Court of Appeal for Ontario
Judges: Simmons, Lauwers and Hourigan JJ.A.
Between
Marsland Centre Limited Plaintiff (Respondent)
and
Wellington Partners International Inc., Henri Stephen Machowski, also known as Steve Machowski and Linda Machowski Defendants (Appellants)
Counsel
Randell K. Thomson, for the appellant
Sahil Shoor, for the respondent
Heard: February 10, 2017
On appeal from: the order of Justice Robert D. Reilly of the Superior Court of Justice, dated July 11, 2016.
Decision
Facts and Background
1The appellant, Wellington Partners International Inc., was the tenant under a commercial lease with the respondent, Marsland Centre Limited, as landlord. The personal appellants are the tenant's principals. The lease started on November 1, 2012 and was to terminate on October 31, 2017.
2By the fall of 2013, the appellants were, as the motion judge observed"suffering from business challenges and economic difficulties." They sought relief from the respondent but were refused. On September 24, 2014, the appellants returned the keys and current monthly parking passes to the respondent and vacated the building. The respondent sued for damages in the amount of $200,000, representing the total rent owed through the term of the lease, together with the costs incurred to bring the action.
3The motion before the motion judge was for partial summary judgment. Specifically, the respondent sought "an order and declaration that the individual defendants are liable pursuant to s. 50 of the Commercial Tenancies Act, R.S.O. 1990, c. L.7, for twice the value of certain goods and chattels removed by them from the premises or with their knowing assistance." This was because the tenant removed most of its furnishings and other assets. As the motion judge noted: "It would appear that the assets that were removed from the Marsland building moved to Wellington [Partners'] other location in Cambridge. Not to be overly dramatic, but in effect, the premises were 'stripped' of most assets of any value."
4The motion judge granted judgment and found "Wellington Partners International Inc., Henri Stephen Machowski, also known as Steve Machowski and Linda Machowski are liable pursuant to s. 50 of the Commercial Tenancies Act for twice the value of certain goods and chattels removed by them or with their knowing assistance to the corporate defendant from the rented premises at the Marsland Centre." He added that if the parties were unable to agree on the value of the assets, there would "be a summary trial or reference [taken] to determine a specific value".
5There are two issues on this appeal. The first is whether the motion judge properly exercised his authority under rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The second is whether he properly applied ss. 48 and 50 of the Commercial Tenancies Act. Because I would resolve this appeal on the basis of the first issue, I would not reach the second and take no view on it.
A. ANALYSIS
Did the motion judge properly exercise his authority under rule 20 of the Rules of Civil Procedure?
6In my view, the motion judge fell into error by failing to take the two-step analytical approach mandated by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, and Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, [2014] 1 S.C.R. 126, at para. 22. See also Trotter Estate, 2014 ONCA 841, 122 O.R. (3d) 625, at paras. 72 and 75, and 1615540 Ontario Inc. (Healing Hands Massage Therapy Clinic) v. Simon, 2016 ONCA 966, at paras. 20-25.
7The motion judge addressed the first step of the Hryniak analysis and found that he was able to "make necessary findings of fact and apply the law to those facts in order to achieve a fair and just adjudication of the case on the merits."
8However, it does not appear that he turned his mind to the second step of Hryniak, which is whether and how the factual issues in dispute between the parties should be determined. There is no doubt that genuine factual issues existed between the parties on the evidence, as the motion judge expressly noted.
9The motion judge observed, at para. 19, that the affidavit evidence, on which there had been no cross-examination, was very much in conflict:
I have carefully considered the affidavits provided by Bradley Marsland and Linda Machowski, though in all candor, I would much have preferred this had been a matter of trial where their evidence had been subject to cross-examination. Based on their affidavits, I have no hesitation in preferring the affidavit of Bradley Marsland to that of Linda Machowski. Suffice to say their affidavits are significantly in conflict. At the risk of overly summarizing the evidence of Linda Machowski on her affidavit, she testified that Mr. Marsland was content that they vacate the premises and take virtually anything they wished with them. The evidence of Bradley Marsland is quite in conflict with that of Linda Machowski.
As a matter of common sense, I do not believe that Bradley Marsland, knowing full well that the tenancy was in jeopardy, would freely permit the tenants to leave and take with them what they wished. Mr. Marsland was an experienced landlord. The quantums of the reserve tenancy was significant. I cannot believe that he would freely permit the tenants to depart with the assets which were in fact or could be his security for rent owed. [Emphasis added.]
10In my view, the motion judge's intuition, revealed by the emphasized words, was correct, but he did not give effect to it. Instead of turning his mind to how the conflicts on the evidence were to be resolved, the motion judge simply picked one party's version over the other. While the respondent's version might well be more plausible or, as he put it, more in keeping with "common sense", that bald conclusion, standing alone, was not a proper basis on which to make a credibility finding in the circumstances of this case, where sworn statements were in conflict on a fundamental issue and where significant amounts of money were involved.
11On this basis alone the order must be set aside.
B. DISPOSITION
12I would allow the appeal, set aside the order granting summary judgment, and leave the parties free to pursue their claims including, if so advised, on another motion for summary judgment, without being bound by any of the determinations made in the decision under appeal.
13The appellants are entitled to their costs in the agreed amount of $6,000, inclusive of disbursements and taxes. If the costs of the motion below are not agreed upon, the parties may file brief written submissions (no more than three pages) within 15 days of the release of these reasons.
"P. Lauwers J.A."
"Janet Simmons J.A."
"C.W. Hourigan J.A."
Released: August 2, 2017
