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Ontario Court Affirmed Jurisdiction over Shareholder Dispute

Thursday, September 13th, 2012

In a recent Ontario Superior Court decision Nagra v. Malhotra released on July 31, 2012, the Court had the opportunity to apply the legal principles recently articulated by the Supreme Court of Canada in Club Resorts Ltd v. Van Breda 2010 SCC 17. The main issue facing the court in Nagra was whether the Ontario Court had the jurisdiction to hear this matter. The Court reached the conclusion that there was a real and substantial connection between the litigation and Ontario. The alternative forum put forward by the defendant, Vermont of the United State, was found not to be the more convenient forum for the trial of this action.

The plaintiff sued the defendant in Ontario, claiming that the defendant owed him $3.5 million in relation to an unpaid promissory note (the “Action”). Subsequently, the defendant brought a motion for an order staying the Action on the basis that the claim should be tried in Vermont. Although the Action did appear to have a number of important connections to Vermont, the Court dismissed the defendant’s motion.

Applying the Van Breda test, the Court found that the defendant failed to rebut the presumption of jurisdiction. The Court considered the following factors in arriving at its decision:

  1. both parties lived in Ontario;
  2. the defendant made his investment in US properties from his home base in Ontario;
  3. the defendant executed the documents from Ontario through his power of attorney in Vermont;
  4. the default of the agreement occurred in Ontario; and
  5. the key witnesses in the Action were the parties themselves and potential American witnesses appeared to be willing to travel to Ontario.

This decision is a good example illustrating how an Ontario court applied the “real and substantial connection” test where the assets in dispute have strong connections to a foreign country.

The entire decision of Nagra v. Malhotra (2012 ONSC 4497) can be read here. The complete Supreme Court decision of Club Resorts Ltd v. Van Breda can be read here. We have previously blogged about the decision here.

 

Echo Wu, B.A., J.D.

 

Brief informational summaries about commercial and other litigation matters in the courts of Ontario and other developments are periodically published on this website. They are intended to be a general comment or general discussion, not legal advice and should not be relied upon as legal advice. Should you require legal advice, please contact info@heydary.com or 416 972 9001.

 

Posted in Civil Litigation, International & Cross-Border, Partnerships and Shareholder Disputes, Promissory Notes, Real Estate Law, Sale of a Business | Add Comment »

Summary Judgment on Promissory Note Refused

Thursday, August 25th, 2011

The plaintiff owned and operated a variety store. He approached his landlord to advise that he planned to sell the store.  The landlord said that he had not increased the rent in some time, and that he intended to increase it to $7500 a month on the expiration of the existing lease. According to the landlord, the parties then made a deal under which the landlord would enter into a new lease with the purchaser of the business for a monthly rental of $6250. In return, the tenant would pay the landlord $30,000, to be secured by a promissory note that was to be payable upon the closing of the sale of the variety store business.

The tenant entered into an agreement with the purchaser, who agreed to pay $240,000 for the variety store. That agreement warranted that the monthly rental for the leased premises would be $6250 a month, and the initial term of the lease would be five years with a five-year renewal right.

The note was not honoured, and the landlord brought an action against the former owner of the variety store for $30,000.  On a motion for summary judgment, the store owner alleged that the note was not payable because there was a total failure in the consideration that had been promised to him.  According to the store owner, the consideration for the $30,000 was that the landlord would provide the prospective purchaser with a reduced rental rate of $5500 a month, rather than the $6250 claimed by the owner.

Attached to the store owner’s affidavit was an alternative agreement of purchase and sale with a higher purchase price of $280,000.  In that agreement, the store owner warranted the building rental at $5750 a month rather than the $5500 a month that the store owner swore to.

The plaintiff and the defendant both provided corroborating affidavit evidence from other parties.  The purchaser of the business swore in his affidavit that the only agreement he ever signed was the one with a purchase price of $240,000 and a rental warrantee of $6250.  He said that this rent was negotiated in a three-way meeting between himself, the variety store owner, and the landlord.

In response to that affidavit, the defendants filed the affidavit of the realtor involved in the transaction.  The realtor said that the earlier agreement, under which the purchaser was to pay $280,000, was legitimate, but that sale fell through when a dispute arose with the landlord over the rent that was to be charged to the new owner.

The judge hearing the plaintiff’s summary judgment motion made note of the fact that Rule 20 had recently been amended.  Prior to the amendments, the rule was seen as overly restrictive; for that reason the Rule was changed so that now judgment can be granted on motion if the court finds that there is no genuine issue requiring a trial.  In addition, the judge hearing the motion has been provided with enhanced powers.  The judge can weigh evidence, evaluate the credibility of a witness, and draw reasonable inferences from the evidence.  Under the former Rule, case law established that the judge was not to assess credibility or weigh evidence on such a motion.

In spite of this liberalization in the summary judgment Rule, the judge hearing this motion concluded that there is no possible way that the conflicting affidavit evidence could be reconciled.  This was a situation involving mutually contradictory statements which required cross-examination at trial.  The judge was not in a position to assess the credibility of the witnesses without such cross-examination, and it was therefore not possible to grant summary judgment based on the materials before the court.

Link: Sioufi v. Yogeswaran, CanLII – 2011 ONSC 4953 (CanLII)

Richard Hayles, B.A., J.D.

Insurance and commercial litigation lawyer

 

Brief informational summaries about commercial and other litigation matters in the courts of Ontario and other developments are periodically published on this website. They are intended to be a general comment or general discussion, not legal advice and should not be relied upon as legal advice. Should you require legal advice, please contact info@heydary.com or 416 972 9001.

Posted in Civil Litigation, Promissory Notes, Sale of a Business, Summary Judgment | Add Comment »