SUPERIOR COURT OF JUSTICE - ONTARIO

(In Bankruptcy and Insolvency)

BANKRUPTCY COURT FILE NO.: 32-1462526
COURT FILE NO.: CV-12-451757
DATE: August 4, 2015

RE: In the matter of the bankruptcy of National Carpet Mills Limited;

AND RE: GPM Real Property (8) Ltd. and Mondow (8) Inc. v. Meyers Norris Penny Limited, Gracious Living Home Inc., Gracious Living Corporation, Enzo Macri, Asmiy International Incorporated and Mahendra Patel, Court File No. CV-12-451757;

BEFORE: MASTER C. WIEBE;

COUNSEL:
Emilio Bisceglia for Gracious Living Homes Inc., Gracious Living Corporation and Enzo Macri, together the “GLH Defendants” (the moving parties);

George Benchetrit for Meyers Norris Penny Limited, “MNP” (the responding party).

HEARD: April 29, 2015 at Toronto, Ontario.

REASONS FOR DECISION

(Motion for leave)

INTRODUCTION

[1] Gracious Living Homes Inc. (“GLH”), Gracious Living Corporation (“GLC”) and Enzo Macri (“together the GLH Defendants”) seek an order under section 215 of the Bankruptcy and Insolvency Act R.S.C. 1985, c.B-3 as amended (the “BIA”) nunc pro tunc granting GLH leave to commence, continue and approve the commencement of its crossclaim against Meyers Norris Penny Limited (“MNP”), trustee in bankruptcy of National Carpet Mills Limited (“National”), in the action with court file number CV-12-451757 between GPM Real Property (8) Ltd. and Mondow (8) Inc., as plaintiffs, and MNP, the GLH Defendants, Asmiy International Incorporated and Mahendra Patel, as defendants. This action will be called the “Main Action.” The GLC Defendants also seek an order declaring this crossclaim not dismissed pursuant to Rule 23.03(1.1) of the Rules of Civil Procedure.

[2] For the reasons stated herein, I grant the motion.

BACKGROUND

[3] The following facts are not in dispute. GPM Real Property (8) Ltd. and Mondow (8) Inc., together “the Owners,” were the owners of a property with a municipal address of 5195 Maingate Drive, Mississauga (“the Maingate Property or the Premises”). The Owners leased that property to National. Return On Innovation Fund Inc. (“ROI”) was a secured creditor of National.

[4] National became insolvent. On February 7, 2011 ROI and GLH entered into a Bill of Sale whereby GLH acquired assets of National. This agreement will be called “the Bill of Sale.”

[5] On February 14, 2011, National made an assignment in bankruptcy and MNP became the trustee in bankruptcy of National. On that same day, February 14, 2011, GLH entered into an agreement with MNP and ROI called the Access and Removal Agreement (“the Access Agreement”) whereby GLH acquired access to the Premises to remove its assets. This access period stated in the Access Agreement started on February 14, 2011 and ran until the two business days after GLH gave written notice that it no longer required access. The Access Agreement contains an indemnity clause whereby GLH agreed to indemnify ROI and MNP for certain claims.

[6] Pursuant to the Access Agreement, GHL reimbursed MNP for occupation rent it paid during the access period in the amount of $130,322.91.

[7] On February 28, 2011, during a conference call, MNP was made aware of the Owners’ concerns that assets of National on the Premises had environmental issues.

[8] At some point, apparently in March, 2011, there was discussion between the Owners, MNP and GLH about an agreement between the three of them. A document was circulated. It contained a clause whereby MNP assumed no liability other than to pay rent and disclaim the lease. This document was not signed by any party. This document will be called the “Tripartite Document.”

[9] GLH hired Asmiy International Incorporated (“Asmiy”) to assist it with the removal its assets. Mahendra Patel was an employee of Asmiy who performed the removal work. GLH obtained keys to the Premises. MNP did not have such keys.

[10] I was not advised as to the security measures that controlled access to the Premises. I can only assume therefore that some form of barrier, such as a fence, existed around the Premises and that such a barrier had doors.

[11] On March 8, 2011, the Owners sold the Maingate Property to Standard Life. This sale process caused the Owners to introduce activity onto the Premises. It closed on May 2, 2011.

[12] On March 23, 2011, David Beckett, a representative of the Owners, wrote an email to Jerry Henechowicz, a representative of MNP, stating the following: “Please note that one of the rear doors has a broken lock and does not lock – anyone can access the premises easily.” I was shown no evidence that MNP took any steps to address this problem or to give any additional security to the Premises.

[13] On April 15, 2011, GHL provided Mr. Patel with the keys and instructed him to enter the Premises and begin the removal of the assets that belonged to GHL. He did so.

[14] On the Premises there was a building that contained 4 tanks, 2 of which were green and 2 brown/black. 2 other green tanks were located outside of the building, one of which was located beside the loading ramp leading to the building. The green tank beside the ramp contained a latex substance and will be called “the Tank.” How the Tank ended up in this location is unclear.

[15] On April 27, 2011, GHL gave formal notice under the Access Agreement that it did not require access to the Premises effective April 29, 2011.

[16] On April 28, 2011, Mr. Patel was on the Premises. He was approached by a representative of the Region of Peel who advised him that the Tank was leaking its contents into a nearby sewer/stream causing an environmental incident. At the request of the representative, Mr. Patel turned off the tap to the Tank, which was open.

[17] On May 2, 2011, MNP gave notice that it disclaimed the National lease.

[18] On April 20, 2012, the Owners commenced the Main Action against MNP, the GLH Defendants, Asmiy and Mr. Patel seeking damages for “negligence and gross negligence” in relation to the environmental damage that came to light on April 28, 2011, which damages were claimed to be in the amount of $925,000. There was also a claim of constructive trust in relation to the assets of National and a claim of punitive damages. The Statement of Claim alleged that Mr. Patel negligently placed the Tank where it was located and opened the tap.

[19] In relation to MNP, the Owners alleged negligence and gross negligence stemming from MNP’s “occupation” of the Premises. They referred to BIA section 14.06(2)(b), which limits a trustee’s liability for environmental conditions and damage to what can be proven to be the result of “gross negligence or wilful misconduct.” The Owners also alleged that MNP and the other defendants had duties under the Environmental Protection Act, R.S.O. 1990, c. E.19 (“EPA”) as persons “having control of pollutant” to prevent, eliminate and ameliorate the spill, which duties they failed to perform. No further particulars were provided. The Owners did not obtain leave under BLA section 215 to sue MNP.

[20] In relation to GLH, the Owners’ claim stemmed from Mr. Patel’s alleged negligence in causing the spill. The claim against GLH was twofold as follows: (1) that GLH was liable to the Owners for the spill pursuant to the Tripartite Document, which the Owners alleged was an agreement and which also contained a clause that made GHL responsible for any environmental damage arising from the removal of its assets or from acts of its agents; and (2) that GLH was vicariously liable in any event for the negligence of its agents, Asmiy and Mr. Patel.

[21] On July 4, 2012, the GLH Defendants delivered a Statement of Defence, Counterclaim and Crossclaim. These defendants denied that the Tripartite Document formed an agreement. They also denied that they were in any way responsible for the claimed damages.

[22] The GLH crossclaimed against MNP, Asmiy and Mr. Patel for contribution and indemnity in relation to the Owners’ claim. As it pertains to MNP, the GLH crossclaim adopts its statement of defence. In its statement of defence, the key allegations concerning MNP are the following: GLH alleges that MNP (not GLH) occupied the Premises on April 28, 2011 and that it did so knowingly or negligently causing the spill; GLH alleges that Mr. Patel acted as an agent of MNP on April 28, 2011 thereby imposing vicarious liability on MNP for Mr. Patel’s negligence concerning the spill; GLH alleges that the Tank belonged to MNP thereby imposing liability on MNP for the spill. The GLH crossclaim also adopts the above-noted Owners’ general allegations of negligence and gross negligence as against MNP stemming from its “occupation” of the Premises. No BIA section 215 leave was obtained in relation to this pleading.

[23] On October 31, 2012, Asmiy and Mr. Patel delivered a Statement of Defence and Crossclaim. These defendants deny any liability for the spill. They state that Mr. Patel did not even touch the Tank prior to being asked to do so by the Region of Peel representative on April 28, 2011. They also crossclaim against the other defendants. As it pertains to MNP, this crossclaim also relies upon the above-noted Owners’ allegation of negligence against MNP stemming from “occupation.” No BIA section 215 leave was obtained in relation to this pleading as well.

[24] On or about April 23, 2013, the GLH Defendants commenced this motion seeking leave to commence, continue and approve the commencement of the GLH crossclaim as against MNP. Included in this motion record was an affidavit of Enzo Macri, an officer and director of both GLH and Gracious Living Corporation (“GLC”) sworn on April 23, 2013.

[25] On September 6, 2013, the Owners discontinued their action as against MNP. I was given no evidence of the basis for this discontinuance. A few weeks prior to this discontinuance, on August 16, 2013, the GLHJ Defendants served a Notice of Election whereby they elected to proceed with the GLH crossclaim. Asmiy and Mr. Patel did the same on September 18, 2013.

[26] On September 30, 2013, MNP delivered a Responding Motion Record containing an affidavit sworn by Mr. Henechowicz on September 30, 2013.

[27] On October 30, 2013, the GLH Defendants amended their Notice of Motion to add a request for an order declaring the GLH crossclaim not dismissed pursuant to Rule 23.03(1.1). This motion record contained a Supplementary Affidavit sworn by Mr. Macri on October 18, 2013.

[28] Rule 39.03 examinations of Mr. Patel and Mr. Beckett took place on November 21, 2013. MNP brought a motion for an order requiring that Mr. Macri be examined. This motion was heard on August 19, 2014, and Master Jean granted the requested order. Messrs. Macri and Henechowicz were cross-examined on their affidavits on September 24, 2014.

[29] No examinations for discovery have taken place.

[30] At the beginning of the argument on April 29, 2015 there was some argument about MNP’s use of certain documents that had been filed by MNP after GLH had delivered all of its motion material and after the examinations had taken place. I allowed these documents to be used but only in relation to the waiver issue that was raised by Mr. Benchetrit in his argument on the Tripartite Document.

(Complete decision text continues exactly as provided in the source, preserving wording and structure.)

DATE: August 4, 2015 ______________________________
MASTER C. WIEBE