Court File and Parties

COURT FILE NO.: CV-12-18820

DATE: 20140321

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Kimberley Amonite

Plaintiff

– and –

A.P. Plasman Corporation and APP Capital Inc.

Defendants

Counsel:

William V. Sasso and Jacqueline A. Horvat, for the Plaintiff

Judy Hamilton, for the Defendant APP Capital

David E. Lederman, for the Defendant A.P. Plasman Corporation

HEARD: March 3, 2014

Decision on Summary judgment motion

Thomas j.:

The Motion

[1] The defendant APP Capital Inc. (APP) has brought a summary judgment motion pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The motion requests the dismissal of claims by the plaintiff Kimberley Amonite (Amonite) as against APP. The co-defendant A.P. Plasman Corporation (Plasman) takes no position on this motion.

[2] The action commenced by Amonite seeks relief against both defendants for breach of an employment contract dated February 28, 2008, and for unjust enrichment.

[3] APP has defended and counter claims for damages arising, in part, from allegations of intentional interference in economic relations by Amonite.

[4] Plasman has delivered a statement of defence and crossclaim.

Background

[5] Plasman opened in 1978 as a Tool and Mold Shop in Windsor, Ontario. It services the auto industry.

[6] By 2009 Plasman employed in excess of 1,000 employees at five facilities in the Windsor area. Amonite was the Chief Financial Officer (CFO) of Plasman from October 12, 2004 until December 12, 2012. Amonite had an employment contract with Plasman dated January 20, 2005 (the 2005 Amonite Agreement). David Wiskel (Wiskel) is the Chief Executive Officer (CEO) of Plasman and has been since 2005. In 2007 the shareholders of Plasman directed Wiskel to seek a buyer for their shares.

[7] Negotiations were commenced between Plasman and George Georgiou (Georgiou). Ultimately, this led to two agreements between the owners of Plasman and Georgiou’s corporation, AJAC Capital Trust (AJAC). Those agreements were a letter of intent dated January 3, 2008 (the AJAC LOI), and a share purchase agreement dated April 7, 2008 (AJAC SPA). The AJAC LOI contained the following termination provision:

This Letter of Intent will terminate and become null and void if the Transaction contemplated herein is not completed for any reason by May 31, 2008.

[8] In addition, the AJAC LOI defined the purchaser as “A Special Purpose Company (SPC) to be formed wholly owned by AJAC”.

[9] A closing condition contained in the AJAC LOI required the management team of Wiskel, Amonite and Tony Romanello to enter into employment contracts with AJAC. In the LOI, the term APP is defined as Plasman:

David Wiskel, Kim Amonite and Tony Romanello, will by January 31, 2008 and set out in writing in a separate side letter shall have entered into employment agreements with AJAC or the successor entity to APP on terms and conditions reasonably satisfactory to AJAC.

[10] By agreement dated February 28, 2008, Amonite entered into a new employment contract signed by Ronald Wyles, the Trustee of AJAC, Wiskel (for Plasman) and Amonite (the 2008 Amonite Agreement). The effective date for the new contract was determined by the following paragraph:

THIS AGREEMENT is made as of February 28, 2008 between AJAC CAPITAL TRUST or its designated entity (the “Purchaser”) as it relates to the acquisition of the shares of AP Plasman Corporation (the “Company”) and Kimberley Amonite (“Amonite”). This Agreement will take effect upon closing of the AP Plasman acquisition by the Purchaser. (emphasis added)

[11] The 2008 Amonite Agreement called for Amonite to continue to receive the benefits of her 2005 agreement with Plasman but, as well, allowed her to participate in an “Equity Incentive Plan” which was a substantial increased benefit if AJAC or its SPC made a profitable resale.

[12] On March 27, 2008, APP was incorporated (as Ontario Corporation 002167658). There is no evidence that APP was incorporated for any other business purpose but to acquire Plasman. The incorporator of APP was William Friedman who continues to act as the lawyer for APP in these proceedings. It appears from the record in this motion that upon incorporation Georgiou owned all the shares of APP.

[13] The shareholders of Plasman agreed to sell to APP pursuant to two share purchase agreements and a debt purchase agreement dated April 7, 2008. In each of the share purchase agreements the term “LOI” is defined as “the letter of understanding dated the 3rd day of January, 2008 inter alia between the Vendor and AJAC Capital Trust”, arguably clarifying that APP is the SPC contemplated by the AJAC LOI.

[14] In October 2008, Georgiou was arrested by the F.B.I. for securities fraud, conspiracy and wire fraud. He was convicted on February 12, 2010, and incarcerated for 25 years on November 19, 2010.

[15] Despite his arrest, Georgiou moved forward with the business of acquiring Plasman, however, no longer visibly the driving force of the transaction.

[16] By October 10, 2008, Thomas Bock (Bock) had been added as a new member of the Trust and Trustee. Georgiou in emails to the Business Development Bank confirmed Bock’s addition and that the Trust would control APP which, in turn, would control Plasman.

[17] On October 17, 2008, Georgiou’s common shares in APP were transferred to Bock, Oliver Bock (Bock’s brother), and Gabrielle Chevalier (Bock’s sister). The share transfer was done for nominal consideration and Bock advised that he agreed to operate the business on a 50/50 partnership with Georgiou.

[18] While the closing date of the transaction described above was extended on several occasions, it had not closed by December 2008 and a letter dated January 5, 2009 was sent by Gowling Lafleur Henderson LLP (lawyers for the selling shareholders). It advised the following:

Further to the terms of the reinstatement letter dated October 17, 2008, the December 30, 2008 expiry date has now come and gone without completion of the sale transactions. On this basis, we confirm that the Agreements are rescinded and the obligations of all parties in respect of such Agreements have come to an end on December 30, 2008.

[19] It is the position of Amonite that she had no knowledge of the letter of rescission until this motion for summary judgment.

[20] It would seem, however, interest in this deal was not dead and by February 11, 2009, APP and Plasman had entered into two share purchase agreements and a debt purchase agreement. There were a number of changes in these agreements from their predecessors including the requirement of three deposits, the elimination of any reference to the AJAC LOI, and the elimination of representations and warranties (an “as is where is” deal).

[21] Amonite signed the 2009 agreements as CFO of Plasman. The deal closed on May 10, 2009. It is clear that both before the deal and after, the C.E.O. Wiskel was communicating to Bock about his concerns about the status of the employment contracts. It is the evidence of Wiskel that Georgiou told him Bock would honour the 2008 employment contracts. Wiskel went so far as to send the same contracts to Bock, amended to reflect the new AJAC ownership, for his approval and signature. Wiskel offered to negotiate on behalf of Amonite. She declined. Eventually Wiskel made a new deal with Bock, the details of which have not been disclosed.

[22] It seems clear that Amonite continued to work as CFO and was remunerated by the new owner in accordance with the 2005 Amonite Agreement. There were no demands from Amonite, just as there was no notice from Bock that the relationship was bound only by the 2005 Amonite Agreement. The equity incentive plan contained in the 2008 Amonite Agreement was never put in force.

[23] Interestingly, Wiskel and Amonite received $100,000 and $50,000 respectively as bonuses from Plasman for their work in completing the 2009 sale. APP, apparently upset with the payments, commenced an action to recoup those sums. The action was eventually resolved.

[24] The fortunes of Plasman and APP changed on December 29, 2011, when APP sold the shares of Plasman to 2310161 Ontario Inc. (Insight Equity) for an amount in excess of $55 million dollars.

[25] As part of the completion of this latest transaction, Amonite had responsibility regarding due diligence. She assisted in the accumulation of material posted in the “data room” and executed the sale agreement representing for Plasman that all relevant employment agreements had been disclosed. She disclosed the 2005 Amonite Agreement but not the 2008 Amonite Agreement which is the focus of his action. Neither did Wiskel disclose his new employment agreement achieved with Bock.

[26] Several members of the management team, including Wiskel, created a company after APP/Plasman sold to Insight Equity, for the purpose of negotiating management compensation. Amonite, as part of that compensation, received one per cent of the shares of Plasman and $250,000. She did not participate in the negotiating company.

[27] APP paid $5,145,000 to Wiskel and another management participant, Tim Berezowski.

[28] Amonite claims that her compensation from the sale pursuant to the 2008 Amonite Agreement should be $1,830,054.

[29] As part of the closing of the transaction, $4,875,000 was paid to an escrow agent to be released upon the basis that no claim exceeding 33 1/3 per cent of the Escrow Funds was made prior to December 29, 2012.

[30] Throughout 2012, Amonite negotiated with the Bocks and then through her counsel with William Friedman. No resolution of her demands related to the 2008 Amonite Agreement could be achieved and on December 27, 2012, the statement of claim was issued. The escrow funds were to have been released one day after the expiration of the relevant limitation period.

[31] Pleadings have been exchanged in this action and cross-examinations on the affidavits have taken place. The plaintiff has delivered its affidavit of documents; APP has not. During the cross-examination of Bock, refusals were provided to any questions exploring Bock’s relationship to Georgiou, the motivation for the Bock family’s acquisition of the APP shares, and the compensation of Georgiou, either from the transfer of his shares or the subsequent sale to Insight Equity.

[32] No examinations for discovery have taken place.

Positions of the Parties

APP (The Moving Party)

[33] APP’s position is that it was never a party to the 2008 Amonite Agreement and, as such, it cannot be bound by it. Further, that there is no evidence that AJAC ever owned APP as contemplated or that APP is the designated entity of AJAC contemplated by the 2008 Amonite Agreement.

[34] In any event, it is argued, that transaction never closed and the 2008 Amonite Agreement died with it. The agreements expired on their terms and/or were rescinded by the Gowling letter of January 5, 2009.

[35] The sale of Plasman to APP on May 10, 2009, was a new deal. Those agreements made no mention of the employment contract of Amonite.

[36] APP sees confirmation of its argument in the actions of Amonite herself. Amonite was aware of the new agreements. Amonite made no demands of APP regarding the 2008 Amonite Agreement, throughout 2009-2011, until after the closing of the sale to Insight Equity. Amonite did not post the 2008 Amonite Agreement in the data room prior to the sale and she represented and warranted to Insight Equity that the 2005 agreement was her only employment contract.

[37] APP maintains that Amonite might have always intended to try to negotiate a new deal, but she never did, and the court cannot be invited to strike a new deal for her now. The timing of her claim is meant to pressure APP to allow for the release of the escrow funds.

[38] As to the claim for unjust enrichment, APP maintains this is a claim for breach of contract and, as such, this equitable remedy is not available or appropriate. In any event, if the moving party’s position is accepted, there can be no unjust enrichment of the plaintiff.

[39] In conclusion, APP states there can be no genuine issue requiring a trial and if the court is inclined to use its Rule 20 fact-finding powers the only inference that can be drawn is that Amonite received all the compensation to which she was legally entitled.

Amonite (The Responding Party)

[40] Amonite argues that she is entitled to the benefits of the 2008 Amonite Agreement. Surely, she says, considering the circumstances here, there must be a triable issue regarding whether APP is the designated entity mentioned in the AJAC IOC and the SPC described as purchaser therein. This May 2009 sale is not a new deal at all, but simply the 2008 transaction refreshed and re-packaged. APP should not escape the legal obligations of the earlier agreement, particularly considering AJAC demanded the new employment agreement be negotiated.

[41] Amonite points out that the 2008 Amonite Agreement was signed by both a trustee of AJAC and the CEO of Plasman. There was no requirement of approval by the board of directors of APP, just as the board never approved either of Wiskel’s agreements in 2008 and 2009.

[42] It is argued that the actions of Amonite from 2009 to 2011 are of little value to the analysis to be embarked upon in this motion. The legality of Amonite’s employment contract cannot be affected by a lack of demands or a failure to disclose the agreement.

[43] Amonite maintains that throughout she felt her 2008 employment agreement was in place. She states she was intimidated by Bock and felt no need to press the issue until it was time for her to be paid on the sale to Insight Equity. Further, this issue should not be determined without the full disclosure that APP’s affidavit of documents and examination for discovery would provide.

[44] Finally, summary dismissal of this claim would not expedite the resolution of this claim and might allow for inconsistent verdicts. The plaintiff is entitled to forward its claim for equitable relief; there is still the counter claim to be tried, as well as the claim by Amonite against the co-defendant Plasman.

The Law

[45] The relevant portions of Rule 20 of the Rules of Civil Procedure are set out below:

20.04

(2) The court shall grant summary judgment if,

(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or

(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment

(2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence

2. Evaluating the credibility of a deponent

3. Drawing any reasonable inference from the evidence.

(2.2) A judge may, for the purposes of exercising any of the powers set out in subrule (2.1), order that oral evidence be presented by one or more parties, with or without time limits on its presentation.

[46] In its January 23, 2014 decision in Hryniak v. Mauldin, 2014 SCC 7, the Supreme Court of Canada provided the latest direction to judges hearing motions for summary judgment.

[47] At paragraph 49 Karakatsanis J. discussed the determination of “a genuine issue requiring a trial”:

There will be no genuine issue requiring trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[48] The fundamental concern, then, is can the motions judge reach a “fair and just determination” of the merits? The court went on to say that “the standard of fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts to apply the relevant legal principles so as to resolve the dispute” (Hryniak, para. 50).

[49] The power available under rules 20.04(2.1) and (2.2) are presumptively available (Hryniak, para. 67).

[50] The motion judge must engage in a comparison between the advantages of proceeding by way of summary judgment versus proceeding by way of trial. Such a comparison may include an examination of the relative cost and speed of each medium, as well as the evidence that is to be presented and the opportunity afforded by each medium to properly examine it. The court noted that, “when the use of the new powers would enable a judge to fairly and justly adjudicate a claim, it will generally not be against the interest of justice to do so” (Hryniak, para. 59). However, the inquiry must go further, and must also consider the consequences of the motion in the context of the litigation as a whole.

[51] The court stated that:

1. The judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-findings powers.

a. There will be no genuine issue requiring trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure.

2. If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the new powers under rules 20.04(2.1) and (2.2).

a. She may, at her discretion, use those powers unless it is against the interest of justice to do so. It will not be against the interest of justice if use of the powers will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole. (Hryniak, para. 66).

Application to the Facts

[52] The resolution of this motion for summary judgment hinges on whether I believe that at this stage I can determine fairly and justly the issue of the plaintiff’s reliance on the 2008 Amonite Agreement. Can I find that by late 2008 or perhaps January 5, 2009, that contract had expired or was rescinded by the failure of the transaction to close, or the change in ownership of APP leading to the fresh agreements of May 2009?

[53] I am convinced that if this motion is to succeed, the conduct of Amonite from 2009 to 2011 cannot assist the moving party. The review at this time must be narrowly focused on the legal relevance of the 2008 Amonite Agreement.

[54] The 2008 Amonite Agreement was a complete contract of employment providing significant benefits to Amonite. It required no further negotiation or clarification. It came into effect upon the sale of Plasman to AJAC or its designated entity. In my view, there is a genuine triable issue as to whether APP was that designated entity as of May 10, 2009.

[55] It seems clear to me that APP as incorporated by Georgiou in March 2008 with the assistance of Friedman was that “designated entity”. The effect of the subsequent ownership transfer, after the arrest of Georgiou, and the re-packaging of the agreements in May 2009 cloud the enforceability of Amonite’s 2008 contract.

[56] Paul Echenberg, the Chairman of the Board of Plasman on its sale to APP, provided an affidavit in this proceeding. He states that Georgiou told him that Bock would honour the 2008 Amonite Agreement and the employment contracts of other key employees. Georgiou advised him that Bock had always been his main financial backer. Further, Echenberg states that Bock told him he was involved from “day one” and was happy to take over the deal and would honour and complete the employment contracts previously negotiated.

[57] Bock denies this conversation ever took place.

[58] It is the evidence of the CEO, Wiskel, that Georgiou continued to consider the 2008 contracts binding on APP.

[59] In examining the test directed by Hryniak, having found a genuine issue requiring a trial, I must move to determine if the powers granted by rule 20.04(2.1) and (2.2) allow me to resolve this issue on the record before me.

[60] I am concerned here about the absence of APP’s affidavit of documents, about the effect of the refusals at the cross-examination of Bock and about the lack of fulsome examinations for discovery. I am not confident that I can make the necessary findings of fact on the record as I have it now (Hryniak, para. 50)

[61] If I were to grant this motion, there is the potential of an outstanding equitable claim for unjust enrichment by this plaintiff and the necessary determination of the counterclaim of APP together with the trial of the claims against the defendant Plasman.

[62] This motion does little to provide a proportionate, more expeditious and less expensive means to resolve this litigation. Those subsequent proceedings after further disclosure and examinations might lead to inconsistent findings of fact and an inconsistent judgment.

Conclusion

[63] As a result, having found a genuine issue requiring a trial which I cannot resolve, this motion by APP is dismissed.

[64] On the issue of costs, if not resolved by the parties, I will receive the written submissions of Amonite within 30 days of the release of these reasons, the submissions of APP within 20 days thereafter, with reply, if any, within 10 days following. All submissions should be directed to me in Windsor and no submission should exceed five type-written pages. If I have no cost submissions within 30 days of the release of these reasons, there will be no order as to costs.

Original signed by “Bruce Thomas”

Bruce Thomas

Justice

Released: March 21, 2014

COURT FILE NO.: CV-12-18820

DATE: 20140321

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Kimberley Amonite

Plaintiff

– and –

A.P. Plasman Corporation and APP Capital Inc.

Defendants

decision on summary judgment motion

Thomas J.

Released: March 21, 2014