ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 10-CV-402545
DATE: 20120427

BETWEEN:

CBS Outdoor Canada, a division of CBS Canada Holdings Co.
Plaintiff

• and -

Clarity Outdoor Media Inc., Stephen Amo and Tribar Industries Inc.
Defendants

COUNSEL:
• Robert C. Dunford for the Plaintiff
• Allan Herman for the Defendants

HEARING DATE: April 22, 2012

PERELL, J.

REASONS FOR DECISION

A. INTRODUCTION

[ 1 ] The Plaintiff CBS Canada Holdings Co. (“CBS Outdoor”), which operates a division known as CBS Outdoor Canada, sues the Defendants Clarity Outdoor Media Inc. (“Clarity”), Stephen Amo, and Tribar Industries (“Tribar”). Clarity has a counterclaim and a claim to a set-off against CBS Outdoor.

[ 2 ] Pursuant to Rule 20 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194, CBS Outdoor moves for summary judgment against Clarity for $545,581.05 owed under advertising contracts, plus $114,840.04 for interest at 2% per month under the contracts. Clarity resists the motion for summary judgment, and by cross-motion, the Defendants move for summary judgment dismissing or striking certain claims against Clarity, Mr. Amo, and Tribar.

[ 3 ] For the reasons that follow, I dismiss CBS Outdoor’s motion for summary judgment with costs in the cause, but I allow the Defendants’ motion to strike the claims against Clarity, Mr. Amo, and Tribar with costs payable to Mr. Amo and Tribar, and costs in any event of the cause to Clarity. The parties may make written submissions about the scale and quantum of costs.

B. EVIDENTIARY BACKGROUND

[ 4 ] CBS Outdoor’s motion for summary judgment was supported by affidavits from:

• Nick Arakgi, the senior manager of CBS Outdoor, who is responsible for Canadian operations. Mr. Arakgi was cross-examined.

• James Riewald, a student at Gowling Lafleur Henderson LLP, CBS Outdoor’s lawyers of record

• Kristina Sebastian-Crone, a law clerk at Gowling Lafleur Henderson LLP.

[ 5 ] The Defendants’ motion for summary judgment was supported by affidavits from Mr. Amo, who was cross-examined.

C. FACTUAL BACKGROUND

[ 6 ] CBS Outdoor is a Nova Scotia corporation carrying on business throughout Canada in the outdoor advertising industry. Among other things, it sells the right to use outdoor advertising facilities, including licensing rights to use sign structures.

[ 7 ] Clarity and Tribar are Ontario corporations also in the outdoor advertising industry. Mr. Amo is the president of both corporations. I understand that he founded Clarity in 2006, and at that time, he acquired the already existing Tribar, which manufactured LED video displays and also sold outdoor advertising.

[ 8 ] In November 2004, Tribar, whose principal was then John Chiapetta, signed a contract with Viacom Outdoor, CBS Outdoor's predecessor, to purchase an advertising program. The program included the right to use a sign structure identified as “P61”. The value of the 2004 Contract was $6,690,501.00.

[ 9 ] Sign P61 is located on the grounds of the Canadian National Exhibition (“CNE”) in Toronto Ontario. It is a large sign that is visible from the Gardner Expressway. Mr. Amo says that P61 was a very successful and profitable revenue generator.

[ 10 ] In April 2006, Clarity signed a contract with CBS Outdoor to purchase an advertising program that included the right to use a sign structure identified as “P8”. The value of the 2006 Contract was $4,470,856.00.

[ 11 ] Sign P8 is also a large sign that is visible from the Gardner Expressway. It, however, is not located on CNE grounds. In terms of advertising effectiveness, P61 is the superior sign, and, indeed, P61 is apparently an extremely effective sign for the purposes of advertising. Mr. Amo deposed that P61 had an exceptional location.

[ 12 ] Between April 2006 and December 2007, Mr. Amo, the president of both Tribar and Clarity approached Mr. Arakgi, and Mr. Amo requested that the 2004 Contract for P61 become a Clarity contract. The plan was that Tribar was to confine its business to being a manufacturer and Clarity would carry on Tribar’s outdoor advertising business. Mr. Amo represented to Mr. Arakgi that:

• “other than the company name, everything stays the same”

• “the mailing address and phone number stay here at Tribar and to me”

• “ownership and operating control is identical as between Tribar and Clarity’

• “the advertising assets of Tribar are being moved into Clarity so that we can separate the advertising and manufacturing units”.

[ 13 ] The Defendants admit that Mr. Amo made these representations.

[ 14 ] As further evidence of the representations, CBS Outdoor produced an e-mail message dated December 12, 2007 that it received from Mr. Amo. The message stated:

Nick:

In accordance with our previous conversations I would like to request that the contract for CBS Outdoor location P61 dated November 17, 2004 be moved over to Clarity Outdoor Media Inc. under the same terms and conditions as the Clarity Outdoor contract for CBS location P8. We also request that the P61 contract be made coterminous with the P8 contract.

As we have discussed ownership and operating control of Clarity Outdoor is identical to that of Tribar. The advertising assets of Tribar are being moved into Clarity Outdoor so that we can separate the advertising and manufacturing business units. Our intent is to start properly branding and marketing the advertising properties under “Clarity Outdoor”.

If you have any questions or require any further detail please feel to contact me.

[ 15 ] As a result of Mr. Amo’s request and his representations, in December 2007, the 2004 Contract and the 2006 Contract were replaced by a new contract between CBS Outdoor and Clarity (the “Revised Contract”) that included the right to use both P61 and P8.

[ 16 ] The contract got underway, and at considerable expense, Clarity upgraded P61 by adding modern display systems. Mr. Amo deposed that P61 was to become the cornerstone of Clarity’s business. In his affidavit, Mr. Arakgi speculates that the principals of Clarity would have known that although P61 was being leased out by CBS Outdoor to Clarity, the sign was actually owned and controlled by the City of Toronto, which operates the Canadian National Exhibition site through the CNE Board.

[ 17 ] Pausing here in the narrative, it is important to point out that the dispute between the parties; i.e., the issues between the parties, concerns about the contract formation, interpretation, and performance of the Revised Contract. For present purposes, the relevant portions of the Revised Contract are set out below.

REVISED CONTRACT

CBS Outdoor Outdoor Product: Permanent Bulletins

Contract Number & Date: 0062758 3/31/06

Advertiser: Clarity Outdoor Media Inc.

We hereby purchase from CBS Outdoor the advertising program for the advertisers in the market and at prices as indicated in the Schedule of Space Booked requested and summarized below:

SUMMARY:

As per attached Schedule of Space Booked

TOTAL NET CONTRACT VALUE: $10,523,362.00

Goods and Services Tax $631,401.72

GRAND TOTAL: $11,154,736.72

SUBJECT TO CREDIT APPROVAL

We acknowledge that the Schedule of Space Book attached, the Terms and Conditions attached, and the Comment page(s) attached from part of this contract, and we acknowledge that CBS Outdoor will not be bound by any verbal commitment made on its behalf.

For the service herein specified, the Advertiser agrees to pay all sums required under the contract monthly in advance.

BY SIGNING THIS CONTRACT, WE ACKOWLEDGE THAT WE HAVE READ AND UNDERSTOOD ALL THE TERMS AND CONDITIONS AND PROVISIONS OF THIS CONTRACT.

NOTES:

Specific location: P8 Bathurst N/O Gardiner Expway ES – Facing West ….

Specific location: P61 Gardiner Expway @ Strahan Ave SS – Facing West ….

This contract is cancellable by Clarity Outdoor Media Inc. with a 120 days written notice.

Appendix A,B,C form part of contract 0062758.

This contract is revised on 12/17/07 to now include location P61 from January 14, 2008 until July 11, 2016.

This change cancels and replaces Tribar contract 0030720 January 14, 2008 to July 15, 2013

NON-CANCELLABLE

Specific Market

Toronto (CMA)

P8 Bathurst ST. N/O Gardiner Expwy ES W

P61 Gardiner Expway @ Strahan Ave SS – Facing West – Starts January 14, 2008.

(REVISED) SCHEDULE OF SPACE BOOKED

We acknowledge that CBS Outdoor’s acceptance of this contract does not confirm availability of all space requested. Any change to the Schedule of Space Booked will be supplied in the form of a Revised Contract by CBS Outdoor confirming the markets and dates secured which will be deemed acceptable to us unless notice in writing is delivered to CBS Outdoor within 10 working days.

APPENDIX “A”

Acknowledgements:

Clarity Outdoor acknowledges that the Board of Governors of Exhibition Place (the Board) may have certain corporate requirements and may also have certain exclusive sponsorship agreements with third parties and agrees with the following:

(a) Rights to Free Advertising

(b) Rights to Purchase Advertising

(c) Limitation on Sales of Advertising by Clarity Outdoor

APPENDIX “C”

7. Clarity Outdoor Media Inc. will have a 120 first right of refusal, at negotiated rates on the renewal of this contract. The 120 day period is calculated from the last posting date of the contract which is July 11, 2016.

[ 18 ] With respect to the contract formation issues between the parties, CBS Outdoor alleges that it was misled and harmed by entering into the Revised Contract. CBS Outdoor alleges that the above representations that led to the Revised Contract were false and fraudulent.

[ 19 ] CBS Outdoor alleges that while some assets were transferred from Tribar to Clarity, Mr. Amo did not disclose that Clarity also agreed to assume Tribar’s liabilities, including accounts payable in excess of $631,000 and shareholder loans of approximately $360,000. It submits that the failure to disclose the assumption of liabilities was a material fraudulent misrepresentation.

[ 20 ] It further submits that certain contracts were not transferred to Clarity until 2008 or later and that this too was a material fraudulent misrepresentation.

[ 21 ] The Defendants’ response is to deny any fraud and to assert that Mr. Amo’s representations were true. Further, they submit that even if the representations were false, CBS Outdoor did not rely on the representations or suffer any detrimental reliance because: (a) CBS Outdoor never required a credit application, references, or financial statements from Tribar or Clarity and it never knew or relied on the creditworthiness of either company; (b) all of Tribar’s assets were subject to security at all material times and the value of the assets was less than the amount of the secured indebtedness; and (c) Tribar is no longer carrying on business.

[ 22 ] For its part, Clarity also raises contract formation issues. Clarity submits that CBS Outdoor misrepresented its rights to P61 and did not disclose that its contract with CNE ran only to August 2009 and not July 2016, a seven year shortfall. Mr. Amo deposed that CBS Outdoor knowingly sold something it did not own. He submits that he negotiated the Revised Contract to secure the right to P61 until July 2016. He says that it was a prized and irreplaceable asset in which Clarity had made a large investment that it would not have made but for long term license to use the sign.

[ 23 ] CBS Outdoor’s response is to deny that it made any misrepresentation and to assert that Clarity’s claim is “a contrivance for the purpose of avoiding payment to the Plaintiff and for the purpose of enabling Clarity to use the Plaintiff’s money to support its obviously under-capitalized business.”

[ 24 ] With respect to the interpretation issues between the parties, Clarity interprets the Revised Contract to be a non-revocable commitment by CBS Outdoor to make signs P8 and particularly P61 available unit July 11, 2016 without any right to substitute an alternative sign. CBS Outdoor interprets the Revised Contract to permit it to substitute a different sign site.

[ 25 ] CBS Outdoor further submits that Clarity knew that sign P61 might not be available until July 11, 2016 because it always knew that the sign was controlled by the CNE Board. Clarity denies that it knew any such thing and, rather, what it knew was that the sign was on CNE property and that the CNE Board had the right to place advertising on the sign.

[ 26 ] Clarity submits that it was surprised and distressed to learn in March 2009 from a CNE agent that CBS Outdoor’s rights to sign P61 were about to expire. Mr. Amo deposed that the circumstance that P61 might not be available threatened Clarity’s existence and that once it confirmed that the information from the CNE agent was true, Clarity decided to withhold payments for P61 to CBS Outdoor on account of the damages suffered and to be suffered as a result of CBS Outdoor’s failure to honour the terms of the Revised Contract.

[ 27 ] Clarity, however, continued to make payments on P8 and did so until it failed to pay CBS Outdoor’s February 2010 invoice.

[ 28 ] Around March 2010, Clarity gave 120 days notice to cancel the contract for P8.

[ 29 ] While it was withholding payments to CBS Outdoor for P61, Clarity made what ultimately turned out to be a successful effort to secure the rights to P61 directly from the CNE Board.

[ 30 ] This effort to secure rights to P61 involved competition from CBS Outdoor and another advertiser and the effort was also difficult, protracted, and involved turbulent negotiations with the CNE Board. Mr. Amo describes these efforts as a costly effort to mitigate CBS Outdoor’s breach of the Revised Contract. He submits that Clarity also suffered business loses as a result of the disturbance caused by the uncertainty of whether it would secure rights to use P61.

[ 31 ] While it was withholding payments to CBS Outdoor for P61 and negotiating with the CNE Board, Clarity continued to have the use of P61 although it submits that with the uncertainty about its future rights, its business and its revenue from P61 were being adversely affected.

[ 32 ] In any event, with Clarity not making any payments for either P61 or P8, on April 12, 2010, CBS Outdoor cut off the power to P8.

[ 33 ] There are issues between the parties about the end of the P8 part of the Revised Contract, but for present purposes, I need not describe the nastiness, beyond saying that Clarity claims that what CBS Outdoor did when it cut off the power to P8 was dangerous, intimidating, and a justification for an award of punitive damages. CBS Outdoor obviously does not agree, but for present purposes, I need not say more about this dust up.

[ 34 ] From an accounts receivable perspective, subject to its counterclaim and subject to one invoice (No. 421486 for $34,421.10), it is not disputed that as of June 30, 2010, $442,317.75 is outstanding for P61 and $103,263.30 is outstanding for P8. The claim for unpaid interest under the 2007 Contract is $114,840.04.

[ 35 ] On May 5, 2010, CBS Outdoor commenced an action against Clarity, Mr. Amo, and Tribar. Its claim against Clarity and Tribar was for payment for the amounts owing under the Revised Contract. As against Tribar, on the grounds of fraudulent or negligent misrepresentation, CBS Outdoor seeks payment for the invoices associated with sign P61 or rescission of the agreement assigning P61 to Clarity. Its claims against Mr. Amo are for fraudulent and negligent misrepresentation and breach of collateral warranty.

[ 36 ] CBS Outdoor also claims an oppression remedy against Clarity and Tribar pursuant to s. 248 of the Ontario Business Corporations Act , R.S.O. 1990, c. B.16.

[ 37 ] On August 13, 2010, the Defendants delivered a Statement of Defence and Counterclaim. The counterclaim is only by Clarity, and it claims damages for breach of contract in the amount of $3 million. By way of defence the Defendants deny misconduct and Clarity pleads that it is entitled to set off or equitable set off of the damages it has suffered and will suffer as a consequence of CBS Outdoor’s alleged breach of contract.

D. DISCUSSION

[ 38 ] In my opinion, there is no genuine issue requiring a trial that Clarity has not fully paid CBS Outdoors for its use of P61 or for the use of P8. There is no genuine issue requiring a trial about the quantum of CBS Outdoor’s outstanding claims for payment under the Revised Contract. But for Clarity’s defence of an equitable setoff, CBS Outdoors would have been entitled to summary judgment for the amounts claimed.

[ 39 ] There is, however, in my opinion, a genuine issue requiring a trial about Clarity’s equitable set-off defence and this defence, if proven, would disentitle CBS Outdoor to the judgment it seeks in whole or in part. In other words, equitable set-off is a true defence and not just a separate counterclaim by a defendant and there is a genuine issue requiring a trial about the claim and the counterclaim.

[ 40 ] The constituent elements of equitable set-off are: (1) there must be some equitable basis to resist the plaintiff’s claim; (2) the equitable ground must go to the essence of the plaintiff’s claim; and (3) it would be manifestly unjust to enforce the plaintiff’s claim without taking into consideration the defendant’s claim: Telford v. Holt , 1987 , [1987] 2 S.C.R. 193 (S.C.C.) ; Cobra [Coba] Industries Ltd. v. Millie’s Holdings Canada Ltd. ( 1985 ), 20 D.L.R. (4th) 689 (B.C.C.A.) ; Algoma Steel Inc. v. Union Gas Ltd. ( 2003 ), 63 O.R. (3d) 78 (C.A.) ; Ferrum Inc. v. Three Dees Management Ltd. ( 1992 ), 7 O.R. (3d) 660 (Gen. Div.) .

[ 41 ] For an equitable set-off, there must be a close relationship between the dealings which gave rise to the respective claims: Telford v. Holt , supra ; Abrasive Engineering & Manufacturing Inc. v. Cowan & Stevens Machinery Sales Ltd ., [2003] O.J. No. 2037 (S.C.J.) .

[ 42 ] In my opinion, if proven, Clarity’s claim that CBS Outdoors purported to sell something it did not own does go to the root of CBS Outdoor’s claim for payment. In my opinion, there is a genuine issue requiring a trial about Clarity’s defence of equitable set-off.

[ 43 ] Put somewhat differently, a trial is required to determine the various elements of this equitable set-off, which based on the evidence I have reviewed, are arguable.

[ 44 ] Therefore, CBS Outdoor’s motion for a summary judgment should be dismissed.

[ 45 ] The situation is different for the Defendants’ motion to strike the claims for fraudulent and a negligent misrepresentation, breach of implied warranty, and for an oppression remedy.

[ 46 ] In responding to a motion for summary judgment, a party is required to put its “best foot forward”.

[ 47 ] In the case at bar, the evidence put forward by CBS Outdoor to support its very serious allegations of fraudulent and negligent misrepresentation and oppressive corporate conduct by Tribar and Clarity are remarkably thin.

[ 48 ] In order for CBS Outdoor to succeed on its claim for fraudulent misrepresentation or deceit, it must prove five elements.

[ 49 ] In the case at bar, based on the evidence that I have reviewed, there is no genuine issue requiring a trial that CBS Outdoor has not proven the required elements.

[ 50 ] The evidence does establish that Mr. Amo’s statements were material and induced CBS Outdoor to act, but the remaining elements are absent.

[ 51 ] Mr. Amo’s statements about the transfer of assets and liabilities were not false.

[ 52 ] The evidence also establishes that the revenues were transferred.

[ 53 ] There clearly was no intent to deceive.

[ 54 ] There also are no damages caused by what Mr. Amo said about the transfer of assets.

[ 55 ] Turning to CBS Outdoor’s claim for negligent misrepresentation, the required elements are not proven.

[ 56 ] There is no genuine issue requiring a trial that the claim could succeed.

[ 57 ] The evidence proffered by CBS Outdoor is remarkably thin.

[ 58 ] It would also be unreasonable for CBS Outdoor to have relied on the alleged statements.

[ 59 ] For the above reasons the claim for breach of collateral warranty also fails.

[ 60 ] Finally, the oppression remedy claim is untenable.

[ 61 ] The oppression remedy is an equitable remedy that gives the court a broad jurisdiction to enforce not just what is legal, but what is fair.

[ 62 ] Based on the evidence proffered for this motion, neither Tribar nor Clarity did anything that would qualify as oppressive corporate conduct.

E. CONCLUSION

[ 63 ] For the above reasons, I grant the Defendants’ motion for summary judgment with costs to: (a) Tribar and Mr. Amo, payable forthwith; and (b) to Clarity in any event of the cause.

[ 64 ] I dismiss CBS Outdoor’s motion for summary judgment with costs in the cause.

[ 65 ] The parties may make written submissions about the scale of costs and the quantum of costs beginning with the Defendants’ submissions within 20 days of the release of these Reasons for Decision followed by CBS Outdoor’s submissions within a further 20 days.

Perell, J.

Released: April 27, 2012