ONTARIO SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 12-CV-443778
DATE: August 27, 2012

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

Leopold Schleifstein

Plaintiff

• and -

KCC Leasing Limited, Ralph Fedato and John Collaton

Defendants

COUNSEL:

• Gil Fischler for the Plaintiff

• Lorne Sabsay for Ralph Fedato

HEARING DATE: August 22, 2012

PERELL, J.

REASONS FOR DECISION

1Pursuant to Rule 20, the Defendant Ralph Fedato brings a motion for summary judgment to have the action against him dismissed. Alternatively, Mr. Fedato also moves pursuant to Rule 21 to have the action dismissed as an abuse of process on the grounds that the Plaintiff Mr. Schleifstein’s claim is barred by an issue estoppel or res judicata.

2Mr. Fedato’s motion under Rule 21 is based on comments made by a Deputy, Small Claims Court judge, expressing the view that Mr. Schleifstein had no claim against Mr. Fedato. Those comments were made in the course of judgment enforcement proceedings. Technically speaking, I doubt that the requirements for an issue estoppel or a res judicata have been satisfied, but it is not necessary for me to decide the point because the court has discretion not to apply an issue estoppel.

3In Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, the Supreme Court of Canada held that where a party establishes the pre-conditions for an issue estoppel, a court must still determine whether, as a matter of discretion, issue estoppel ought to be applied. The court should stand back and, taking into account the entirety of the circumstances, consider whether the application of issue estoppel in the particular case would work an injustice. In my opinion, it would not be fair to decide this matter based on an issue estoppel, and it should be decided on its merits, which brings me to Mr. Fedato’s motion for a summary judgment.

4The factual background is that Mr. Schleifstein leased a truck from KCC Leasing Limited and he paid $30,189. He returned the truck, and when KCC Leasing did not repay him, he sued it in the Small Claims Court. On May 31, 2010, the Small Claims Court granted Mr. Schleifstein a judgment of $25,000 plus costs of $1,000 with prejudgment interest from July 31, 2009.

5When KCC did not pay the judgment, Mr. Schleifstein commenced this action on January 11, 2002 against KCC Leasing, Messrs. Fedato, and Collaton. He sues for the recovery of his Small Claims Court judgment and punitive damages of $70,000.

6The allegation against Mr. Fedato is that he was a director of KCC Leasing and that sometime before May 31, 2010 KCC Leasing ceased operations and underwent a corporate restructuring and its business was taken over by another corporation. Mr. Schleifstein alleges that Mr. Fedato knew about the Small Claims Court action but failed to take steps to ensure that KCC Leasing keep a reserve of assets to pay any judgment against it. It is alleged that these actions constitute oppression under s. 248 of the Ontario Business Corporations Act,

7Mr. Schleifstein relies on Re Sidaplex-Plastic Suppliers Inc. and Elta Group Inc. (1998), 1998 5847 (ON CA), 40 O.R. (3d) 563 and Downtown Eatery (1993) Ltd. v. Ontario (2001), 54 O.R. (3d) 16 in support of his claim for an oppression remedy.

8Mr. Fedato’s motion for summary judgment is based on the evidence and the submissions that he was in truth not a director of KCC Leasing, and, in any event, he was not in a position to commit the alleged wrongful act of failing to ensure that KCC Leasing keep a reserve for its indebtedness to Mr. Schleifstein. Mr. Fedato submits that the truth is that KCC’s business affairs and operations were under the control of another corporation; namely, CorpFinance International Limited.

9Putting aside for the moment whether Mr. Fedato was a director of KCC Leasing, there is no genuine issue for trial about the following facts:

• CorpFinance is a financial services company that provides financing for motor vehicle dealers through securitization agreements.

• In 2002, Mr. Fedato was an employee of CorpFinance, and he was assigned to manage CorpFinance’s financing of KCC Leasing, which he did from KCC Leasing’s business premises.

• In 2007, CorpFinance exercised its rights under its securitization agreements, and it took over the business operations of KCC Leasing and put in place new management.

• In 2008, Mr. Fedato became the general manager of KCC Leasing. He assumed this role as an employee of CorpFinance. Mr. Fedato reported to CorpFinance, which controlled all of the finances and operations of KCC Leasing. Around this time, Mr. Fedato was registered as a director of KCC Leasing, although his evidence was that this appointment was done without his knowledge or consent.

• In January 2010, Mr. Fedato became aware that he was registered as a director of KCC Leasing, and he took steps to have the registration corrected.

• In January 2010, Mr. Schleifstein commenced a Small Claims Court action against KCC Leasing.

• In February 2010, CorpFinance exercised its rights and seized the assets of KCC Leasing for default under the securization agreements. KCC Leasing ceased operations and is insolvent.

• In February 2010, Mr. Fedato stopped working at KCC Leasing and has assumed a new position at another leasing company.

• On May 31, 2010, the Small Claims Court granted Mr. Schleifstein a judgment of $25,000 plus costs of $1,000 with prejudgment interest from July 31, 2009.

• In August 2010, the corporate records of KCC Leasing were corrected to retroactively correct and expunge Mr. Fedato’s egistration as a director effective April 8, 2008.

• In November 2010, in aid of execution of the Small Claims Court judgment, Mr. Fedato was examined as the previous general manager of KCC Leasing.

10Based on the above evidence and even assuming that Mr. Fedato was a director of KCC Leasing and even assuming that his evidence is false about not knowing this to be the case, there is no genuine issue for trial that Mr. Fedato had no ownership interest in KCC Leasing or in CorpFinance. There is no genuine issue for trial that he was not the controlling mind of KCC Leasing or of CorpFinance and that he was never in a position to have KCC Leasing or CorpFinance keep a reserve for its indebtedness to Mr. Schleifstein, assuming for the sake of argument that the failure to do so was oppressive conduct.

11Mr. Fedato was just an employee under the control of CorpFinance and not its controlling mind.

12Assuming that Mr. Fedato was a director of KCC Leasing, there is no genuine issue for trial that there was nothing that he did that was oppressive or unfairly prejudicial to him. Mr. Fedato had nothing to do with the seizures made under the securitization agreement and the alleged failure to establish a reserve.

13It follows that Re Sidaplex-Plastic Suppliers Inc. and Elta Group Inc., supra, and Downtown Eatery (1993) Ltd. v. Ontario, supra, whatever relevance they may have to Mr. Schleifstein’s action against the now moribund KCC Leasing and against John Collaton, who is alleged to have been a director of KCC Leasing, are not relevant to the claim against Mr. Fedato.

14It follows that Mr. Schleifstein’s submission that discoveries, and the production of documents is necessary to determine the truth or not of Mr. Fedato’s involvement as director, is incorrect. No useful purpose would be served by such a trial, and it further follows that Mr. Fedato’s motion for summary judgment should be granted.

15If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Mr. Fedato’s submissions within 10 days of the release of these Reasons for Decision followed by Mr. Mr. Schleifstein’s submissions within a further10 days.

16Judgment accordingly.

Perell, J.