Hilco v. Sarnia Wheels Inc.

Court File No. CV-12-459687
Motion Heard: July 27, 2012
2012 ONSC 4442

ENDORSEMENT

S. Sood for the plaintiffs

L. Poliacik for the defendant

[ 1 ] This is a motion brought by the plaintiffs on an urgent basis pursuant to section 103(6) of Courts of Justice Act , R.S.O. 1990, c. C.43 (the “CJA”) and Rule 42.02 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 (the “Rules”) for an order granting them leave to issue a certificate of pending litigation (“CPL”).

[ 2 ] The plaintiffs and the defendant entered into an Asset Marketing Agreement (the “Agreement”) on March 8, 2012. Under the terms of the Agreement, the defendant engaged the plaintiffs to be its exclusive marketing and sales agents for the purposes of selling certain assets owned by the defendant and located at 21 UBE Drive, Sarnia (the “Property”). As part of the agreement, the defendant granted the plaintiffs a form of a proprietary interest in the assets, including the right to enter onto the Property and remove and sell the assets. The defendant has also granted the plaintiffs a security interest over the assets.

[ 3 ] A dispute has now arisen between the parties concerning certain of the assets described in the Agreement as Tec Cable. The plaintiffs argue that they are entitled to remove all of this cable. The defendant takes the position that only the cable that is not required for the functioning of the building systems can be removed. The defendant is now preventing the plaintiffs from removing an unknown quantity of this Tec Cable. The defendant also alleges that the plaintiffs are in breach of other terms of the Agreement which are not germane to this motion.

[ 4 ] It is common ground that the test to be applied on a motion for leave to issue a CPL brought on notice is the same as a motion to discharge a CPL.

[ 5 ] In Perruzza v. Spatone , [2010] ONSC 841, Master Glustein concisely sets out the factors the court is to apply when deciding a motion to discharge a CPL. At paragraph 20 of Perruzza , Master Glustein identifies those considerations as follows:

(ii) The threshold in respect of the "interest in land" issue in a motion respecting a CPL (as that factor is set out at section 103(6) of the Courts of Justice Act , R.S.O. 1990, c. C.43) is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed ( 1152939 Ontario Ltd. v. 2055835 Ontario Ltd. , 2007 CarswellOnt 756 (S.C.J.) , as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber , [1999] O.J. No. 300 (Gen. Div. - Comm. List) at para. 62);

(iii) The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL has "a reasonable claim to the interest in the land claimed" ( G.P.I. Greenfield Pioneer Inc. v. Moore , 2002 6832 (ON CA) , 2002 CarswellOnt 219 (C.A.) at para. 20 );

(iv) Factors the court can consider on a motion to discharge a CPL include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security ( 572383 Ontario Inc. v. Dhunna , 1987 CarswellOnt 551 (S.C. - Mast.) at paras. 10-18 );

(v) The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated ( 931473 Ontario Ltd. v. Coldwell Banker Canada Inc. , 1991 CarswellOnt 460 (Gen. Div.) ; Clock Investments Ltd. v. Hardwood Estates Ltd. , 1977 1414 (ON SC) , 1977 CarswellOnt 1026 (Div. Ct.) at para. 9 ).

[ 6 ] These are the factors and principles I have applied in determining the issues on this motion.

[ 7 ] I am satisfied, on balance, that the plaintiffs have established, for the purposes of this motion, a claim to an interest in land. The Agreement gives the plaintiffs the right to enter upon the land, remove fixtures that are attached to the land and sell those fixtures to third parties. The Agreement also gives the plaintiffs a security interest over those fixtures. Neither party could provide the court with any case law in which a CPL was issued in similar circumstances. However, in White Holdings Ltd. v. Bolus-Revelas-Bolus Ltd. (1980), 14 R.P.R. 145 (H.C.J.) at page 149, Justice Learner states that “it is the rule that a removable fixture is part of the freehold while it is attached thereto”. Clearly these cables are fixtures attached to the building. The defendant acknowledges that they are critical for its operation. In my view, this proposition is a basis for the plaintiffs’ claim to an interest in the real property as contemplated by the CJA and the Rules.

[ 8 ] I am also satisfied that there is a triable issue with respect to the plaintiffs’ claim to the Tec Cable. Item 40 of Exhibit A to the Agreement identifies the Tec Cable “throughout the plant” as one of the assets to be removed and sold by the plaintiffs. The defendant argues that a handwritten revision immediately above the reference to the Tec Cable modifies that item by excepting any Tec Cable “required for building facilities”. This amendment is listed as item 39 and appears opposite the typewritten item 39 on Exhibit A to the Agreement. In my view, it is far from clear that this amendment applies to the Tec Cable listed as item 40. In any event, it certainly gives rise to a triable issue as to whether all of the Tec Cable can be removed and sold or whether only that portion of the Tec Cable not required for building facilities can be removed and sold. The defendant has not met its onus in this regard.

[ 9 ] However, the inquiry does not end there. Even if the plaintiffs have demonstrated an interest in land and a triable issue is found to be present, the court must still exercise its discretion in equity and make such order as is just. In exercising this discretion the courts will look to the so-called Dhunna factors referred to above. Having done so, it is my view that a CPL should not be issued on the facts before me on this motion. Dhunna factors 1, 4 and 7 are not relevant to this motion. As for factors 2 and 3, there is nothing unique about the cable in question. The clear intention of the parties to the Agreement is to simply re-sell the cable for the value of the copper. Indeed, part of the plaintiffs’ motivation in bringing this motion is to be able to sell the cable to a willing purchaser who they fear may go elsewhere if this matter is delayed.

[ 10 ] Factors 5 and 6 favour the defendant. Damages are easily calculated. Indeed, we already know what an arms’ length purchaser is willing to pay for the cable - $7.00 per metre. Presumably it will be a simple exercise to determine the amount of cable remaining in the building and multiply that figure by $7.00 per metre. I am satisfied that damages are a satisfactory remedy in the circumstances of this dispute.

[ 11 ] Finally, factor 8 requires the court to look at the harm to each party. If the CPL is granted the defendant will be unable to lease or deal with its property in any way pending a determination of the plaintiffs’ claims. If a CPL is not granted, the plaintiffs will still have an easily calculable claim in damages against the defendant.

[ 12 ] I do not see the fact that the defendant has recently mortgaged the Property and is attempting to lease the Property as relevant factors on this motion. The only evidence before the court is that there remains significant equity in the Property. There is no evidence that the defendant is carrying on business out of the usual course or that there is anything nefarious about the mortgages or the attempts to lease the Property. The plaintiffs have certainly not alleged that the mortgages are improper.

[ 13 ] Having weighed and considered all relevant matters between the parties, it is my view that equity requires that I exercise my discretion not to grant leave to issue the CPL. The plaintiffs’ motion is therefore dismissed.

[ 14 ] The defendant seeks its costs of this motion. It has been completely successful and is entitled to costs. However, I am not satisfied that the plaintiffs have engaged in conduct that should attract costs on an elevated scale. I have reviewed the defendant’s costs outline. The plaintiff did not have a costs outline available for the court. This motion was served on one day’s notice. The parties have been here until 5:00 p.m. today. The defendant’s lawyer had to start from scratch yesterday afternoon in order to be in a position to respond to this motion. In my view, the partial indemnity costs requested by the defendant are fair and reasonable having regard to these factors and the factors under Rule 57.01(1) generally. The plaintiffs shall pay the defendant’s costs of this motion fixed in the amount of $4,231.23 within 30 days.

July 27, 2012

Master R.A. Muir