltd. v. Coady Estate, 2016 NSSC 106 (Quadrangle). The Court in Quadrangle, supra, confirmed that there is no discretion in the operation of Rule 13.04(1). A judge must grant summary judgment where there is no dispute of material fact and no outstanding question of law or, ostensibly, where the judge exercises the discretion in Rule 13.04(6) to determine that question of law [Quadrangle, supra, at para 20]. [15] In Burton, supra, the Court of Appeal outlined the test for summary judgment in Nova Scotia as follows: 87 Before turning to the final issue raised on appeal, I wish to provide a quick summary of the law as it presently stands in Nova Scotia concerning summary judgment litigation. From the jurisprudence to which I have referred as well as the case law cited therein, a series of well-established legal principles have emerged. I will list these principles in the hope that their enumeration will serve as a helpful checklist or template to guide counsel and judges in their application. In Nova Scotia: 1. Summary judgment engages a two-stage analysis. 2. The first stage is only concerned with the facts. The judge decides whether the moving party has satisfied its evidentiary burden of proving that there are no material facts in dispute. If there are, the
moving party fails, and the motion for summary judgment is dismissed. 3. If the moving party satisfies the first stage of the inquiry, then the responding party has the evidentiary burden of proving that its claim (or defence) has a real chance of success. This second stage of the inquiry engages a somewhat limited assessment of the merits of the each party's respective positions. [16] The Burton test can be summarized as follows: Page 5 (a) (b) Whether there is a genuine issue of material fact requiring trial; and Whether the challenged pleading requires trial for the determination of a question of law. [17] The Nova Scotia Court of Appeal in Shannex Inc. v. Dora Construction Ltd., 2016 NSCA 89, paras. 33-34 (Shannex) confirmed that the analytical framework as outlined in Burton, supra, remains essentially the same. Justice Fichaud, at para. 33, commented that [t]he amended rule frames, but does not materially change Burton s test and interpreted Rule 13.04 to pose the following sequential questions: First Question: Does the challenged pleading disclose a genuine issue of material fact, either pure or mixed with a question of law? [Rules 13.04(1), (2), and (4)] [ ] Second Question: If the answer to #1 is No, then: Does the challenged pleading require the determination of a question of law, either pure, or mixed with a question of fact? [ ] Third Question: If the answers to #1 and #2 are No and Yes respectively, leaving only an issue of law, then the judge "may" grant or deny summary judgment: Rule 13.04(3). Governing that discretion is the principle in Burton's second test: "Does the challenged pleading have a real chance of success?" [ ] Fourth Question: If the answer to #3 is Yes, leaving only an issue of law with a real chance of success, then, under Rule 13.04(6)(a): Should the judge exercise the "discretion" to finally determine the issue of law?
Page 6 [18] Recently, in Martin Marietta Materials Canada Ltd. v. Beaver Marine Ltd., 2016 NSSC 226, at para. 11 (Beaver Marine), (see also Martin Marietta Materials Canada Ltd. v. Beaver Marine Ltd., 2016 NSSC 225, at para. 102 (Martin)) the Court stated: 11 This new Rule does away with the two-part test that had existed previously (Quadrangle Holdings v. Coady Estate 2016 NSSC 106; Drysdale v. Bev & Lynn Trucking 2016 NSSC 109). The burden remains on the applicant: if that party can satisfy the court that there is no genuine issue of material fact for trial, and no question of law requiring determination, the court must grant summary judgment. In response, the opposing party is expected to put their "best foot forward" in showing what that material fact could be, or what that question of law could be. [19] In Hatch Ltd. v. Atlantic Sub-Sea Construction and Consulting Inc., 2017 NSCA 61 (Hatch), the Nova Scotia Court of Appeal reversed Beaver Marine, holding that the Honourable Justice who granted summary judgment in Marietta Materials Canada Ltd v. Beaver Marine Ltd., supra, erred in weighing the evidence in granting summary judgment. [20] RBC submits that there are no material facts in dispute and no question of law requiring trial. Issues of Material Fact [21] The material facts relate to facts that will effect the outcome of the trial, i.e. whether the defendants owe RBC the claimed debts and are obligated to repay the indebtedness of the Debtor Company pursuant to their guarantees. [22] On a motion for summary judgment, each party must put their best foot forward. No party can rely on conjecture or bald denials. They must establish the evidentiary foundation for their position (HSBS Bank of Canada v. Ford, 2012 NSSC 179) (Ford). [23] The defendants must lead evidence which, if proven at trial, establishes that they have a real chance of success. [24] The RBC has placed on record in its affidavit evidence the documentation of the indebtedness of the Debtor Company in the amount of $365,697.49 and the joint and several guarantees signed by the individual defendants.
Page 7 [25] RBC submits that the material facts are clear and not in dispute, as the Debtor Company and guarantors defaulted on their obligations under the CFA and the guarantee. [26] RBC further states that there is no need for the Court to determine a question of law. [27] RBC asks the court to turn to the pleadings to determine whether the challenged pleadings take an arguable and realistic position that finds support in the record and not something based on a hunch, hope or speculation (Burton, supra, para. 87). [28] RBC argues that the pleadings reveal no such arguable or realistic position, and say summary judgment must follow. Proportionality [29] In exercising its discretion proportionality will play a role in the Court deciding a question of law. [30] Justice Karakatsanis in Hryniak v. Mauldin, [2014] 1 SCR 87, 2014 SCC 7, (Hryniak) said proportionality will play a role. Justice Karakatsanis, writing for the Court, described the meaning of the term at paras. 30-31: 30 The proportionality principle is now reflected in many of the provinces' rules and can act as a touchstone for access to civil justice. For example, Ontario Rules 1.04(1) and (1.1) provide: 1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. (1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding. 31 Even where proportionality is not specifically codified, applying rules of court that involve discretion "includes... an underlying principle of proportionality which means taking account of the appropriateness of the procedure, its cost and impact on the litigation, and its timeliness, given the nature and complexity of the litigation": Szeto v. Dwyer, 2010 NLCA 36, 297 Nfld. & P.E.I.R. 311, at para. 53.
Page 8 [31] She noted that the principle of proportionality had been applied to the Nova Scotia Civil Procedure Rules in Saturley v. CIBC World Markets Inc., 2011 NSSC 4. [32] Hryniak, supra, was also considered by this Honourable Court in Pettipas v. Hunter Noel Holdings, 2014 NSSC 70 (Pettipas). Summary Judgment must be granted whenever there is no genuine issue requiring trial. Further, the Court commented at para. 13, there will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion. In a process that will allow a judge to: (1) make the necessary findings of fact and (2) allow the judge to apply the law to the facts and (3) in a circumstance that is a proportionate, more expeditions and less expensive way to achieve justice. [33] Given the cost and impact of prolonged litigation and given the nature and the complexity of the litigation and the issue of timelines, I have no difficulty in finding that the summary judgment procedure is appropriate to the circumstances of this case. This Court can make the necessary findings of fact and apply the law to the facts and achieve justice in a proportionate, expeditious and inexpensive manner. [34] I will examine each defendant s position and pleadings to determine if there are any material facts at issue or questions of law to be determined and if there is, any real change of success. The Liabilities of the Debtor Company [35] Mr. MacLeod s affidavits sworn on March 6, 2018, and April 24, 2018, clearly set out the material facts of RBC s claim, the RBC loan to the company and the company s repeated failure to deposit funds pursuant to the terms of the loan, finally requiring RBC to demand payment of all the funds made available under the CFA. The RBC claim is valid, pursuant to the record. Its documents are clear and unambiguous. The defendant s company has chosen not to oppose this motion, nor have they filed any evidence in support of their pleadings. [36] Quite simply, I find there is no chance of success for the Debtor Company had it pursued this litigation.
Page 9 The Liability of the Individual Defendants [37] All three guarantors, Ms. Cormier, Ms. Devouge, and Mr. Boudreau, signed the guarantee on behalf of the Debtor Company in their personal capacity, jointly and severally guaranteeing the obligations of the company to RBC, including under the CFA and including the outstanding principle, interest, and other charges (MacLeod affidavit sworn March 6, 2018, Exhibits D, E, and F ). [38] The guarantors were limited to the sum of $360,000 together with interest thereon from the date of the demand for payment at a rate equal to the bank s prime rate plus 5% per annum as well after as before default and judgement. [39] The guarantees were clearly worded and unambiguous. The guarantors were the sole signatories. The calculation of the debt claimed is supported by the record. The guarantors have produced no evidence in denial of the debt or that they signed the guarantees. Mr. Boudreau [40] Mr. Boudreau s defence consists of a blanket denial of RBC s claim. Mr. Boudreau was asked to secure independent legal advice as he was not an active member of the company or an officer or director of the company. He did so before signing the guarantee as evidenced by the MacLeod affidavit (Exhibit G). [41] He secured an acknowledgement in undertaking this advice required from Mr. Martin Pink, who advised the bank in writing as follows: I have advised the Obligant fully as to the effect of the action and the liability which the Obligant would incur by taking it, and the manner in which that liability could be enforced. The Obligant understands the nature and effect of the liability which would arise from the taking by the Obligant of that action. I gave this advice to the Obligant as solicitor for and in the Obligant s interest only, and without regard to or consideration for the interests of the customer or of the Bank. I have not given any legal advice either to the customer or to the Bank in connection with this matter. [42] Mr. Boudreau has in his pleadings made a blanket denial. He has chosen not to appear to oppose the motion.
Page 10 [43] He has provided no substantive challenge to the material facts supporting this claim nor has he raised a question of law to be determined. His defence of the claim has no chance of success. [44] He is liable to RBC for the outstanding indebtedness pursuant to this guarantee. Ms. Devouge [45] This proceeding against her has been thwarted by a notice of stay of proceedings issued by her trustee in bankruptcy. [46] Nevertheless, I find that the document, the personal guarantee is valid and binding. Apart from bare allegations asserted concerning undue influence being exerted upon her, she chose not to explain this allegation in any detail in her pleading and chose not to lead any evidence or oppose this motion. In light of her assignment in bankruptcy, I need not deal further with Ms. Devouge. Ms. Cormier [47] Ms. Cormier did oppose this motion. [48] Ms. Cormier s pleadings contain a blanket denial of RBC s claim that she guaranteed any obligations of the Debtor Company to RBC. In the alternative she claims that if she did guarantee the company s debt it was because of the undue influence exerted upon her by her step-father, Timothy Devouge, who was the General Manager of the Debtor Company. She also pleads that she did not receive independent legal advice and therefore did not understand the nature, quality and ramifications of signing the guarantee. [49] Ms. Cormier s affidavit dated April 24, 2018, is before me. At the hearing of this matter Ms. Cormier was cross-examined by RBC s counsel. [50] In her affidavit she chronicles her association with the Debtor Company from June 27, 2011, until January 27, 2016. Apart from being an officer and director, she states that she was employed as a Business Manager of the company from June 1, 2011, until she left on maternity leave a year later, on June 30, 2013. [51] She states that she did not have access to the business records and was unaware of the financial records or position of the company.
Page 11 [52] After her maternity leave she then went to work for the Shine Factory at Horseshoe Lake Drive in Halifax, from March 1, 2014, to August 31, 2015. She was next employed with Allstate Insurance of Canada through August 2017. [53] Her affidavit also states that she was made aware of the Debtor Company s need to finance a line of credit in November 2015. She then recounts her memory of the meeting in which the RBC documents were signed and again asserts that she did not have independent legal advice, was unaware of the consequences and legal effect of the documents and that the documentation was not explained to her at the meeting. [54] On cross-examination by Ms. Laing, Ms. Cormier described her various duties at the Debtor Company, which she described as a used car and truck dealership. She agreed that she was familiar with the vehicle finance documentation, that was the essence of her job as the business manager. Ms. Cormier down played her role, testifying that she often just inputted data and wasn t really sure how it all works to be honest with you. [55] She did agree however, she understood debt financing with respect to the purchase of a car. She further agreed she assumed the documents could contain conditions of purchase obligations of a borrower to a lender. [56] It was her testimony that usually the car salesmen reviewed the financing documents with the customers. [57] She also agreed, she understood the terms of the financing as it related to failure to pay the debt and the recovery rights of the lender. [58] With respect to the meeting of November 23, 2015, when the Debtor Company line of credit documents were executed, as well as the guarantees, Ms. Cormier testified that she was merely handed documents to sign with sticky tags attached to show where her signature was required. She had brought her two children to the meeting, which took place in a crowded office with seven to eight people in it. She said that the person asking for her signature expressed the view just sign here we know you have to get home with your two kids. [59] This is in sharp contrast with the affidavit evidence of Robert MacLeod, dated May 7, 2018. He describes attending a meeting at the office of the Debtor Company in Truro, Nova Scotia, with his direct supervisor, Paul Miller, the Bank s Vice President of Commercial Financial Services. Timothy Devouge, Starria
Page 12 Devouge, and Chantal Cormier were present. Robert MacLeod distinctly recalled explaining the nature, consequences and legal effects of the guarantee to Ms. Devouge and Ms. Cormier, requiring that upon the demand by the bank they would personally be responsible for any debt incurred by the Debtor Company up to the amount of $360,000 with interest at the bank s prime rate, plus 5%. [60] Mr. MacLeod observed that nothing about Ms. Cormier s behaviour or demeanor during the meeting suggested she did not understand his explanations of the guarantees. Further, he states she did not express any reluctance or concern before signing and was provided the opportunity to review the guarantee before signing it. [61] With respect to Ms. Cormier s defence that RBC did not require she have independent legal advice, RBC cites Bennett on Creditors and Debtors Rights and Remedies, 5 th ed. (Toronto: Carswell, 2006): In taking a guarantee, the creditor should take reasonable steps to ensure that the guarantor understands the nature of the transaction and that the guarantor is freely entering the agreement. While there is no legal obligation to have a certificate of independent legal advice as a prerequisite to enforcing a guarantee, the certificate does establish that the guarantor had obtained independent advice about the nature and effect of the guarantee before signing it. The typical situations in which the guarantor raises the defences of undue influence, unconscionability or misrepresentation, usually arise where a spouse of a principal of the corporate debtor has been requested to execute a guarantee. [62] They also rely on Bank of Montreal v. Courtney, 2005 NSCA 153, which bears some similarity. Ms. Courtney was the spouse of the principal debtor in that case. In this case Ms. Cormier was a step-daughter. [63] Ms. Courtney had finished one year of university, obtained a legal secretarial diploma, and worked in the business community for fifteen years before remaining at home. Ms. Cormier completed high school and went to work in family businesses in managerial positions, then the insurance industry before remaining at home with her children, having worked in business for ten years. Both women stood to gain by their business activities. [64] In Bank of Montreal v. Courtney (supra), Oland, J. stated: 27 The trial judge found that based on her education and experience, Holly Courtney was well aware of her legal obligations regarding these loans and that whatever influence was exerted upon her husband, it was not sufficient to
constitute undue influence. I see no palpable or overriding error in his refusal, based on the evidence before him, to accept that Mrs. Courtney was the victim of undue influence by her husband. 28 I also reject the argument that the trial judge erred in law by failing to address the presumption of undue influence. Mrs. Courtney submits that instead of asking whether there was sufficient evidence to support the presumption, he went into another debate entirely, namely whether there had been evidence of undue influence. 29 In Geffen v. Goodman Estate, [1991] 2 S.C.R. 353, [1991] S.C.J. No. 53 (QL version), Wilson, J. (Cory, J. concurring) addressed what a plaintiff had to establish in order to trigger a presumption of undue influence: 43.... In my view, the inquiry should begin with an examination of the relationship between the parties. The first question to be addressed in all cases is whether the potential for domination inheres in the nature of the relationship itself.... 44. Having established the requisite type of relationship to support the presumption, the next phase of the inquiry involves an examination of the nature of the transaction. When dealing with commercial transactions, I believe that the plaintiff should be obliged to show, in addition to the required relationship between the parties, that the contract worked unfairness either in the sense that he or she was unduly disadvantaged by it or that the defendant was unduly benefited by it.... Once this two-part test is satisfied and the presumption raised, then the onus moves to the defendant to rebut it. Page 13 [65] Ms. Cormier is required to put her best foot forward. In answering this application she was required to adduce at least some evidence of how undue influence was exerted upon her by her step-father. She ought to have also led some evidence to show that the guarantee worked some unfairness toward her. There was no such evidence. [66] Ms. Cormier presents as an intelligent affiant, who has the education and business experience to understand the nature of the documents that were before her. She knew the line of credit being sought would benefit the company of which she was an owner and Vice President. She was, by virtue of her experience as a business manager for an auto dealership, familiar with lending documents and their obligations. She understood the need to have other persons co-sign loans. [67] I believe Ms. Cormier was well aware of and understood the nature of a guarantee and in particular would have understood the guarantee she signed in
Page 14 support of this loan, as explained to her by Mr. Robert MacLeod on November 23, 2015. [68] I accept the evidence before me, that Mr. MacLeod saw nothing that would suggest Ms. Cormier was being subjected to undue influence or did not understand his explanation of the nature, consequences, and legal effect of her signing the guarantee. He saw no reluctance or concern as she willingly signed the guarantee. [69] Ms. Cormier has failed to present enough evidence to show the court that there is any genuine issue of material fact requiring trial or any question of law requiring answers. [70] With respect to the Debtor Company and the individual defendants before the court, Mr. Boudreau and Ms. Cormier, the RBC is entitled to summary judgment against them. [71] This case does not present a genuine issue for trial as there is no material fact in dispute and no question of law to be determined. The RBC has proven its claim and the defendants are liable to RBC for the default under the CFA by the Debtor Company and the obligations of the individual defendants pursuant to their personal guarantees. [72] RBC shall have its Tariff costs of $500 increased by a multiple of three for a total of $1,500. Robertson, J.