Court File and Parties

Barrie Court File No.: CV-13-0356 Date: 20170321 Superior Court of Justice - Ontario

Re: 1758704 Ontario Inc. and 1191305 Ontario Inc., Plaintiffs And: Carl Priest, Defendant And Re: 1737161 Ontario Limited, Applicant And: 1758704 Ontario Inc. and 1191305 Ontario Inc., Respondents

Before: The Hon. Mr. Justice G.M. Mulligan

Counsel: K. McKenzie, Counsel for the Plaintiffs/Respondents, 1758704 Ontario Inc. and 1191305 Ontario Inc.

Heard: February 28, 2017

Endorsement

Introduction

[1] By order of Justice Healey on April 30, 2014, these two actions were consolidated; 17587004 Ontario Inc. and 1191305 Ontario Inc. became the plaintiffs (the plaintiffs). 1737161 Ontario Limited and Carl Priest became the defendants (the defendants) in this consolidated action.

[2] The consolidated Statement of Claim was issued on July 15, 2016, by the plaintiffs and then served on their counsel of record for the two actions. The defendants, not having filed a Statement of Defence, the plaintiffs requested noting in default on August 10, 2016. The registrar’s noting the defendants in default, proceeded as a result of Justice Vallee’s Endorsement of August 30, 2016 which provided, “I am satisfied that the amended Statement of Defence was served. Carl Priest and 1737161 Ontario Limited having failed to serve and file a Statement of Defence, may be noted in default.”

[3] The plaintiffs now seek default judgment against both defendants: 1737161 Ontario Limited and Carl Priest. In support of its motion for judgment, the plaintiffs filed the affidavit of Martin Donkers, director of both plaintiff corporations. In support of his affidavit were 30 exhibits covering two volumes, setting out the basis of, and the calculations for, various heads of damages sought by the plaintiffs.

[4] In addition, Mr. Donkers filed an updated affidavit providing further details of his calculations for damages, together with further exhibits.

[5] Before reviewing the particulars of the damages sought by the plaintiffs, a brief review of the litigation history would assist. The relationship between these parties started out as an Asset Purchase Agreement whereby the plaintiffs sold certain assets to 1737161 Ontario Limited in May of 2010. A consideration for the sale was a promissory note as collaterally secured by a General Security Agreement, covering the assets of the business. A promissory note for $558,740 was signed by 1737161 Ontario Limited and Carl Priest, personally. Para. 3.02 provides that the note beared interest at the rate of seven percent per annum.

[6] Payments were made on the promissory note, but default occurred on November 18, 2012. At that point in time the balance owing on the promissory note was $120,645.

[7] Part of the asset purchase and sale included equipment leases assumed by the purchasers for which the plaintiffs continued to be responsible for. The plaintiffs were called upon to make these payments when the defendants defaulted on their obligations to make these payments to the leasing companies.

[8] The plaintiffs then commenced their original action for damages and attempted to seize assets pursuant to the General Security Agreement in order to mitigate its damages.

[9] The defendant, 1737161 Ontario Limited obtained an injunction. As part of the injunction application both 1737161 and Carl Priest gave an undertaking to pay damages.

[10] As part of the application for the injunction, Carl Priest provided an affidavit in support, sworn on January 13, 2013. In support of that application for injunction he stated that he was the owner and director of 1737161 Ontario Limited. The affidavit further stated at paragraph 15:

The applicant [1737161 Ontario Limited] and I hereby undertake to pay any award this honourable court may make respecting costs or damages should it determine that this injunction should not have been granted.

The Injunction Set Aside

[11] By order dated July 4, 2013, Justice MacKinnon dissolved and set aside the injunction finding that it was “unjustified”. As part of that order, 1737161 and Carl Priest were required to advise the plaintiffs of the location of certain assets. Finally, Justice MacKinnon fixed costs against 1737161 Ontario Limited in the amount of $16,000.

Carl Priest’s Undertaking Re: Damages

[12] I am satisfied that on the record before me, the order of MacKinnon J. removing the injunction, constitutes a judicial determination that the injunction should not have been granted. I therefore find that Mr. Priest and 1737161 Ontario Limited are liable to pay the damages flowing from the injunction which prevented the plaintiffs from mitigating their damages by exercising their rights to seize and sell the assets in a timely manner. As previously noted, Mr. Priest is also personally responsible on the promissory note.

[13] I now turn to the damages claimed by the plaintiffs. As appears from paragraph 23 of Mr. Donkers affidavit of February 28, 2017, the claim is for $459,254.66 together with per diem interest. That claim can be broken down as follows:

(i) Balance owing on the promissory note plus interest to date - $161,943.65 (ii) Balance owing for excavator payments and interest - 189,604.49 (iii) Balance owing for truck and trailer plus interest - 50,814.84 (iv) Personal expenses claimed by Mr. Donkers - 73,478.87 (v) Time spent by Mr. Donkers - 17,436.00 Total - $493,277.85

[14] Against this amount, the plaintiffs credit the amount recovered from the sale of assets, less the expenses related to the seizure and sale of these assets. This can be broken down as follows:

(i) Recovery - $270,305.84 (ii) Expenses - $236,082.65 (iii) Net Credit to the defendants - $34,223.19

[15] The plaintiffs’ total claim is therefore calculated based on total expenses, less recovery, for a grand total of $459,254.66 as follows:

(i) Total damages - $493,277.85 (ii) Less Credit - 34,223.19 (iii) Total Claim - $459,254.66

Heads of Damages

[16] I will now deal with each of these categories of damages individually.

Promissory Note

[17] A promissory note was executed by 1737161 Ontario Limited and Carl Priest, personally, for $558,740. The promissory note stipulated that the rate of interest on the note was seven percent per annum. Payments were made on the promissory note and on default the principle balance was $120,645. Exhibit ‘B’ of Mr. Donkers supplementary affidavit sets out, by way of schedule, the principle and interest from default until the date of the hearing. I am satisfied that the amount claimed of $161,943.65 is due and owing to the date of the hearing, and further, that this amount attracts interest at the rate of seven percent per annum from the date of judgment.

John Deere Excavator/Loader

[18] These pieces of equipment were assumed by the defendants as purchasers under the Asset Purchase Agreement but the plaintiffs remained responsible under the original contract with John Deere. Payments were not made and the assets were seized and sold by John Deere. By way of Exhibit ‘B’ to Mr. Donkers current affidavit, the plaintiffs were required to pay ongoing lease payments to John Deere during the currency of the lease and a balance after seizure by John Deere after credits by John Deere were applied. In his updated affidavit, Mr. Donkers claims that the defendants’ obligation to pay these lease payments is $141,440.81. The plaintiffs also claim interest of seven percent pursuant to the Asset Purchase Agreement. The total claim for principle and interest to date is $189,804.49. I am satisfied that the plaintiffs have proven their claim for principle and interest and are also entitled to post-judgment interest at the rate of seven percent on this amount.

Other Leased Equipment

[19] The plaintiff also claims interest with respect to leases on an International truck and Universal trailer. The plaintiffs remained responsible for these leased items. Payments were not made by the defendants and the plaintiffs were required to pay them. The amount claimed by the plaintiff, as set out in Exhibit ‘A’ of Mr. Donkers affidavit, is $38,070.99 plus interest for the period in question, bringing the total to $50,814.84 for principle plus interest at the rate of seven percent. I am satisfied that the plaintiffs have proven the claim for the principle amount plus interest at the rate of seven percent, pursuant to the Asset Purchase Agreement. The plaintiff is also entitled to post-judgment interest at the rate of seven percent on this item.

Personal Expenses

[20] The plaintiff also claims the recovery of personal expenses of $73,478.87. As Mr. Donkers states in his affidavit at paragraphs 20 and 21:

My investment advisor, Raymond Leslie, E.P.C. of Manulife Investments, has calculated the amount of money lost due to us having to cash in our retirement savings and the total is $46,008, not including future growth.

My wife and I also had to fund the cost of repossession, the interest on the leases we assumed, and selling the seized assets by way of credit card. The total amount of interest came to $27,398.87.

[21] There were no supporting documents to support these figures. There were no credit card invoices, no correspondence from their investment advisor, and no RRSP statements. In my view, these are allegations that are unsupported by any evidence.

[22] The plaintiffs entered into an Asset Purchase Agreement and a promissory note, providing for interest at seven percent. I have allowed interest to the plaintiffs with respect to the claims. I see no basis for providing any additional relief for this head of damage.

Time Spent Compensation

[23] The plaintiffs claim compensation for time spent. Paragraph 22 provides:

This is my livelihood and for which I bill out a competitive rate and my time spent on the logistics of seizing the equipment, getting appraisals, locating missing equipment, dealing with the Ministry of the Environment, organizing the auction, selling the equipment, creating Bills of Sale, et cetera, comes to $17,436.

[24] Once again, these are allegations without any supporting documentation. I see no basis for it in the Asset Purchase Agreement. This head of damage, unsupported, simply reflects the costs of doing business when assets are sold on the strength of a promissory note and a General Security Agreement.

Credit to the Defendants

[25] The plaintiffs incurred substantial expenses for storage, recovery, and sale of equipment. According to the affidavit of Mr. Donkers, the expenses totalled $236,082.65. The total recovered was $270,305.84. Particulars are provided in paragraph 37 of Mr. Donkers affidavit of December 7, 2016. I am satisfied in reviewing the affidavit and exhibits that the credit to the defendants is fair and accurate under the circumstances. As an aside, I note that the largest expense incurred by the plaintiffs was an equipment storage fee to a company called “Call Service Towing”. This company stored assets that were seized. The plaintiffs’ ability to sell these items once seized was forestalled because of the injunction. During that period of time it is obvious that the plaintiffs were unable to mitigate their damages for storage during the currency of the injunction.

[26] Having considered the various heads of damage claimed by the plaintiffs, I award damages to the plaintiffs for $368,339.79 after giving credit to the defendants for the surplus recovery on the sale as follows:

(i) $161,943.65 - promissory note plus interest (ii) $189,804.49 - excavator cost plus interest (iii) $50,814.84 - truck equipment plus interest (iv) ($34,223.19) – minus recovery credit Total – $368,339.79

[27] I am satisfied that the said sum bears interest at the rate of seven percent per annum, pursuant to paragraph 3.02 of the Asset Purchase Agreement and paragraph one of the promissory note.

Costs

[28] The plaintiffs provided a costs outline seeking fees, disbursements and HST on a partial indemnity basis of $3440.85 plus disbursements of $880.88 for a total of $4321.73, plus a fee on attendance for the motion. The plaintiffs also provided their actual rate. I am satisfied that the plaintiffs, being successful on this motion, are entitled to partial indemnity costs for fees, disbursements and HST in the amount of $5,000 payable forthwith.

[29] The plaintiffs also seek recover of costs from an earlier motion whereby the parties agreed to settle the costs on the consolidated action motion. Paragraph 5 of that Agreement dated October 9, 2015, provided:

Costs of this motion shall be fixed at $10,000 and shall only be payable if the court determines that the applicant or Mr. Priest owe Mr. Donkers or any of his companies any money. Mr. Priest would be personally responsible for those costs. If no money is owing, Mr. Priest and the applicant shall have no entitlement to claim any costs of this motion.

[30] The plaintiffs in this motion having succeeded in an award against Carl Priest and 1737161 Ontario Limited, further costs are awarded to the plaintiffs herein, fixed in the amount of $10,000 as agreed, payable forthwith.

MULLIGAN J. Date: March 21, 2017