Court File and Parties

COURT FILE NO.: CV-17-0203-00 DATE: 20181004

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Familymat Laundromat Inc., Shrawan Motwane and Madhu Motwane Plaintiffs – and – The Laundry Lounge Inc. and André Fiset Defendants

Counsel: Adam Jarvis and Tristen Audet, counsel for the Plaintiffs André Fiset, for the Defendants

HEARD: April 3 and 5, 2018

Reasons for Judgment

PETERSEN J.

Overview

[1] This action arises from the sale of a laundromat business in the city of Toronto.

[2] The corporate defendant, Laundry Lounge, sold the business assets to the corporate plaintiff, Familymat. The transaction included a chattel mortgage and security agreement. The deal closed, but the agreement subsequently fell apart, with each side alleging that the other had committed breaches of contract. Ultimately, Laundry Lounge resorted to the security under the chattel mortgage, seized the business assets and resumed operating the laundromat.

[3] The plaintiff Madhu Motwane is the sole shareholder and director of Familymat. Shrawan Motwane, the other personal plaintiff, is her husband.

[4] The defendant André Fiset is the President of Laundry Lounge.

[5] In the underlying action, Familymat and Ms. Motwane are seeking an order of rescission of the purchase agreement, including the chattel mortgage agreement, among other relief. Mr. and Ms. Motwane are seeking an order for the return of personal items seized from the laundromat premises by the defendants. Laundry Lounge and Mr. Fiset have counterclaimed against all three plaintiffs, alleging breach of contract and a variety of torts.

[6] The motion before me was brought by Mr. Motwane. In it, he seeks partial summary judgment, dismissing the counterclaim against him personally and ordering the defendants to return personal belongings that he claims are being wrongfully detained by them.

[7] The defendants take the position that summary judgment is not appropriate. They argue that the motion raises genuine issues requiring a trial. In the alternative, they submit that the items sought to be returned were properly seized and retained pursuant to the chattel mortgage agreement.

[8] I am mindful of the potential dangers of granting motions for partial summary judgment: CIBC v. Deloitte & Touche, 2016 ONCA 922, at paras. 1 and 32-40. I have therefore considered the advisability of a partial judgment in the context of this litigation as a whole: Butera v. Chown Cairns LLP, 2017 ONCA 783, at paras.22-35. For the reasons set out below, I have concluded that it is appropriate to grant (in part) Mr. Motwane’s request for an order to return some personal items to him. That issue can be readily bifurcated from the other issues raised by the main action. It can be decided through a summary judgment process without compromising fairness to the parties. Moreover, there are pragmatic reasons why that issue needs to be decided prior to trial.

[9] In contrast, the issues raised by Mr. Motwane’s motion to dismiss the counterclaim against him cannot be readily bifurcated from the issues in the main action. There would be a risk of duplicative or inconsistent findings at trial if the counterclaim were decided by way of partial judgment. For that reason and also because the issues raised by the counterclaim are not amenable to resolution by way of summary process, the motion to dismiss the counterclaim will not be decided on a partial judgment basis. It requires a trial.

Chronology of Events

[10] Although the following chronology is more detailed than the broad overview set out above, it is not intended to be an exhaustive review of all the relevant evidence, facts and issues in dispute. It is merely a summary providing context for my reasons below.

[11] For a number of years prior to 2016, Laundry Lounge operated two businesses at two separate locations in downtown Toronto: (i) a coin-operated laundromat with wash-and-fold services at a Maitland street location and (ii) a dry-cleaner with alterations and wash-and-fold services at a nearby Yonge street location. The two locations are in close walking distance of each other.

[12] On February 9, 2016, Laundry Lounge entered into an Agreement of Purchase and Sale (APS) with Mr. Motwane “(In Trust) To Be Incorporated”. The APS was for Laundry Lounge’s business assets at the Maitland street location, including the goodwill of the business, as well as all chattels, fixtures, furniture and equipment, but not the business name. The agreed upon purchase price was $480,000. A deposit of $10,000 was made when the APS was signed.

[13] Familymat was subsequently incorporated and assumed the purchaser’s responsibilities under the APS.

[14] The terms of the APS included an assignment of Laundry Lounge’s lease of the Maitland street premises to Familymat, mutual non-competition clauses, restrictions on Familymat’s use of the Laundry Lounge name, and an obligation for Familymat to pay an additional $100,000 on closing, with provision for a vendor take-back mortgage.

[15] According to the vendor’s non-competition clause in the APS, Laundry Lounge agreed not to carry on any business competitive with or similar to the Maitland street business “as presently carried on”, within a radius of 10 miles for a period of 10 years. However, Laundry Lounge’s “current business” at the Yonge street location was specifically excluded from the application of this clause. The parties have different interpretations of the clause.

[16] According to the purchaser’s non-competition clause in the APS, Familymat agreed not to carry on any type of dry-cleaning or alteration services at the Maitland street location or at any other location within a 10 mile radius.

[17] The APS included a provision that Familymat would change the name of the business within 30 days of closing and would not use or make reference to “The Laundry Lounge” in its printed materials or on new signage going forward.

[18] Pursuant to the APS (as amended on March 10, 2016), Familymat paid a total sum of $100,000 to Laundry Lounge by the closing date on May 18, 2016. Ms. Motwane executed the closing documents on behalf of Familymat. Mr. Fiset signed on behalf of Laundry Lounge, including a Bill of Sale listing all of Laundry Lounge’s chattels and equipment at the Maitland street location on the closing date.

[19] At the time of closing, Mr. Fiset signed a Non-Competition Agreement (“NCA”) both in his personal capacity and on behalf of Laundry Lounge, stipulating their agreement not to carry on any coin laundry business competitive with or similar to the Maitland street business “as presently carried on”, within a radius of 10 miles for 10 years. Unlike the vendor’s non-competition clause in the APS, this stand-alone NCA did not contain an exemption for Laundry Lounge’s current business at the Yonge Street location. There is contradictory evidence about the purpose of the NCA and how it came about. The parties have different positions on its meaning and effect.

[20] On the closing date, a chattel mortgage and security agreement was executed between Familymat as mortgagor, Laundry Lounge as mortgagee, and Ms. Motwane as personal guarantor. The mortgage loan was for $380,000. A principal sum of $100,000 was to be repaid by Familymat on November 18, 2016 and the balance was repayable in monthly installments, with interest at the rate of 7% annually.

[21] The chattel mortgage agreement provided Laundry Lounge with a security interest over “all of the Mortgagor’s property” until the purchase price was paid in full. It stipulated that the “Mortgagor’s property” included “leasehold interest, tenants’ improvements”, all the goods and chattels listed in the Bill of Sale and situated at the Maitland street location, as well as “goods and chattels or any interest whatsoever in goods and chattels which shall hereafter be taken or brought into stock or possession by the Mortgagor” during the currency of the chattel mortgage agreement. The agreement further provided that, upon default in payment of the principal sum or interest payments due, the whole of the outstanding monies owed would immediately become due and payable. Laundry Lounge, as mortgagee, would then have the right to enter upon any premises where the mortgagor’s goods and chattels are located for the purpose of taking possession of them.

[22] Familymat assumed operation of the Maitland street laundromat on May 18, 2016. Laundry Lounge continued to operate its dry cleaning business at the Yonge street location. Both businesses provided wash-and-fold services to their customers.

[23] Familymat did not promptly remove all of the signage bearing the name “Laundry Lounge” from the Maitland street premises. Mr. Fiset discussed the signage with Mr. Motwane on more than one occasion. There is conflicting evidence about precisely what was said during these conversations and about when the discussions occurred.

[24] In late June 2006, Laundry Lounge distributed promotional flyers in the neighbourhood, advertising its business at the Yonge street location, including wash-and-fold services. The flyers offered a 50% discount to customers who presented a coupon from the flyer. The discount coupon was valid from July 4 to July 31, 2006. On the back of the coupon, customers could fill in their name and contact information to be entered into a draw for a chance to win a Harbourfront scenic buffet cruise for two people.

[25] A number of customers entered Familymat’s business at the Maitland street location and presented the discount coupon, expecting to get 50% off and/or to have their name entered in the draw. Initially, these customers were turned away by one of Familymat’s employees. A decision was subsequently made by Familymat to honour the coupons. Customers who submitted coupons thereafter were not told that the flyers were printed by Laundry Lounge, a separate business, operating 60 metres down the road. Instead, Familymat honoured Laundry Lounge’s coupons in order to keep the customers’ wash-and-fold business.

[26] On July 21, 2006, Familymat’s counsel sent a cease-and-desist letter to the Laundry Lounge, asserting that the wash-and-fold services advertised at the Yonge street location constituted a breach of the NCA that was signed on closing.

[27] Laundry Lounge disputes that the NCA precludes the offering of wash-and-fold services at its Yonge street location.

[28] Laundry Lounge argues that Familymat’s failure to change the signage on the Maitland street premises constitutes a breach of contract that caused customers to be confused about who was operating the Maitland street laundromat and resulted in unjust enrichment to Familymat.

[29] These are the issues at the heart of the dispute between the parties. The plaintiffs allege that the defendants fraudulently or negligently misrepresented during negotiations that they would operate only a dry-cleaning and alterations business at the Yonge street location. The plaintiffs assert that the defendants never advised them of an intention to offer a competitive wash-and-fold service. They argue that the vendor’s non-competition clause in the APS excludes only Laundry Lounge’s “current business” at the Yonge Street location, which is described in the APS as a “dry cleaning plant and alteration business”, without any mention of wash-and-fold services. Furthermore, they rely on the stand-alone NCA that was signed by Mr. Fiset on closing, which does not exempt Laundry Lounge’s Yonge street location from its application. They argue that the NCA must be read in conjunction with the non-competition clauses in the APS and that where the agreements diverge, the NCA prevails.

[30] The defendants take the position that wash-and-fold services were part of Laundry Lounge’s “current business” when the APS was signed. They assert that wash-and-fold services had been offered at the Yonge street location for years prior to the APS, were always openly advertised with prominent signage and were not concealed from the plaintiffs during the negotiations of the APS. The defendants note that the APS did not require removal of the wash-and-fold signage at the Yonge Street location. The defendants deny ever representing to the plaintiffs that they would restrict their Yonge street business to dry cleaning and alterations only. They deny having violated any agreement and rely on the specific exemption of the Yonge street location from the vendor’s non-competition clause in the APS.

[31] Familymat’s counsel wrote to Laundry Lounge’s counsel on August 9, 2016, demanding that Laundry Lounge cease offering wash-and-fold services at the Yonge street location. Laundry Lounge did not cease.

[32] Familymat did not make the $100,000 payment due November 18, 2016.

[33] Mr. Fiset and Mr. Motwane had a telephone conversation about the missed payment late on November 18, 2016.

[34] Mr. Fiset wrote to Mr. Motwane on November 19, 2016, noting the default in payment and requesting confirmation that the monies would be paid by noon on Monday November 21, 2016. Mr. Fiset also raised his concern about Familymat’s continued use of signage bearing the name Laundry Lounge on the exterior walls of the Maitland street premises, as well as the distribution of Familymat promotional materials containing a photograph of the premises bearing the name Laundry Lounge. He asserted that these practices constituted a breach of the APS and were resulting in unjust enrichment of Familymat. He demanded that the use of the Laundry Lounge signage cease.

[35] Familymat did not make the $100,000 principal payment on November 21, 2016 (or at any time thereafter). Mr. Fiset wrote to Ms. Motwane that day, noting that the default in payment was a violation of the chattel mortgage agreement she signed as guarantor.

[36] Over the next few weeks, correspondence ensued between Mr. Fiset and the lawyer acting for Familymat and Ms. Motwane. Each party accused the other of breaches of contract. Familymat twice confirmed that it would not be making any further mortgage payments. It threatened legal action but offered, on a without prejudice basis, to accept rescission of all agreements between the parties, with a return of all monies paid.

[37] At some point in December 2016, Familymat arranged for black tape to be placed over the “Laundry Lounge” name on exterior signs at the Maitland street location.

[38] The parties were unable to work out their differences. On December 24, 2016, Mr. Fiset advised that Laundry Lounge intended to exercise its security right to take over the Maitland street premises, which it did shortly after midnight that night. Laundry Lounge seized all of the chattels on site, including a number of items that Mr. Motwane claims are his personal belongings.

[39] Laundry Lounge resumed operating a laundromat at the Maitland street location on December 25, 2016.

[40] The plaintiffs commenced this action on January 16, 2017. In the Statement of Claim, Ms. Motwane and Familymat seek (among other things) rescission of the APS and chattel mortgage agreements and return of all deposits made. In the alternative, they seek damages for unjust enrichment, breach of contract and fraudulent or negligent misrepresentation. Mr. and Ms. Motwane plead conversion and seek an order for the return of personal property seized by the defendants when the laundromat was repossessed by Laundry Lounge.

[41] The defendants filed a Statement of Defence and Counterclaim on March 16, 2017. They claimed a total of $650,000 in general, special and punitive damages as against Ms. Motwane and Familymat for breach of contract, unjust enrichment and various alleged torts. These damages include $380,000 for the unpaid balance of the chattel mortgage loan. The defendants also counterclaimed against Mr. Motwane personally, seeking $200,000 in general and special damages for inducing Familymat’s breach of contract, conspiracy, fraudulent misrepresentation, deceit and interference with Laundry Lounge’s economic interests.

[42] On March 31, 2017, Familymat’s counsel wrote to the defendants pursuant to s.18(1) of the Personal Property Security Act, R.S.O. 1990, c.P.10 (“PPSA”), requesting a statement detailing the description and value of all items seized and the amount that Laundry Lounge claims is still owing by Familymat. The defendants did not respond to this letter.

[43] The plaintiffs filed a Reply and Defence to Counterclaim on April 6, 2017.

Mr. Motwane’s Motion for Return of Personal Belongings

Is this an Appropriate Issue for Partial Summary Judgment?

[44] For the reasons outlined below, I have concluded that it is advisable in the context of this litigation to decide this issue on a partial summary judgment basis.

[45] Pursuant to Rule 20.04(2)(a) of the Rules of Civil Procedure, summary judgment will be granted if the motion judge is satisfied that there is no genuine issue requiring a trial.

[46] Mr. Motwane’s request for the return of his personal belongings is a straightforward issue that can be fairly and expeditiously determined based on the motion record, without conducting a trial. The record provides me with sufficient evidence to make the necessary factual findings with respect to this issue, apply the law to the facts and reach a just result: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 SCR 87, at para.49.

[47] Pursuant to Rule 20.04(2.1), I can weigh the evidence in the motion record, evaluate the credibility of deponents and draw reasonable inferences from the evidence. I have decided to do this without exercising the “mini-trial” powers in Rule 20.04(2.2) because I am confident that I can reach a fair and just determination of the issue based on the motion record alone.

[48] Furthermore, Mr. Motwane’s request for return of his personal belongings is a discrete issue that can readily be bifurcated from the other issues to be decided at trial. Deciding this issue by way of partial judgment will not create a risk of duplicative or inconsistent findings at trial. The concerns about partial summary judgments raised by the Ontario Court of Appeal in CIBC and Butera have no application to this issue.

[49] Moreover, there is an important pragmatic reason why this issue needs to be decided in advance of the trial. One of the items seized by the defendants is an Asus laptop computer that contains electronic copies of documents relevant to this proceeding. Those documents are currently inaccessible to all parties. Laundry Lounge has possession of the laptop but Mr. Fiset does not have the password required to access the documents stored on its hard drive. Mr. and Ms. Motwane have the password, but do not have possession of the laptop and therefore cannot access the documents. Something needs to be done to resolve this stalemate because both parties require the documents to complete discoveries and advance this litigation to trial. Partial summary judgement may provide a solution.

[50] It should be noted that, on March 31, 2017, Justice Emery issued a consent order intended to resolve the problem. He ordered the defendants to provide one of the plaintiffs and their lawyer access to the Maitland street premises for the purpose of reviewing relevant business documents, including those stored on the laptop. The order permitted the plaintiff to obtain copies of relevant business documents, provided that copies were also provided to the defendants. A visit to the laundromat occurred in April 2017 and many documents were copied for the plaintiffs, with copies kept by Mr. Fiset for the defendants. However, a dispute arose between the parties, which led to the visit being cut short. Numerous copies of documents were obtained, but not all of the relevant documents stored on the laptop were retrieved.

[51] For all of the above reasons, I find that this is an appropriate issue to hear and decide by way of partial summary judgment motion.

What are the Items in Dispute?

[52] Mr. Motwane deposed that the following items belong to him, were on the laundromat premises, were seized by the defendants and are being wrongfully retained by the defendants: the Asus laptop computer, a Samsung tablet, a deity idol, a Prestocard and TTC token, an incense holder, a small steel container for diffusing oil, a printer, a paper cutter, a black diary, handwritten notes contained in a blue folder, a white opaque pouch with a yellow rim, a plastic accordion folder and personal bills.

What are the Parties’ Respective Arguments?

[53] In support of his motion for the return of these items, Mr. Motwane argues that: a) The items in question constitute his personal belongings. b) The chattel mortgage agreement only provided security over Familymat’s (the mortgagor’s) assets and did not entitle Laundry Lounge to seize any of his personal belongings. c) Even if his personal items were subject to the chattel mortgage simply by virtue of their location on the premises, they should still be returned to him because the defendants effectively rescinded the APS and chattel mortgage agreements. d) Moreover, when the defendants resorted to seizure, the balance owing on the chattel mortgage loan was offset by the value of the items seized, which included all the assets itemized in the Bill of Sale. The defendants cannot be permitted to “double dip” by pursuing damages for the amount owing under the APS and chattel mortgage agreement, while simultaneously retaining the assets seized as security for that amount. e) Even if the items are found to be co-owned by Ms. Motwane, they should be returned because Ms. Motwane did not provide a security in her personal capacity when she signed the chattel mortgage as guarantor. f) Personal items are exempt from seizure under security agreements pursuant to the combined operation of s.62(2) of the PPSA and s.2(1) of the Execution Act, R.S.O. 1990, c.E.24.

[54] In response to the motion, the defendants argue the following: a) Not all of the items sought to be returned were on the Maitland street premises when Laundry Lounge entered and seized Familymat’s assets. Some of the items are not in the defendants’ possession. b) All of the items are reasonably presumed to belong to Ms. Motwane or to be co-owned by Ms. Motwane and are covered by the personal guarantee that she provided in the chattel mortgage agreement. c) Even if the items belong exclusively to Mr. Motwane, Laundry Lounge was entitled to seize them pursuant to the chattel mortgage agreement because it provided a security interest over not only the chattels listed in the Bill of Sale and situated at the Maitland street location on the closing date, but also any chattels that thereafter were “brought into stock or possession” by Familymat. d) The purchase price of $480,000 reflected the value of more than just the business’s physical assets; it included the value of the business itself. The value of the physical assets seized therefore did not fully offset the balance owing pursuant to the chattel mortgage agreement. e) Many of the items in question are of trivial or no value.

Who Owns the Items in Question?

[55] I am not persuaded by the evidence that all of the disputed items belong to Mr. Motwane.

[56] In particular, I find, on a balance of probabilities, that the paper cutter is a business asset belonging to Familymat. I make this finding based on the following evidence: Both Mr. and Ms. Motwane recalled (during their cross-examinations) that Mr. Motwane had purchased it at Ms. Motwane’s request. Ms. Motwane stated that they needed it for “the office” and that it was used for Familymat’s business, as well as for personal use. She acknowledged that Familymat may have reimbursed Mr. Motwane for the purchase. Neither she nor Mr. Motwane could recall whether in fact he was reimbursed. Ms. Motwane, who was responsible for Familymat’s accounting, could not recall whether she claimed the purchase as a business expense, but she did not deny that possibility.

[57] Mr. Fiset testified that no Presto-card or TTC tokens were seized on the Maitland street premises. I find that, even if such items were seized, they did not belong to Mr. Motwane. Ms. Motwane testified that she used public transit for transportation to and from the laundromat because she does not have a driver’s licence. She stated that Mr. Motwane usually traveled at a different time and that he traveled by car, not public transit. Based on this uncontested evidence, I find that any Presto-card and TTC tokens seized by Laundry Lounge belong to Ms. Motwane.

[58] I find that the deity idol, incense holder and small container for diffusing oil belong to Mr. Motwane. I disagree with Mr. Fiset’s submission that Mr. and Ms. Motwane’s evidence on this point was inconsistent and contradictory. They differed somewhat in their recollection of who suggested that the deity idol be brought to the laundromat. However, both of them testified that the deity idol belonged to Mr. Motwane, that it had come from his mother, had been in his family for many years and was brought to the laundromat for the purpose of a Hindu religious ceremony when the business opened. The incense holder and steel container were used in the ceremony; the evidence establishes that they too belong to Mr. Motwane.

[59] I accept Mr. Motwane’s uncontradicted evidence that the Samsung Tablet belongs to him. He explained that he brought it to the laundromat to play games during his spare time.

[60] I accept Mr. Motwane’s uncontradicted evidence that he owns the printer seized by the defendants. He testified that it is a very old printer that he purchased years ago for his own personal use. He brought to the laundromat so that his wife could also use it for Familymat’s business. He did not give it to her or to Familymat.

[61] I also accept Mr. Motwane’s uncontradicted evidence that he owns a black diary, blue folder, white opaque pouch and accordion folder, which he believes were seized by the defendants. Mr. Fiset denies that any of these items are in his possession. He did not, however, take an inventory of the items seized. In any event, it is clear from the record that Mr. Motwane is not concerned about the content of any of these items, he just wants the items returned to him. He acknowledged that they are of nominal value (less than $5).

[62] It is not disputed that any personal bills in Mr. Motwane’s name belong to him.

[63] Finally, with respect to the Asus laptop, I have concluded that it belongs to Mr. Motwane. His evidence was that he bought it three or four years ago and did not retain the purchase receipt. He acknowledged that he gave the password to Ms. Motwane and that she borrowed the laptop for Familymat business purposes, but stated that he also continued to use it for personal matters.

[64] Mr. Fiset argues that the Asus laptop is a Familymat asset. He relies on a credit card statement showing a purchase by Familymat in the amount of $576.01 on May 24, 2016 at a retail store called Canada Computers. I cannot reasonably draw an inference that Familymat owns the Asus laptop from the mere fact of this purchase at a retailer with the word “computer” in its name. Any number of other electronics or computer accessories could have been purchased at that store. There is insufficient evidence to support the finding that Mr. Fiset urges me to make.

[65] Moreover, there is documentary evidence that corroborates Mr. Motwane’s claim to ownership of the laptop. When he attended the Maitland street premises with Familymat’s counsel in April 2017 pursuant to Justice Emery’s order, they took a photograph of the laptop screen. In the photograph, the screen displays the licensing information for Microsoft software on the laptop. The software licence is registered in Mr. Motwane’s name.

[66] Considering the totality of the evidence, I find on a balance of probabilities that the Asus laptop computer belongs to Mr. Motwane.

Is Laundry Lounge Required to Return the Items to Mr. Motwane?

[67] I have found that the Presto-card, TTC token(s) and paper cutter do not belong to Mr. Motwane. He has no right to them. The defendants therefore have no obligation to deliver those items to him.

[68] With respect to the black diary, blue folder, white pouch and accordion folder, I find that Mr. Motwane’s claim for the return of these items is frivolous. I dismiss the claim on that basis. The items in question have nominal monetary value, no religious or other significance, and their contents (if any) have no relevance to this litigation.

[69] I find that all of the other disputed items (i.e., the Asus laptop computer, the Samsung tablet, the printer, deity idol, incense holder, small container for diffusing oil, and personal bills) belong to Mr. Motwane and must be returned to him forthwith. I order that the Asus laptop computer, in particular, be returned to Mr. Motwane no later than 2 days after the date of these Reasons for Judgment.

[70] The defendants’ right to seize property on the Maitland street premises arose from Laundry Lounge’s security interest set out in the chattel mortgage agreement. Mr. Motwane is not a party to that agreement. The agreement provided a security interest over Familymat’s assets. Although the security interest encompassed assets that were acquired by Familymat after the closing date, it cannot reasonably be interpreted to encompass third party assets that happened to be on the premises when the seizure took place.

[71] Whether or not the chattel mortgage agreement gave Laundry Lounge the right to seize Ms. Motwane’s personal belongings (based on her guarantee) is not an issue before me.

[72] It is unnecessary for me to consider the other arguments raised by Mr. Motwane in support of his request for the return of his belongings.

[73] Given the defendants’ failure to respond to the plaintiffs’ March 31, 2017 letter, the defendants will be liable for any loss or damage caused to any of Mr. Motwane’s personal belongings, pursuant to s.18(5) of the PPSA.

[74] Any and all documents stored on the Asus laptop that are required to be disclosed by Familymat or by Mr. or Ms. Motwane in the context of this litigation shall be disclosed to the defendants within 30 days of the return of the laptop.

Mr. Motwane’s Motion to Dismiss Counterclaim

[75] The counterclaim against Mr. Motwane is based on Mr. Fiset’s perception that Mr. Motwane is to blame for Familymat’s and Ms. Motwane’s conduct, including the default in making the $100,000 mortgage payment and the failure to replace the signage at the Maitland street location. Mr. Fiset alleges that Mr. Motwane is either the (behind-the-scenes) controlling mind of Familymat, who engaged in tortious activity against Laundry Lounge, or he is a third party who induced Familymat’s breaches of contract and interfered with Laundry Lounge’s economic interests.

[76] Both Mr. and Ms. Motwane deny that Mr. Motwane is the controlling mind of Familymat. They claim that he was an unpaid employee of Familymat who assisted Ms. Motwane on occasion with the business.

[77] In this motion, Mr. Motwane asks the court to dismiss the counterclaim against him on a summary judgment basis pursuant to Rule 24.04(2)(a). He submits that none of the tort claims against him rise to the level of a genuine issue requiring trial. He argues that the defendants’ counterclaim consists of bald pleadings without supporting facts, that they have failed to discharge the evidentiary onus upon them, that they have not substantiated any of their allegations against him and have not quantified any damages suffered as a result of his alleged misconduct.

[78] Mr. Motwane bears the onus, as the moving party on a summary judgment motion, to establish the absence of a genuine issue requiring a trial. However, the defendants have an evidentiary burden pursuant to Rule 20.02(2), which requires a responding party in a summary judgement motion to set out, in affidavit material or other evidence, specific facts showing there are issues for trial. Mr. Motwane argues that the defendants are relying on a self-serving affidavit sworn by Ms. Fiset, without any supporting evidence or particularized facts.

[79] The responding party in a motion for summary judgment cannot simply rest on allegations or denials in their pleadings and argue that more evidence will be adduced at trial: Rule 20.02(2) and Transamerica Occidental Life Insurance Co. v. Toronto-Dominion Bank, [1999] O.J. No.1195, at para.49. As a general rule, the motion judge is entitled to assume that the motion record contains all of the evidence that the parties would present at trial: Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200 at paras. 27 and 32, aff’d 2016 ONCA 753, leave to appeal to S.C.C. denied.

[80] In this case, however, there are Familymat business records and other documents stored on the Asus laptop computer, which are currently inaccessible to the parties. The evidence on the laptop is relevant to the issues to be determined at trial. It may (or may not) support the allegations made by the defendants in the counterclaim against Mr. Motwane. It may (or may not) support the defendants’ claim for damages and may (or may not) assist the defendants in quantifying their damages. Some of the plaintiffs’ undertakings have not been completed because of lack of access to the documentation on the laptop. The evidence stored on the laptop is not before the court because it is inaccessible to all parties. In these unique circumstances, I cannot safely assume that the motion record contains all of the evidence that the parties would present at trial.

[81] Furthermore, although I agree with Mr. Motwane that the defendants’ pleadings are deficient in certain respects, I do not agree that the evidence adduced by the defendants consists only of a self-serving affidavit sworn by Mr. Fiset. Mr. Fiset conducted cross-examinations of deponents, which produced relevant evidence upon which he is entitled to rely. Some of the evidence supports elements of his counterclaim.

[82] The evidence in the record raises some genuine issues that require a trial, such as the extent of Mr. Motwane’s involvement in Familymat’s finances and operations, the degree to which he may have been in effective control of the company or, alternatively, may have induced the company to violate its contractual obligations to Laundry Lounge under the APS and chattel mortgage agreement.

[83] There are credibility issues raised by the defendants’ counterclaim. For example, Mr. Motwane is alleged to have been responsible (either as Familymat’s controlling mind or as a third party inducing breach of contract) for the decisions not to replace the Laundry Lounge signage and to use a photograph of the signage in Familymat promotional materials. With respect to interior signage at the laundromat, Mr. Motwane deposed that Mr. Fiset recommended to him that the signs be retained because of their artistic value, a claim that Mr. Fiset categorically denies. With respect to the exterior signage, Mr. Motwane claims that it was retained for the benefit of Laundry Lounge, but the decision to request rescission of the agreements occurred weeks after the signage was required to be replaced by the terms of the APS. This inconsistency in the evidence needs to be resolved.

[84] Another more serious credibility issue relates to whether Mr. Motwane induced Ms. Motwane and Familymat not to pay the $100,000 that was due under the chattel mortgage agreement. During his cross-examination, Mr. Motwane denied having any discussion whatsoever with Ms. Motwane about the $100,000 payment prior to November 18, 2016. In contrast, Ms. Motwane testified that she discussed not paying the $100,000 with Mr. Motwane. She could not remember if she asked for his opinion on the issue but she recalled that he agreed with her decision. She insisted that it was her decision and not his, but her evidence was unclear regarding whether he encouraged or persuaded her not to make the payment.

[85] Credibility findings also need to be made with respect to the treatment of customers who brought Laundry Lounge discount coupons into Familymat’s premises under the misapprehension that it was the same business. Ms. Motwane testified that “quite a few” customers did this. After an initial period during which Familymat’s employee was turning these customers away, Ms. Motwane testified that the coupons were honoured by Familymat so that wash-and-fold business would not be lost to Laundry Lounge. The defendants argue that Familymat’s failure to replace the Laundry Lounge signage led to this confusion and resulted in unjust enrichment to Familymat. There is contradictory evidence about whether Mr. Motwane had any involvement in the decision to honour the Laundry Lounge coupons and the extent to which his conduct contributed to the customers’ confusion. He denies any involvement but Ms. Motwane recalled, during her cross-examination, that she spoke to him about the Laundry Lounge discount flyer and asked him what he wanted to do about it. She testified that he told her, “Honour it”.

[86] These are just a few examples of numerous credibility issues raised by the motion record. Although I have the authority, pursuant to Rule 20.04(2.1), to evaluate the credibility of deponents in a summary judgment motion, I am of the view that, in the particular circumstances of this case, it is in the interest of justice for that to be done at trial.

[87] It would not only be difficult for me to make credibility findings in this motion without the benefit of viva voce evidence, it would also be inappropriate to make those findings in the context of a partial summary judgment. The factual matrix that underlies Mr. Motwane’s motion to dismiss the counterclaim against him overlaps to a large extent with the factual matrix underlying other issues to be determined at trial. For example, if I were to conclude that Mr. Motwane intentionally caused Familymat to breach the chattel mortgage agreement by persuading Ms. Motwane not to make the $100,000 payment, I would then be required to determine whether there was a juristic reason for his actions. [1] That would necessitate a finding with respect to rescission, which in turn would require interpretation of the NCA and non-competition clauses in the APS – issues that lie at the heart of the main action to be tried. The risk of duplicative or inconsistent findings at trial is evident.

[88] For all of the above reasons, I conclude that it is inadvisable to determine the merits of the defendants’ counterclaim against Mr. Motwane on the basis of a partial summary judgment.

Conclusion and Orders

[89] Mr. Motwane’s motion is granted in part. The defendants shall return to Mr. Motwane the following items seized on December 24, 2016: Asus laptop computer, Samsung tablet, printer, deity idol, incense holder, small container for diffusing oil, and personal bills in Mr. Motwane’s name. The items must be returned forthwith. The laptop, in particular, must be returned to Mr. Motwane no later than 2 days after the date of these Reasons for Judgment.

[90] Any and all documents stored on the Asus laptop that are required to be disclosed by Familymat or by Mr. or Ms. Motwane in the context of this litigation shall be disclosed to the defendants within 30 days of the return of the laptop.

[91] I decline to consider or decide the merits of the defendants’ counterclaim against Mr. Motwane on a partial summary judgment basis.

[92] Costs of this motion are reserved to the trial judge.

Petersen J. Released: October 4, 2018

Footnotes

[1] The absence of a juristic reason is one of the elements of the tort of inducing breach of contract.