Court File and Parties
COURT FILE NO.: CV-17-5561-00 DATE: 2018 09 24
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
1316223 ONTARIO INC., o/c 1,000,000 COMIX Plaintiff
- and -
KOSTAS GIANCOULAS Defendant
COUNSEL: Ted Evangelidis, for the Plaintiff Daniel Camenzuli, for the Defendant
HEARD: June 11 and 18, 2018
REASONS FOR DECISION
Emery J.
[1] The Giancoulas brothers have been in the business of buying and selling comic books and comic book paraphernalia for over 25 years. They started the business together through a small company they owned themselves until 1998. The brothers shut that business down after they encountered tax trouble when they failed to remit GST to the government.
[2] Chris Giancoulas (“Chris”) and his brother Kostas restarted the business in 1998. This time around, they ran the business through 1316223 Ontario Inc. (“131”), operating under the name 1,000,000 Comix. All of the shares in this corporation are held by their aunt, Chrisanthi Stoikos, who is now 85 years old.
[3] Ms. Stoikos not only holds all shares in 131, she is also the sole officer and director of the corporation. Ms. Stoikos made a large shareholder loan to 131 shortly after its incorporation, advancing $350,000 to fund its operations. Between 2013 and 2017, Ms. Stoikos lent another $110,000 to the corporation, to bring the approximate total shareholder loan to $460,000. She raised this amount of money to lend to 131 by financing her own home through Home Trust.
[4] The Giancoulas brothers operated the business from a store located at 484 Yonge Street in Toronto, often for cash, and sold products online. They also sold products at trade shows. Unfortunately, the working relationship between the Giancoulas brothers broke down in 2017 when they could not agree on the direction the business should take. The store on Yonge Street ultimately closed in April 2017 when the lease expired and they could not find a new site for a brick and mortar location.
[5] Three truck/trailor loads representing the Inventory of the business was removed from the store after it closed. The three trailors of Inventory was stock piled in storage, subsequently set up at trade shows, and moved again to those places where each trailor was unloaded for a final time.
[6] 131 brings this action against Kostas for interlocutory orders to require him to return Inventory that belongs to 131 pending trial, and damages for the conversion of Inventory he has already sold or traded. Kostas has defended, taking the position that the apparent ownership of the business by 131 is a sham. Instead, he maintains that he is personally an owner of the business, and is therefore entitled to control the Inventory.
[7] There are two competing motions before the court, one brought by 131 and the other by Kostas. 131 seeks an order under Rule 44 to recover that part of the Inventory currently in the possession or control of Kostas. In the alternative, 131 seeks an order under Rule 45 for the preservation of the Inventory Kostas is storing at a property in Bolton where he resides with his parents, Fontine and Zisis Giancoulas. Kostas opposes both motions, taking the position that 131 has not met the test under either rule. Instead, he has brought a motion of his own for the court to make a mandatory order that 131 deliver the Inventory in its possession to him, or in the alternative to preserve that Inventory pending trial.
The property at issue
[8] Chris and Kostas have each filed extensive affidavit material describing the movement of Inventory and the purchase or sale of comic books and related paraphernalia that represents the bulk of that inventory. The affidavits also give a detailed description of the manner in which they operated the business. This evidence is given for the purpose of showing whether 131 has substantial grounds to claim it owns the Inventory or not, the nature of the business, and how funds earned by the business were disbursed in better times.
[9] 131 carried on its business of purchasing and reselling comic books and related products from the store in Toronto until 2017. 131 housed in excess of 50,000 individual items (comics and comic related paraphernalia) at the Yonge Street store at any given time, with thousands of items being sold and added to its stock on a weekly basis. All of the comics and comic related paraphernalia at the corporation’s store on Yonge Street were sold separately or in quantities, priced according to varying degrees of rarity.
[10] The plaintiff corporation never kept track of the comic books and comic related paraphernalia at its store, regardless of whether those items were part of the Inventory of the business or were products placed with 131 on consignment. Moreover, the business never kept a list of its sales. It relied totally on invoices to determine what comics and comic related paraphernalia it had in its possession at any given time.
[11] The business account was used like a personal bank account by Chris and Kostas, with no interference from Ms. Stoikos. In fact, both Chris and Kostas had unfettered access to the corporation’s operating account and both had debit cards for it.
[12] The corporation’s operating account paid the mortgages of Chris, Kostas, Zisis and Ms. Stoikos. The corporation also paid for Chris’ credit card debts, car insurance and his cellular telephone bill with Rogers.
[13] When the store closed on Yonge Street, the Inventory was loaded into three truck trailers. One of those trailers was taken to the home where Chris lives.
[14] Other Inventory in the second trailer was moved to the residence at 54 Esposito Drive in Bolton (the Bolton property) owned by Fotini and Zisis Giancoulas. Kostas resides with his parents Fontine and Zisis Giancoulas at the Bolton property.
[15] The Giancoulas brothers rented a storage unit at Public Storage Canadian Properties in Mississauga (the “Storage Unit”) into which they moved the Inventory from the third trailer.
[16] Kostas was listed as the tenant on the contract for the storage unit, and Chris was listed as the alternate contact. However, Chris was the only brother who had a key to the Storage Unit holding the Inventory.
[17] The Inventory stored at the Bolton property contained products that were generally in demand and easily sold at trade shows. Other products owned by different people and provided to 131 to sell on consignment (the “consignment Inventory”) was also stored at the Bolton property.
[18] 131 continued to sell Inventory online and through trade shows in order to service its debts after the Yonge Street store closed.
[19] The business showcased an array of Inventory at the Anime North Trade Show on May 26 to 28, 2017. After that trade show, Chris, Brandon Wood (an employee of the company), and Jason Rodriguez (a store regular that helped the company out from time to time at trade shows) packed up the Inventory into a 26 foot trailer that was later unloaded into the garage at the Bolton property.
[20] The Inventory was again showcased at the Niagara Falls, Con Trade Show in June, 2017. Chris describes how he and Kostas, Brandon Wood and John Butler–Caughie (another store regular who sometimes helped out at trade shows) packed up the Inventory after the trade show and unloaded approximately eight pallets of Inventory into the garage at the Bolton property. Chris believes that Kostas moved most, if not all of this Inventory from the garage into the basement of the Bolton property soon after.
[21] The Inventory showcased at the two trade shows included, but was not limited to, thousands of comic books and Certified Guarantee Comic books, clothing and apparel, graphic novels, statues, Hot Toys, Funko Pops, Magic: The Gathering binders, Pokémon and other toys.
[22] In late June 2017, Kostas terminated the rental contract for the Storage Unit and cut the lock to gain access. Kostas emptied the Storage Unit, moving the Inventory to which the plaintiff’s motion relates, as well as store fixtures, store supplies, paperwork and electronics belonging to the corporation to the Bolton property. He also removed certain consignment Inventory that was not the property of 131.
[23] By moving the contents stored in the Storage Unit, Kostas had possession and control of those items as well as the contents of the second trailor moved from the Yonge Street store into the Bolton property. Chris estimates that Kostas at that time held at least 50% of the Inventory that belonged to 131.
[24] After Kostas removed the Inventory from the Storage Unit, the corporation retained Mr. Evangelidis as counsel to seek the return of that Inventory to the corporation. Chris states in his affidavit that Kostas refused to return the Inventory despite the repeated requests by the corporation and its counsel. At first, Kostas claimed he did not have any of the property at issue. He later changed his position to claim that the items in his possession belong to him and not to 131.
Inventory had been purchased by 131
[25] Chris has provided evidence in his affidavit that the Inventory at issue was purchased by 131. He intends to establish through evidence that because 131 purchased substantial products from third parties, the Inventory is property that is truly owned by the plaintiff corporation.
[26] Chris has attached Excel spreadsheets prepared by Diamond Comics Distribution Inc., a supplier for the company between the years 1998 to 2015, to his affidavit. These spreadsheets from Diamond Comics show the details for invoices rendered in 2013 including the invoice number, invoice date, invoice amount and a description of the items purchased by 131.
[27] In addition to the spreadsheet containing invoice details from Diamond Comics, Chris has also attached a copy of invoices from three of the four company’s primary Inventory suppliers to his affidavit. The invoices from BioWorld, Grosner Distribution Inc. and Prince Wholesalers show invoices rendered to 131 for products sold to and purchased between 2015 and 2017.
[28] Chris acknowledges that 131 cannot provide a detailed Inventory list describing precisely what Inventory is in the possession of Kostas because of the nature of the business, as well as the sheer volume of product purchased and sold over the years. He also alleges that Kostas took certain company paperwork, documents and records relating to the Inventory that were in the Storage Unit. However, Chris emphatically states that all of the Inventory was invoiced to 131 and paid for by 131, and that at no time was any Inventory purchased directly by Kostas or himself.
[29] Excel spreadsheets prepared by Sideshow Collectables, a speciality manufacturer of movie, film, television and proprietary collectable figures, statues and other high end pieces, show the products sold to the plaintiff corporation between January 2016 and August 2017. This spreadsheet from Sideshow Collectables shows, among other things, the invoice date, invoice number, item purchased, and the description, quantity, unit price and freights costs charged to 131. Chris again states that this spreadsheet is evidence that 131 was the customer of Sideshow Collectables, and not Kostas or himself.
[30] Chris also makes reference to emails that he characterizes as evidence showing that Kostas is attempting to exchange certain items purchased by 131 in satisfaction of certain debts he owes to consignors who provided the corporation with product for resale. One such consignor has actually filed a complaint alleging theft with the police to investigate $15,000 worth of items placed with 1,000,000 Comixs on consignment in October 2016.
Kostas claims 131 is a façade
[31] Fundamental to the position Kostas is taking on these motions is his assertion that he and Chris are the true owners or the business, even though they are not named as officers or directors of the corporation. Ms. Stoikos was used as a legal façade by the Giancoulas brothers to avoid liability for HST owed by their previous company. Kostas maintains that Ms. Stoikos, who he describes as an 85 year old woman of Greek descent and who is not proficient in English, was never involved in the operation of the business. Her decision to commence this litigation is entirely motivated by Chris forcing her to do so, and Kostas alleges she has done so under duress.
[32] Money from the business has dripped through the hands of the Giancoulas brothers like water through fingers. Kostos states that he was forced to sell his family home in Nobleton. He states that he used the net proceeds to pay the corporation’s expenses and purchase comics and comic related paraphernalia. Kostas has given evidence that he has advanced between $145,000 and $157,000 to the business. He further acknowledges that Zisis and Ms. Stoikos have also loaned money to Chris and Kostas to keep the business afloat.
[33] Kostos admits that his decision to take the comics and comic related paraphernalia from the Storage Unit stems from his proprietary interest in them. He says he paid for those items from his personal account, and that he and Chris are the true owners of the corporation in any event.
Prior Litigation
[34] This action is not the first time that 131 has commenced litigation against Kostas for the return of Inventory. After the corporation discovered that Kostas had moved Inventory from the Storage Unit, an earlier action was commenced bearing the court file CV-17-4315-00. In that action, 131 requested substantially the same relief it is seeking in this action.
[35] In November, 2017 the corporation brought a motion in the first action for an order seeking recovery of the Inventory in the possession or control of Kostas. That motion was scheduled for hearing on December 7, 2017.
[36] Before Kostas delivered a defence to that action or any responding material to the motion, the parties resolved both the motion and the action at large. Formal minutes of settlement were executed. Those minutes included the following terms relevant to the motions now before this court:
(a) Kostas shall immediately provide the Inventory held in his possession of the company; (b) On behalf of the company, Chris shall make arrangements for the immediate pickup and delivery of the Inventory at the company’s expense; (c) Neither Chris nor Brandon Wood (Chris’ assistant) can be present at the time of pickup of the Inventory; (d) The pending Recovery Motion shall be dismissed without costs; (e) Following the pick-up of the Inventory, the company shall immediately serve and file a Notice of Discontinuance disposing of the Action; (f) On behalf of the company, Chris shall inspect the Inventory after pick-up, which should take no more than 30 days, to determine the extent of the Inventory and whether anything has been sold or disposed of by Kostas; (g) As a term of this settlement, both Kostas and the company agree that neither party, including Chris, can continue to use the business name “1,000,000 Comix” in the future; (h) To the extent the company is satisfied with the content of the Inventory returned, the parties shall exchange a Full and Final Mutual Release, which shall release all possible claims between the company, Kostas, Chris and their family members, spouses, etc., including Chrisanthi Stoikos and her husband, Vasillios Stoikos (the “Release”). If the company is not satisfied with the content of the Inventory returned, the Parties shall not be obligated to execute and exchange the Release.
[37] The parties arranged for movers to pick up the Inventory from Kostas at the Bolton property on December 15, 2017 under the minutes of settlement. Chris states in his affidavit that 131 complied with it’s obligatons under the settlement, which included making arrangements for the pick up of Inventory at the Bolton property. Chris further states in his affidavit that Kostas did not perform his part of the bargain. Although he was to have all Inventory in his possession moved into the garage for pick up, much remained in the home. Chris states that the movers left items like racking, coimiuc drawers and boxes having little value behind when they left, while Kostas claims he told them there were further items they would have to return to retrieve due to space limitations.
[38] Chris has expressed the view that the Inventory picked up by the movers from the Bolton property on December 15, 2017 is a fraction of the Inventory that was taken by Kostas from the Storage Unit in June 2017. The Inventory that was picked up from the Bolton property on December 15, 2017 does not remotely fill the 10’ by 30’ storage locker rented recently by the corporation to store the items picked up from the Bolton property. By comparison, the Inventory moved from the Yonge Street store to the Storage Unit in April 2017 was “so full of Inventory that it was barely possible to open the door without product falling out.”
[39] Chris inspected the Inventory obtained by the movers in accordance with the minutes of settlement. He concludes that the vast majority of the Inventory having value was not made available and is missing. From that inspection, Chris concluded that all of the Inventory taken by Kostas has been withheld or previously sold by Kostas while in his possession. Notably, hundreds of thousands of comics, Funko Pops, Hot Toys, Magic: The Gathering binders,sealed product, clothing and apparel, graphic novels and statues are missing. Chris swears that most of what was contained in the Inventory from the trade shows has not been returned.
[40] As a result, the corporation refused to sign the Release contemplated by the minutes of settlement the parties signed on December 7, 2017.
The allegation that Kostas is selling Inventory
[41] 131 takes the position that Kostas retained the corporations most viable Inventory instead of returning it pursuant to the minutes of settlement, and that he is in the process of attempting to sell that Inventory online. The plaintiff alleges that Kostas lists much of the Trade Show Inventory on the e-bay website, under the current e-bay USER ID name “scarecrowcollectables-1”, which was formerly “zigzag380”.
[42] Chris states that this account was originally set up in the name of his father Zisis Giancoulas, and that the e-bay user id for this account was originally created on June 20, 2017 under the name zisigiancoula0”. This username id was subsequently changed to “zigzag380”. On January 11, 2018 it was changed to “scarecrowcollectables-1”.
[43] Chris attributes the setting up of this e-bay account to Kostas entirely. Zisi is 85 years of age, and is not computer savvy. He does not have the ability to create, let alone operate or manage an e-bay account.
[44] The address listed on the e-bay account is the Bolton property that is owned by Zisi, and where Kostas resides.
[45] Chris refers to copies of a webpage screen shot from e-bay as evidence that that Kostas has been selling Inventory of the corporation under zigzag380. He states this Inventory is easily identifiable as most of those items are rare.
[46] Mr. Evangelidis notified Mr. Camenzulli, counsel for Kostas of this effort to sell Inventory online. Mr. Evangelidis demanded that Kostas stop selling the Inventory immediately. Kostas then changed the e-bay user id name to scarecrowcollectables-1.
[47] Kostas has also created a website under the name www.scarecrowcollectables.com. This website was registered on August 21, 2017.
[48] Chris also states that Mr. Camenzulli did not respond to the demand made by Mr. Evangelidis in his correspondence that Kostas stop selling the Inventory.
[49] Chris has attached an Excel spreadsheet he has prepared listing all of the company’s Inventory that Kostas has sold on e-bay since he created this account in June of 2017. This spreadsheet shows that Kostas has generated significant sales through this e-bay account.
[50] There is an email exchange between Chris and Tim So, a former customer of the company that Chris attaches as proof that Kostas is selling property that belongs to 131. Mr. So confirms that he purchased three collectable figurines from Kostas in late June or early July, 2017. Mr. So describes the collectable figures he purchased as being:
(i) The Iron Man Mark SLVI Sixth Scale Power Pose Collectible Figure (SKU 902622); (ii) The War Machine Mark III Sixth Scale Collectible Figure (SKU 902621); and (iii) The Iron Man Mark XLVI Sixth Scale collectible Figure (SKU 902708).
[51] The spreadsheet prepared by Sideshow Toys shows the Inventory sold to the company for the period January 2016 to August 2017. This spreadsheet refers to the collectible figures purchased by Mr. So as items ordered on the corporation’s account, and received by the corporation on May 31, 2017 and July 5, 2017. This spreadsheet also shows that those figurines were shipped directly to the Bolton property.
[52] From this chain of evidence, Chris concludes that the items that Kostas sold to Mr. So were part of the Inventory owned by the plaintiff corporation.
[53] Chris has compiled another spreadsheet which contains a list of all of the corporation’s Inventory that Kostas has listed for sale, or is in the process of selling, or has sold on e-bay to date. On that speadsheet, he also provides the item name, the year and invoice number for each item, and the supplier of those items to show that the products listed on the spreadsheet are part of the corporation’s Inventory.
[54] Chris alleges that Kostas has been selling the Inventory, or utilizing parts of it to pay personal and other debts. He alleges that Kostas is using the Inventory as currency in kind without the authorization or consent of himself, Ms. Stoikos, or the corporation.
[55] Chris states that if the company does not obtain the order requiring Kostas to return the Inventory in his possession forthwith, he believes the corporation will suffer significant financial prejudice and injury. He also believes that Kostas will continue to sell the most valuable items in his possession at “fire-sale” prices without accounting to 131 for the amounts he receives from liquidating Inventory.
[56] Kostas has explained in his evidence that he operates a separate business, Scarecrow Collectables. He only sells comic books and collectable items through Scarecrow Collectables that he has purchased himself. This is the product line that Kostas is marketing on the www.scarecrowcollectables.com website and selling on e-bay through the account bearing the id name scarecrowcollectables-1.
[57] Kostas also alleges that Chris has been selling Inventory owned by the business in his possession under the banner “Legendary Collectables”.
[58] It is difficult, if not nearly impossible to make findings of credibility on the written record before me as to whether the items he has been selling is owned by him personally, and not by 131. However, I have two reasons to find, for the purpose of this motion, that Kostas did not purchase the items he has sold through Scarecrow Collectables.
[59] First, Kostas has never produced invoices or any other proof of purchase for the 72 items he says he owned, or that he has sold through Scarecrow Collectables. Whe he was asked to provide these documents at his crossexamination, that request was refused by or on behalf of Kostas. This was a relevant question, and I am therefore drawing the adverse inference that he has refused to produce these documents because they do not exist.
[60] Second, there is the evidence from both Chris, who says he and Kostas never possessed individual collections of comic books and other products, and of Brandon Wood, who helped Kostas move from his house in Nobleton to the Bolton property. Mr. Wood deposed that Kostas did not move a personal collection of comic books or related material at the time. I find this evidence to be a sufficient basis to find as a fact, for the purpose of this motion, that Kostas did not own collectables or a product line of his own to sell outside the business of the plaintiff corporation.
Issues and Analysis
[61] These motions in this action were first before Regional Senior Justice Daley on February 27, 2018 and adjourned on terms. The motions came before me on June 11, 2018 to be heard together. However, owing to the time it took for counsel to make submissions on the plaintiff’s motion, the motions were adjourned to June 18, 2018. On that day, I reserved my decisions and continued the order made until the release of these reasons. This order also contained a term that each party, including Chris as the third party, would preserve all property of the business in the possession or control of that party.
[62] The terms of adjournment continued on June 18, 2018 provided that the order made by Regional Senior Justice Daley on February 27, 2018 would remain in effect. Paragraph 1(ii) and paragraphs 2, 3 and 4 of Justice Daley’s order read as follows:
THIS COURT ORDERS this motion is adjourned to June 11, 2018, for a one day hearing on the following terms: (ii) Kostas Giancoulas shall immediately (within 48 hours of the date of this Order) transfer at his expense any and all comic book and comic related paraphernalia i.e. statues, figurines, comic books, graphic novels, clothing and apparel, toys, gaming cards, etc., that form part of the subject matter of this litigation in his possession, located on the premises of the property known municipally as 54 Esposito Drive, Bolton, Ontario (the “Bolton Property”) and/or at any other storage location where some of all of these items may be located, to a commercial storage locker/unit (the ”Storage Unit”), the keys to which will be controlled by counsel; and
THIS COURT ORDERS that paragraph 1(i) and (ii) above do not apply to any comic book and comic related paraphernalia purchased by Kostas Giancoulas after February 27, 2018, which can be verified by proof of purchase (i.e. invoice and payment) documentation evidencing same.
THIS COURT ORDERS that within seven (7) days of transferring the items listed in paragraph 1(ii) above, Kostas Giancoulas shall provide the Plaintiff with a list of comic related items that he has acquired in his personal capacity since September 2017 with documentation evidencing proof of purchase and payment through the use of his own family funds.
THIS COURT ORDERS that Kostas Giancoulas shall immediately (within 30 days of the date of this Order) provide the Plaintiff with a detailed list/Inventory of all “Funko Pops” he claims to have returned to the Plaintiff’s supplier of these items, Prince Wholesalers (“Prince”), to satisfy the Plaintiff’s debt with Prince, including any and all documentation evidencing the exchange and satisfaction of the debt.
[63] Chris has stated in his affidavit that Kostas has not complied with any of the terms ordered by Justice Daley.
Recovery of property from Kostas
[64] The motion 131 has brought for the recovery of Inventory currently in the possession of Kostas relies to a substantial extent on the affidavit filed by Chris, supported by affidavits sworn by Brandon Wood. These affidavits are filed to give evidence on how and when Inventory was purchased, and whether items similar to the Inventory in dispute were ever observed in the possession of Kostas as part of his personal collection.
[65] Since the decision in Ryder Truck Rental Ltd. v. Walker, [1960] O.W.N. 70, affirmed on appeal at [1960] O.W.N. 114, the moving party must show that there are substantial grounds for the plaintiff’s claim for the court to order the return of personal property pending trial. This test was expanded in Clark Door of Canada Ltd. v. Inline Fibreglass Ltd, 1996 CarswellOnt 193, where Justice Molloy provided a thorough analysis of what standard is required to show “substantial grounds”, as follows:
23 Clearly, the test for whether a replevin order should be made is not going to be exactly the same as the test for any type of injunction. However, the term "substantial grounds" is somewhat vague and it helps, in my opinion, to put it in a contextual framework. As I have said earlier, it is obvious that the substantial grounds test is a lesser standard than the test for summary judgment. Similarly, I consider the Mareva injunction "strong prima facie case" requirement to be too high a standard for replevin orders which are much less draconian and far reaching. On the other hand, the "substantial issue" test (not frivolous or vexatious) applied generally in prohibitive injunction cases is, in my view, too low a standard for a replevin order which requires one party to actually deliver up possession of property to the other. It must be remembered that before obtaining a prohibitive injunction, a party must satisfy other requirements not imposed on applicants for replevin (eg. the requirement of demonstrating irreparable harm which damages cannot remedy). As the replevin order is more in the nature of a mandatory injunction and is a greater interference with responding parties' rights than a prohibitive injunction, a stronger standard is required. Accordingly, I am of the view that the "substantial grounds" test for interim recovery of property requires a high degree of assurance that the plaintiff will be successful at trial.
[66] Kostas takes the position that the motion of 131 must fail for the primary reason that there is no adequate description of the property 131 seeks to recover. He submits that the evidence before the court does not meet that part of the test. Alternatively, Kostas argues that 131 has not satisfied the evidentiary requirement to show that there are substantial grounds for the court to find that 131 is the owner of the Inventory.
[67] Kostas submits that his evidence reveals that he and his brother Chris are the true owners of the business, and not 131. Kostas therefore submits that he has the right to possess and control the Inventory in his possession. He seeks that possession and control so that he is at liberty to liquidate Inventory in the market place to obtain repayment of his unsecured loan to the business, as well as the loans made by Zisis.
[68] Kostas emphasizes the lack of evidence available to 131 to identify and describe the property for which it seeks an order. To the contrary, it is his evidence that the corporation has absolutely no record of comic books or comic related paraphernalia :
- that were moved to Chris’, Kostas’ or Chrisanthi’s homes and/or the Storage Uint from the Yonge Location after it was closed;
- that were particularly stored at Chris’, Kostos’ or Chrisanthi’s homes and/or the Storage Unit respectively;
- that were taken to the two (2) trade shows outlined above and/or sold at those trade shows; and
- that were then returned to Chris’, Kostos’ or Chrisanthi’s homes and/or the Storage Unit after each of the two (2) trade shows.
[69] The comic books and related paraphernalia that were moved to and from the trade shows were not visible in the boxes that were sealed for moving. This was corroborated by Brandon Wood on his cross-examination. At no point did Chris, Kostas or Brandon go through particular items that were dropped off at various locations.
[70] Even questions of credibility must be considered on evidence put forward by the moving party to show whether substantial grounds have been shown for obtaining the relief sought. Those cases that rely on documents are less difficult to determine when credibility is a factor on establishing the substantial grounds part of the test. As Justice Molloy explained at paragraph 24 of Clark Door:
24 Cases in which there is clear documentation supporting the plaintiff are more likely to meet the substantial grounds test. Cases in which straight issues of credibility will determine the action are less likely to meet the test. However, that is not to say that the presence of a credibility issue is fatal to the plaintiff's success or that a solid "paper trail" is unrebuttable by a defendant. Most cases will fall somewhere in the middle with some but not perfect, documentation and some issues of credibility. The case before me falls into that category.
[71] The moving party has the evidentiary burden to satisfy the statutory requirements. First among those requirements is to provide a description of the property sufficient to make it readily identifiable, and the value of the property in question.
[72] The moving party must also establish it has substaintial grounds to claim the ownership of the personal property, and that the property was unlawfully taken from the plaintiffs possession or has been unlawfully detained by the defendant. The moving party must provide a high degree of assurance that it will succeed at trial to meet this test. The high degree of assurance required by the caselaw is a standard of proof that is “clearly a weighty standard to meet.” See Higher Ground LLC v. Langstaff, 2010 ONSC 4108.
[73] The moving party must also satisfy the court that the balance of convenience favours its position: In Higher Ground LLC v. Langstaff.
[74] I heard submissions that the outcome of the motions before me could well determine the outcome of the action. That is not the intent of Rule 44. This is not a motion for summary judgment by another name.
[75] The intent under Rule 44 is to determine whether personal property that is the subject matter of the action should be returned to the plaintiff pending trial. It is also for this reason that Rule 44.03 provides that the court may order the plaintiff to post security in exchange for recovering possession of personal property on an interim basis.
[76] There is no dispute that the Inventory or any part in the possession or control of Kostas has not been described sufficiently to make it readily identifiable. I find as a fact on this record that the Inventory was never tracked after it was transported from the Yonge Street store to various destinations. The prerequisities for an order under Rule 44.01 must be fulfilled for the motion to succeed: Abel/Woser Corp. v. C.P.M.S. Computerized Portfolio Management Inc., [1987] O.J. No.176 (High Court).
[77] The evidence filed by 131 in support of the motion does not provide this court with the value of Inventory in the possession of either party at the time the motion was argued. This is an evidentiary requirement on a motion for the recovery of possession of property pending trial such as this. The requirement is reinforced by the mandatory language in Rule 44.02 that an interim order for the recovery of possession of property shall contain a description of the property sufficient to make it readily identifiable, and shall state it’s value.
[78] The requirements of Rule 44 are imperative to provide certainty for the party against whom an order is made, and the party who obtains the order. The order makes it known to the obliged party the personal property to return, and to the entitled party what property has been recovered and what has not for the purpose of enforcement.
[79] The spreadsheets and analysis furnished by Chris as evidence that 131 purchased specific products and for how much are not evidence of what Inventory remains in the possession of either party today, or the current value of that Inventory. This evidentiary vacuum also makes it impossible for me to order 131 to post security for all or twice the value of that property under Rule 44.03, even if I were inclined to order Kostas to return that property to 131.
[80] The motion of the plaintiff corporation for the return of property pending trial must fail for these reasons.
Cross-motion brought by Kostas for mandatory order
[81] Kostas brings a cross-motion for a mandatory order that 131 and Chris return all Inventory of the business in their possession to him. He seeks this mandatory order, rather than an order under Rule 44.01, for the same reason he opposes the motion 131.
[82] Kostas instead relies on the three part test in RJR MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 for his cross-motion. He must therefore meet the threshold by satisfying the court on the evidence that he has a strong prima facie case that he is an owner of the property at issue.
[83] Kostas refers to the decision of the Court of Appeal in Yaiguaje v. Chevron Corporation, 2018 ONCA 472, as authority for the court to pierce the corporate veil where it is satisfied that the corporation is a “mere façade concealing the true facts”. Kostas argues that the requirements to pierce the corporate veil that must be established are:
(i) The corporation must be a “mere puppet” of the controlling shareholder; and (ii) The corporation must have been incorporated for a fraudulent or improper purpose or used by the controlling shareholder as a shell for improper activity.
[84] Under Yaiguaje, the inquiry whether the corporate veil should be pierced in either respect is extremely fact specific.
[85] Chris relies upon the decision of the Supreme Court of Canada in McClurg v. Minister of National Revenue, [1990] 3 S.C.R. 1020 for the principle that the corporation is a separate entity from its shareholders, and that the assets of the corporation belong to the corporation, not the individual shareholders that hold shares in the corporation. At paragraph 61, Justice La Forest put it this way:
61 The independent legal existence of the corporation means that, whild the shareholder remains a proportionate owner of the corporation, he does not actually own its assets. These assets belong to the corporation itself, as a separate legal entity. Schmittoff, Palmer’s Company Law, Vol. 1, 23 rd ed. (1982), at 384, paragraph 33-01. Management of the corporation is entrusted to its officers and directors with the shareholder’s interest protected through the distribution of shareholder votes. Thus, the corporate entity is unique in that it allows the shareholder to alienate ownership of property by placing it in a structure where the ownership of the property is separated from the effective control over that property: see Welling. Supra, at page 81. The sole link between the shareholder and the company is the share, which provides both a measure of the shareholder’s interest in the company, as well as of the extent of the shareholder’s liability for the actions of that company; see Borland’s Trustee v. Steel Brothers & Co.,
[86] I do not consider the facts on the evidentiary record before me to make the Yaiguaje case applicable here. Yaiguaje involved a question of whether one corporation with assets in Canada should be responsible for the liability found against a subsidiary or parent corporation by a court in another jurisdiction.
[87] Kostas is an unsecured creditor who seeks to maximize his ability to convert Inventory to cash in order to repay himself, and perhaps to recover payment on behalf of his father. There is convincing evidence that 131 operated the business and purchased the Inventory. While I make no finding of fact in this regard, the evidence filed on behalf of 131 must be balanced against the evidence filed by Kostas. I cannot conclude on the current record that Kostas has satisfied the burden of showing he has a strong prima facie case that he is the owner of the business instead of 131.
[88] The shares in 131 are not held by another corporation in this case, but rather by Ms. Stoikos. There is evidence before this court that Ms. Stoikos struck a bargain with her nephews that she would lend them money to resurrect their business after they encountered tax trouble in 1998, but only if the business was owned and operated by a corporation, and that she would be the sole shareholder, officer and director of that corporation. Consequently, I find no grounds to conclude that the corporate veil should be pierced or to find on this record that the brothers, and not 131, own the Inventory at issue.
[89] In the absence of piercing the corporate veil or finding on this record that 131 is not the actual owner of the Inventory, I conclude for the purpose of this motion that the Inventory in the possession of each 131 Chris and Kostas is an asset that belongs to 131.
[90] I therefore find that Kostas has not established a strong prima facie case for the mandatory order he seeks to enjoin Chris or 131 from dealing with the Inventory they or either one of them possess, or to return that Inventory to him.
Preservation of personal property under Rule 45.01
[91] In the alternative to seeking the return of property, 131 seeks an order requiring Kostas to preserve the Inventory in which 131 claims as its property pending trial.
[92] The court may make an interim order for the custody or preservation of a property at issue in an action or relevant to an issue in an action. To obtain an order for the interim preservation to personal property, the moving party must satisfy the three part test set out in Kotar v. Scheiner, 2011 ONSC 3188, which adapted to this case, would be as follows:
(i) The comics and comic related paraphernalia sought to be preserved constitute the every subject matter of the dispute; (ii) There is a serious issue to be tried regarding the plaintiff corporation’s claim to those items; (iii) The balance of convenience favours granting the interim preservation of those comics and comic related paraphernalia.
[93] Since this motion was heard, there has been an interim order in place pending the release of this decision that requires each of the parties, as well as Chris Giancoulas and Ms. Stoikos, to preserve any and all property in their possession or control that could form part of the Inventory of the business.
[94] This order was intended to have the effect of protecting the rights of each of the parties.
[95] It is a regrettable fact that 131, if it is found to own the business, and the Giancoulas brothers themselves, if it is found they are the true owners, have borrowed and advanced far more money than the business can repay. There is undisputed evidence that Ms. Stoikos is owed $460,000. There is unsubstantiated evidence that Chris has advanced some $60,000, and the contentious evidence Kostas has given that he put upwards of $157,000 into the business upon selling his house in Nobleton. There is also allegations that their father Zisis has invested close to $500,000. This amounts to claims against the business by unsecured creditors that could total $1,177,000 from family members alone. That’s a lot of comic books and related products to sell. It is also the reason as much Inventory that remains in the possession and control of Kostas must be preserved until those those claims and the ownership issues can either be resolved, or determined by the court.
Orders
[96] The evidence filed on behalf of the plaintiff 1316223 Ontario Inc. in support of its motion for the interim return of property under Rule 44.01 fails to provide a sufficient description or value of the personal property it seeks to recover. This motion is dismissed for that reason.
[97] The evidence on the cross-motion of Kostas Giancoulas fails to show he has a strong prima facie claim to ownership of the property that forms the Inventory of the business. There is persuasive evidence that the Inventory at issue was purchased by, and is the property of the plaintiff corporation. The cross-motion of the defendant Kostas Giancoulas for a mandatory order to secure the possession of property from either 131 or Chris is dismissed in it’s entirety.
[98] On the motion of the plaintiff 1316223 Ontario Inc. for the preservation of property under Rule 45, there shall be an order that Kostas shall preserve all Inventory in his possession, including but not limited to comic books, action figure collectables and any other like items or products that could be considered Inventory of the business, including those items he considers to be his own personal property or the property of Scarecrow Collectables, until further order of the court.
Costs
[99] In view of the outcome of these motions, I am inclined to order no costs. However, I have not heard or received submissions from counsel and I will not make a decision on costs until I have received them or the time has elapsed to receive them. In the event a party intends to seek costs, that party may file submissions on the costs they seek by October 5, 2018. The responding party shall then have until October 15, 2018 to file responding submission. No submission in reply shall be permitted without leave. All submissions shall be limited to two pages, not including offers to settle or time dockets, and may be filed by sending those submissions by email to my judicial assistant, Ms. Melanie Powers, at Melanie.Powers@ontario.ca in Brampton. If I have not received any submissions by October 1, the parties shall be deemed to have resolved the issue of costs as between them.
[100] I can appreciate that counsel and the parties were anxious to receive this decision. I thank them all for their patience. I suspect that one or both sides will be disappointed by the result. The parties should carefully consider the questions I asked counsel on the second day of the motion about whether any thought has been given to making an application to the court for the appointment of a receiver, or to bring a proceeding for an order winding up the corporation under the section 207(1) of the (Ontario) Business Corporations Act. In my view, either approach would be a more effective way to seek remedies that will meet the objectives of the litigants according to law.