Defendant liable for payment of default judgment against corporation

Ontario civil | Corporations

DIRECTORS

Defendant liable for payment of default judgment against corporation

Plaintiff had obtained default judgment against corporate defendants, but had been unable to recover. Plaintiff’s claim against respondent defendant was for repayment of US $1,000,000 debt and interest of $400,000, with liability arising from his alleged agreement to repay or by piercing the corporate veil. By means of defendant’s representations, plaintiff agreed to invest in energy project by way of US $1,000,000 loan, structured as convertible debenture: upon maturity, plaintiff had option of repayment with 30 per cent interest or converting investment to shares. Defendant directed funds to account controlled by corporate defendant, which he admitted was a shell and he personally and totally controlled funds. Issues arose on project and parties agreed to extension of one month with interest rate increased to 40 per cent. Plaintiff sent over 20 emails to defendant confirming terms of revised agreement and repayment obligations but he chose not to respond, other than sending text acknowledging he would make partial repayment of $700,000, though he did not repay anything, ignored repayment demands and now denied all liability. Motion by plaintiff for summary judgment of US $1.4 million. Motion granted in part. Defendant offered no credible evidence to address plaintiff’s allegations or explain his bald denials and some of his denials were contradicted by his own admission he received emails confirming he would cause $1.4 million to be repaid and his text message assuring he would repay $700,000. While loan agreement and debenture were not entered with defendant personally, and he did not execute guarantee, evidence established loan proceeds of US $1 million were transferred to company he controlled and had since disappeared without explanation. However, as defendant was not signatory or party to debenture, evidence fell short of establishing with necessary clarity that he had agreed to be responsible for repayment of interest provided for. Summary judgment for US $1 million granted against defendant but his personal liability for interest was a triable issue.
Irani v. Cheung (Mar. 24, 2015, Ont. S.C.J., Stewart J., File No. CV-13-494071) 252 A.C.W.S. (3d) 472.

Free newsletter

Our daily newsletter is FREE and keeps you up to date on all the developments in the Ontario legal community. Please complete the form below and click on subscribe for daily newsletters from Law Times.

Recent articles & video

Ford government’s cuts to Toronto city council ruled constitutional

Histories of Canadian law and Métis people are entwined, says Jean Teillet

More women are on TSX company boards - but there’s slow progress to the C-Suite, says Osler

GM lawyer Michael Smith becomes partner at Bennett Jones

Ontario court rules cap on general damages does not apply to sexual abuse

House of Commons reveals legal fee reimbursement over $54k

Most Read Articles

Ontario court rules cap on general damages does not apply to sexual abuse

Man discharged from his fourth bankruptcy

Insurance lawyers reveal their referral philosophies

Court of Appeal rules auto insurer not liable for parental negligence claim stemming from accident