Court File and Parties

COURT FILE NO.: CV-11-433830

DATE: 20140331

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: REXEL CANADA ELECTRICAL INC., Plaintiff

AND:

TRON ELECTRIC INC., TRON INC., TRON ELECTRIC (1997) INC., GIUSEPPE CERASUOLO, ANNA CERASUOLO, and RAFFAELE CERASUOLO, Defendants

BEFORE: D.L. Corbett J.

COUNSEL:
R. Drake and B. Bilimoria, for the Plaintiff

C. Lu and R. Moubarak, for the Defendants

HEARD: March 28, 2014

ENDORSEMENT

[1] This is a plaintiff’s motion for summary judgment for breach of contract and breach of trust under the Construction Lien Act.

[2] Rexel delivered electrical equipment to the Tron companies, with supplies being delivered to Tron’s premises rather than to specific construction sites.

[3] There are three issues in this case:

(a) Tron does not dispute receiving goods from Rexel for which it has not paid. It does dispute the amount.

(b) Tron argues that the contracting party is Tron Electric Inc., the company to which Rexel addressed its invoices. Tron argues that the court ought not pierce the corporate veil to attribute liability to other Tron companies.

(c) The defendants dispute the trust claim. They say that Rexel has not shown receipt of funds by any of the defendants and thus that there are no funds on which a trust has been imprinted. There is no evidence that funds were distributed to any of the individual defendants, let alone that funds were distributed in breach of trust.

[4] I am satisfied that judgment ought to be granted in Rexel’s favour on the first two issues. On the third issue, I conclude that there ought to be a chance for further production of materials from the defendants and a cross-examination.

Quantum of the Claim

[5] Rexel has provided invoices and account statements for its claim of $150,950.16. The defendants have provided no documents casting that amount in doubt. Mr Cerasuolo’s “feeling” – that the outstanding balance should be lower – is not entitled to any weight. The parties have to “put their best foot forward” on a motion for summary judgment, and the court is entitled to assume that it has all the evidence that would be available at trial. Rexel’s documents are sufficient to establish the account balance, and in the absence of any probative evidence to the contrary, I accept it.

[6] There will be judgment for Rexel for $150,950.16, plus interest.

Corporate Defendants

[7] The defendant corporations are iterations of the same business, a family-run electrical contractor, started by the parents of Giuseppe and Raffaele Cerasuolo.

[8] It is not clear which company ordered and used the goods purchased from Rexel. This lack of clarity lies entirely at the feet of the defendants: they know which company ordered the goods. They know which company used the goods in its construction projects. And if some of the supplies have remained in inventory, the defendants know where that inventory is located and which corporate defendant controls it.

[9] I do not suggest there has been any chicanery here among corporate alter egos. It seems likely, on the record before me, that different corporate defendants have been active at different times. Giuseppe takes the position that the contracting defendant is Tron Electric Inc. The alacrity with which he gives this “concession” is, no doubt, connected to the fact that this company ceased operations back around 2003 when the brothers Cerasuolo had a falling out. All of the supplies delivered by Rexel that are the subject matter of this proceeding were delivered after 2003, and so they were not likely delivered to a dormant Tron company.

[10] It is within the defendants’ knowledge as to which corporate defendant has had the benefit of the supply of Rexel’s goods. Mr Cerasuolo’s claim that Tron Electric Inc. is the correct defendant, even though it has been inactive for a decade, is a sufficient basis to conclude that the defendants are deliberately misdirecting liability among themselves. I conclude that, for the purpose of the supply contracts at issue in this proceeding, the corporate defendants are alter egos of each other and have acted as a single business. They are all, therefore, jointly and severally liable for Rexel’s claim.

Breach of Trust

[11] The parties advise that they intend to consent to discontinue as against Anna Cerasuolo.

[12] Giuseppe Cerasuolo says in his evidence that his brother, Raffaele, has not been active in the family business since the two of them had a falling-out in around 2003. Rexel says that on the basis of the “best foot forward” principle, I should draw an adverse inference against Raffaele, because he did not provide an affidavit himself.

[13] Rexel’s evidence is that all its material dealings with the Tron companies have been with Giuseppe Cerasuolo. Rexel has no evidence that Raffaele has been active in the business since 2003. On the strength of Giuseppe’s evidence, and in the absence of any evidence to the contrary, I am not prepared to draw an adverse inference against Raffaele.

[14] It is clear that Giuseppe is the operating mind of the Tron companies, and was the person with whom Rexel dealt in respect to its outstanding account. The question is whether the Tron companies received funds impressed with a trust in favour of suppliers pursuant to the Construction Lien Act, and whether these funds were distributed in contravention of the trust provisions of the Act. If there was a breach of trust, Giuseppe Cerasuolo will be liable for it.

[15] I agree with the defendants that it is for Rexel to show that there are trust funds, and that those funds have been disbursed in breach. I agree with Rexel that the information relevant to establishing these propositions will be in the possession of the defendants and has not been produced.

[16] I also agree that Mr Cerasuolo failed to attend for cross examinations in accordance with the schedule established by Low J. On the other hand, there is evidence that this failure was inadvertent and that Mr Cerasuolo was prepared to attend after the deadline but before return of the motion. The court will draw an adverse inference where a defendant obstructs the fact-finding process or fails to discharge an onus he bears in his own evidence. However, the court will not usually do so on the basis of one failed attempt to cross-examine.

[17] This is a close call, given the paucity of information provided relevant to Mr Cerasuolo’s trust obligations. However, I am prepared to give him another chance to discharge his obligations as a litigant before drawing an adverse inference of breach of trust.

[18] Mr Cerasuolo shall provide a list of documents, and copies of those documents, relevant to the breach of trust issues by April 30, 2014, including:

(a) Financial statements for all operating Tron companies during the period of the subject invoices;

(b) A list of all construction projects undertaken by any of the Tron companies during the period of the subject invoices, including the name(s) of all persons with whom Tron contracted for the supply of electrical services and supplies, the name(s) of the owners of the projects to which these services and supplies were delivered, and the municipal addresses of these projects;

(c) Financial documents from which it may be determined (i) how much any of the Tron companies was paid for supplies and/or services on the projects described in (b) and (ii) how funds received by or on behalf of any of the Tron companies in connection with the projects described in (b) were disbursed.

[19] This disclosure list is not exhaustive. If Rexel seeks additional disclosure prior to cross examining Mr Cerasuolo, it shall provide a list of what it seeks by April 7, 2014. Mr Cerasuolo shall provide the requested disclosure by April 30, 2014, or, if he objects to any of the requested disclosure, he shall state the reason(s) for his objection(s), in writing to Rexel, by April 30, 2014.

[20] By April 30, 2014, the parties shall agree to a date for cross examination of Mr Cerasuolo, to be conducted by May 16, 2014.

[21] If the parties cannot agree on a disclosure issue or on the date for cross examination, they shall arrange a conference call with me for directions, to be conducted on May 2, 2014, at 9:30 am. Arrangements for this call shall be made by Rexel’s counsel and confirmed with my assistant.

[22] The balance of this motion is adjourned to a date in June 2014 to be fixed with the motions office, to be added to my existing list for an estimated half an hour on any day I am scheduled to be sitting. Rexel’s counsel shall make the necessary arrangements with the motions office after consulting with defendants’ counsel on available dates. Rexel’s counsel will need to confirm the motion in the ordinary course, so that the matter appears on my list and the requisite materials are placed before me in advance of the motion.

[23] The parties are to bear in mind the principles of proportionality that govern all civil proceedings, and should expect a sharp costs endorsement in response to any unreasonable conduct in implementing these terms.

[24] I have taken a different approach to the question of piercing the corporate veil as among the corporate defendants, and in respect to Mr Cerasuolo’s liability for breach of trust. The factual and legal situations before me are sufficiently different to justify the different approaches. There is evidence that the corporate defendants have held themselves out as continuations of the same business over the past 35 years. The functional names of the businesses are all “Tron” and connote that relationship. And the directing mind, Mr Cerasuolo, has taken active steps to confuse the roles of the companies in his defence of this matter, by urging the court to find liability on the part of a long-inactive Tron company while failing to disclose which Tron company had the benefit of the supplies delivered by Rexel.

[25] The evidence shows that Mr Cerasuolo controls Tron, and would have known about and acquiesced in any breach of trust. But there is, as yet, no evidence of receipt of trust funds or disbursal of those funds in breach of trust, and, as yet, an insufficient basis to find such facts on by adverse inference.

[26] Rexel is entitled to its costs to date as against the corporate defendants. If those costs cannot be agreed then Rexel shall provide its costs submissions in writing by April 9, 2014. The defendants shall provide responding submissions by April 16, 2014. There shall be no reply or oral costs submissions unless I subsequently direct otherwise.

D.L. Corbett J.

Date: March 31, 2014