BARRIE COURT FILE NO.: 10-0276

DATE: 20120620

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ADDMORE OFFICE FURNITURE INC. and INTACT INSURANCE COMPANY Plaintiffs – and – PAUL BERENDSON Defendant

J. Heeney, for the Plaintiffs
Paul Berendson, self-represented

HEARD: June 19, 2012

QUINLAN J.:

INTRODUCTION

[ 1 ] The plaintiffs seek summary judgment in the amount of $125,788 on the ground that there is no genuine issue requiring a trial with respect to its claim. In the alternative, the plaintiffs seek an order for summary judgment on the issue of liability and an order directing a trial of an issue with respect to damages.

BACKGROUND

[ 2 ] The plaintiff Addmore is an office supply company. Intact Insurance Company is its insurer. The defendant Berendson was employed by Addmore as a store manager at its Barrie location. The plaintiffs allege that Berendson conducted fraudulent transactions at Addmore by selling furnishings and other products owned by Addmore and retaining the proceeds.

[ 3 ] In order to determine the extent of the loss sustained by Addmore, Intact retained a forensic accounting firm. By way of a report dated August 7, 2008, the forensic accountant determined that Addmore's shortfall in inventory for the year immediately preceding the discovery of irregularities was $125,788. Intact paid $100,000 to Addmore pursuant to its insurance policy. As a result, Intact seeks payment from Berendson of that amount. Addmore seeks the balance in the amount of $25,788.

[ 4 ] In his statement of defence, Berendson admitted that he converted certain of the assets of Addmore to his own use or benefit. He denied the extent of the damages claimed by Addmore and admitted no specific amount. He further asserted that most of the amounts claimed by the plaintiffs related to transactions conducted by him for the benefit of Addmore. Berendson claimed that he paid $15,000 in restitution to “the Plaintiffs”.

[ 5 ] Berendson filed an affidavit in response to the motion for summary judgment. In it, he deposed that for the three years that he was the store manager of Addmore, he was advised that he was doing a “superb managerial job". Berendson deposed that there were a number of issues that would account for inventory discrepancies, including double payment by customers, a failure on the part of any employees of Addmore to sign for inventory, and the sale of damaged furniture at a discount in the used sales department (this not having been accounted for in the forensic accounting). In his affidavit, Berendson deposed that he paid Addmore (as opposed to “the Plaintiffs”) $15,000.

[ 6 ] In his affidavit, Berendson, albeit with some lack of clarity, admitted that he had stolen $30,000 in furniture from Addmore. He directly acknowledged the theft and fraud of $30,000 in the course of the hearing of the motion. In response to my question as to whether he had documentation to contradict or challenge the forensic accounting, Berendson advised that he was unable to return to Addmore upon his dismissal to retrieve an accounting book to support his position.

[ 7 ] In the course of the motion, Berendson then advised that he had pleaded guilty to defrauding Addmore of the sum of $50,000 and that he was ordered to pay restitution in that amount. On October 22, 2009, Berendson was convicted of fraud and ordered to make restitution to Intact (by then ING) in the amount of $24,212. The plaintiffs' motion materials included a copy of the restitution order to ING in that amount. In the course of the motion, as a result of submissions made by Berendson, a copy of the information charging Berendson with fraud was obtained. That information disclosed that $35,000 in restitution was ordered: $24,212 to ING and $10,788 to Addmore. Berendson advised that the $15,000 paid to Addmore was in addition to the $35,000 ordered in restitution.

[ 8 ] Berendson takes the position that the quantum of restitution ordered to Addmore supports payment by him of $15,000 restitution. That is, Addmore claims $25,788 as being the amount of the fraud not covered by its insurer Intact. If Berendson had paid $15,000 restitution, that would leave $10,788 outstanding. A letter from the trustee in bankruptcy dated September 15, 2011 directed to Berendson seeks payment in the amount of $10,788.

[ 9 ] In addition, in the course of the motion, Berendson provided a copy of a letter from his criminal defence counsel dated October 22, 2009. That letter was directed to “Addmore Office Furniture c/o ABCO Group”, to an address that plaintiffs' counsel advised was not the address of Addmore. The letter was said to enclose a trust account check in the sum of $15,000 as partial restitution. Berendson could not explain why his counsel's letter was directed to ABCO Group or to the particular address, taking the position that he was only aware that ABCO purchased some of the stores of Addmore at a later date.

[ 10 ] In an affidavit filed in support of the summary judgment motion, the former president of Addmore, Stephen Weiss, deposed that he was advised by a student-at-law at the office of the plaintiffs' counsel that Berendson has not made restitution or any payments to the plaintiffs to account for the loss arising from his fraudulent conduct.

[ 11 ] For the reasons that follow, I find that the plaintiffs are entitled to an order for summary judgment on the issue of liability. However, I find that it is necessary for a full appreciation of the evidence and issues that there be a trial of an issue with respect to damages.

ANALYSIS

Principles

[ 12 ] Rule 20.04 states that summary judgment shall be granted if the court is satisfied that there is “no genuine issue requiring a trial” with respect to a claim or defence. In determining that, the court shall consider the evidence submitted by the parties and the judge may exercise any of the following powers for that purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

(i) Weighing the evidence;

(ii) Evaluating the credibility of a deponent; and

(iii) Drawing any reasonable inference from the evidence. [^1]

[ 13 ] In Combined Air Mechanical Services Inc. v. Flesch, [^2] the Ontario Court of Appeal developed the approach to be taken in interpreting the amended Rule 20. The Court of Appeal concluded there are three types of cases amenable to summary judgment:

(i) Where the parties agree that it is appropriate to determine an action by way of a motion for summary judgment (this does not apply in the case at bar);

(ii) Where the claims or defences are shown to be without merit (I am not satisfied that this applies in the case at bar); and

(iii) Where the trial process is not required in the “interest of justice”.

[ 14 ] As noted in that case, the phrase “interest of justice” “operates as the limiting language that guides the determination whether a motion judge should exercise the powers to weigh evidence, evaluate credibility, and draw reasonable inferences from the evidence on a motion for summary judgment, or if these powers should be exercised only at a trial.” [^3]

[ 15 ] A trial judge is in a “privileged position” in assessing the evidence, the credibility of witnesses and ensuring fairness in the process. [^4]

[ 16 ] In cases where summary judgment is sought under the third category of cases (where the trial process is not required in the interest of justice), the Court of Appeal developed the “full appreciation test”:

In deciding if these powers should be used to weed out a claim as having no chance of success or be used to resolve all or part of an action, the motion judge must ask the following question: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of trial?

[ 17 ] In deciding whether to grant summary judgment, the motion judge must consider if this is a case where “meeting the full appreciation test requires an opportunity to hear and observe witnesses, to have the evidence presented by way of a trial narrative, and to experience the fact-finding process first-hand.” [^5]

[ 18 ] The new Rule 20 does not change the evidentiary obligations on a summary judgment motion. Each side must put its “best foot forward”.

[ 19 ] In response to evidence supporting a motion for summary judgment, Rule 20.02 provides that a responding party may not rest solely on the allegations or denials in the party’s pleadings, but must set out, through admissible evidence, specific facts showing why there was a genuine issue regarding a trial.

Liability

[ 20 ] I find that there is no genuine issue requiring a trial in relation to liability. Berendson admitted in his statement of defence that he converted assets of Addmore to his own use or benefit. Berendson admitted in the affidavit filed in support of this motion that he defrauded Addmore of $30,000. Berendson pleaded guilty to defrauding Addmore of $50,000.

Damages

[ 21 ] I am not satisfied that the plaintiffs have demonstrated that Berendson’s defence to payment of the full amount of damages is without merit. Upon consideration of the entire evidentiary record and upon application of the full appreciation test, I conclude that there is a genuine issue requiring a trial regarding damages. Although Berendson has not filed an expert report or any accounting documentation to challenge the accountant’s report, he has deposed in his affidavit that there were issues relating to inventory control that a trial judge might find call into question the accuracy of the forensic accountant’s report.

[ 22 ] In view of the fact that Berendson was immediately fired from his position at Addmore upon discovery of the fraud (according to the forensic accountant's report), Berendson would be in a difficult position to provide accounting or office documentation to the contrary and his evidence in that regard will need to be assessed by a trier of fact. I find that it is necessary for the court to hear the evidence of the forensic accountant and Berendson in order to fully appreciate and understand the quantum of loss suffered by Addmore that is properly attributable to Berendson.

[ 23 ] In addition, as became fully evident at the hearing before me, there is a lack of clarity as to whether and to whom any amount of restitution has been made, and I am not satisfied that an adjournment of the summary judgment motion to allow further investigation into the issue of restitution would alter my view that the issue of damages cannot be resolved on a summary judgment motion.

[ 24 ] Rather, on a consideration of the material before me, I find that damages cannot be resolved on a motion for summary judgment by way of any dispositive findings. I find that “the attributes of the trial process are necessary… to fully appreciate the evidence and the issues posed by the case.” [^6]

Conclusion

[ 25 ] For the foregoing reasons, the plaintiffs’ motion for summary judgment on the issue of liability is granted and I hereby direct the trial of an issue with respect to damages.

COSTS

[ 26 ] Insofar as costs are concerned, I accept that the plaintiffs should be awarded a portion of their costs. The plaintiffs have been partially successful on their motion. Until the filing of the affidavit in response to this motion, Berendson had not acknowledged liability for any specific amount. In the affidavit filed, he acknowledged the theft of $30,000. In the course of the hearing, he acknowledged pleading guilty to having defrauded Addmore of $50,000.

[ 27 ] Berendson did not provide supporting documentation in relation to the payment of any amount of restitution until directed to do so in the course of the motion. The issue of to whom payment of restitution was made and why it was made “c/o ABCO” still remains outstanding. As a result, I find that this motion was necessary to confirm the issue of liability and in order for Berendson to provide some supporting documentation so that further enquiries can be made to determine whether any amount should be credited to him for payment of restitution.

[ 28 ] The plaintiffs seek their costs on a substantial indemnity basis totalling $7764.88. I find that the time expended is reasonable. A law clerk or student-at-law was utilized when appropriate. However, in view of the partial success of the plaintiffs, I find that a fair and reasonable amount to order for costs of this motion is $5000.

[ 29 ] Accordingly, Berendson is ordered to pay costs to the plaintiffs in the amount of $5000.

QUINLAN J.

Released: June 20, 2012

[^1]: Rule 20.04(2) and (2.1), Rules of Civil Procedure.

[^2]: 2011 ONCA 764 at paras. 40-44.

[^3]: Supra, at para. 45.

[^4]: Supra, at para. 48.

[^5]: Supra, at para. 55.

[^6]: Supra, at para. 54.