118 Market Street et al. v. Wilshire Group Inc.

CITATION: 118 MARKET STREET ET AL v. WILSHIRE GROUP INC., 2011 ONSC 5583

COURT FILE NO.: CV-10-101164-00

DATE: 20110926

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 118 MARKET STREET LIMITED PARTNERSHIP ET AL, Plaintiffs

AND:

WILSHIRE GROUP INC., Defendant

BEFORE: The Honourable Mr. Justice M.F. Brown

COUNSEL: M. Greenglass, for the Plaintiffs

C. Neil, for the Defendant

HEARD: April 28, 2011

ENDORSEMENT

I. OVERVIEW

[1] The motion which is currently before the court is a motion for partial summary judgment which has been brought by the plaintiffs. By its summary judgment motion, the plaintiffs seek:

(a) Rent arrears due under a lease for a commercial premises;

(b) Unpaid utility accounts the plaintiffs state were the obligation of the defendant as being accounts incurred during the term of the commercial lease; and,

(c) Summary judgment dismissing the counterclaim of the defendant.

II. BACKGROUND

[2] The underlying commercial transaction between the plaintiffs and the defendant was the sale and subsequent lease back by the defendant to the plaintiffs of a hotel property located in Hamilton, Ontario. The lease provides for minimum annual rent during the lease term of $1,400,000 plus tax ($116,666.66 plus tax monthly) with the defendant to be responsible for realty taxes and utilities.

[3] There was included in the sale price of the hotel, as part of the transaction, chattels associated with the operation of the hotel. The chattels were valued at $500,000 as of the date of sale and were the subject matter of a bill of sale.

[4] The plaintiffs’ supporting affidavit material deposed to the following:

(a) During the last month of the tenancy of the defendant, a portion of the minimum monthly rent was not paid totalling $98,866.66;

(b) The defendant did not pay realty taxes in year 2010 during the time period of its tenancy and that the applicable quantum of realty taxes, inclusive of interest and penalties for non-payment totalled $187,751.52;

(c) Subsequent to the termination of the tenancy and in reference to the matters outstanding described in sub-paragraphs (a) and (b) above, a payment was made in the sum of $79,758.28 to reduce the outstanding minimum rent and tax matter to the sum of $204,859.90;

(d) In accordance with the terms of the lease, interest was payable on the overdue amount and such interest, calculated up to and including August 23, 2010 (the calculation date specified in the statement of claim) was $6,646.51 so as to yield a total rent and additional rent claim as of August 23, 2010 in the sum of $211,506.41;

(e) The plaintiffs gave credit to the defendant in the sum of $10,000 in reference to the amount of money owed to the defendant concerning the exercise of an option agreement to acquire the defendant’s share in the limited partnership of the plaintiffs; this reduced the amount of the rent arrears to the sum of $201,506.41, calculated as of August 23, 2010;

(f) Production was made of the unpaid utility bill owing in the sum of $3,453.42 and which was the obligation of the defendant.

[5] The defendant pleads in its statement of defence and counterclaim that all minimum rent and additional rent was paid. However, the responding affidavit of Dennis Vranich does not direct itself to the outstanding claim for rent and utilities. The affidavit of Mr. Vranich is only directed to the matter of the counterclaim and the allegation of conversation of chattels.

[6] The affidavit of Dennis Vranich claims that the plaintiffs have converted the chattels owned by the defendant and, in that regard, has complained about the value obtained on distraint by the plaintiffs through the bailiff.

III. ANALYSIS

(i) Partial Summary Judgment

[7] Given the record before me, there is simply no genuine issue regarding a trial with respect to the plaintiffs’ claim for rent arrears and unpaid utility accounts. The defendant does not even address that issue in the affidavit material filed on behalf of the defendant. Accordingly, pursuant to Rule 20.04 of the Rules of Civil Procedure partial summary judgment will be granted for the claims set out in paragraphs 1(a), (b) and (c) of the plaintiffs’ statement of claim.

(ii) Counterclaim

[8] The plaintiffs also seek summary judgment dismissing the counterclaim of the defendant. In my view there is a genuine issue for trial raised on the material filed by the defendant regarding the issues of conversion and distress of chattels. As well, the matters relied upon by the defendant are sufficiently connected with the plaintiffs’ cause of action to justify it being set up as a counterclaim. Accordingly, the motion by the plaintiffs to dismiss the defendant’s counterclaim is dismissed. I acknowledge that the affidavit materials filed on behalf of the defendant were not subject to cross-examination by the plaintiffs nor did the defendant seek to cross-examine the affiant of the materials filed on behalf of the plaintiffs. Justice McEwen, in his order of March 1, 2011, ordered that cross-examination in this matter be completed by April 15, 2011. This was not done. Counsel for the plaintiffs submit that I should accordingly disregard the materials filed by the defendant because they were not cross-examined upon. Counsel for the defendant submits the failure of cross-examination should be something that goes to weight. In any event, both counsel were content that they proceed on the motion regardless of my ruling on this issue. In my view, the fairest way to deal with this matter is to permit the affidavit materials of the defendant to be admitted into the record and I have given the affidavit material filed by the defendant the appropriate weight given that Mr. Vranich was not subject to cross-examination on his affidavit.

(iii) Stay of Enforcement of Summary Judgment

[9] The defendant asks me to exercise my discretion under Rule 20.08 to stay enforcement of the summary judgment. I agree with the position of the defendant in this regard. The case law suggests that a stay of execution should be granted unless the counterclaim is without merit and the threshold is not onerous. All that is required is that it must present a tenable argument or a triable issue. See Polar Hardware Manufacturing Co. v. Zafir (1983), 42 O.R. (2d) 161 (Div. Ct.). As I have indicated, there is a triable issue raised by the counterclaim of the defendant. As well, I am of the view that the counterclaim in this case is not a sham.

[10] That being said, I have considered the strength of the counterclaim in this case and I am of the view that the appropriate remedy is to place a condition on the stay of execution of the judgment in this case. Specifically, that the amount of the judgment, exclusive of post-judgment interest, shall be paid into court pursuant to Rule 72.02 by the defendant within 30 days of the date of this order. Failing payment within the time-limit set out, the plaintiffs will be able to exercise whatever rights they have as to execution on their judgment. See Iraco Ltd. v. Staiman Steel Ltd. (1987), 62 O.R. (2d) 129 (Ont. C.A.).

IV. CONCLUSION

[11] For the above reasons the following order is made:

(i) Partial summary judgment is granted effective April 28, 2011 to the plaintiffs against the defendant in the amount of $232,536.65 pursuant to the pre-judgment interest calculation sheet filed;

(ii) Post-judgment interest is payable to the plaintiffs by the defendant from April 28, 2011;

(iii) The motion by the plaintiffs to dismiss the defendant’s counterclaim is dismissed

(iv) Execution of the partial summary judgment referred in paragraph (i) above is stayed on the following condition: the defendant will pay into court (the Ontario Superior Court of Justice) to the credit of this action within 30 days of this date (September 26, 2011) the amount of $232,536.65 in Canadian currency. Failing payment within the time-limit set out, the plaintiffs will be able to exercise whatever rights they have to execution on the judgment.

(v) If the plaintiffs and the defendant are unable to agree as to costs of this motion, they may, on or before October 26, 2011 provide me with written submissions of no more than 3 pages regarding costs.

M.F. Brown J.

Date: September 26, 2011