COURT FILE NO.: CV-16-11321-00CL

DATE: 20181211

ONTARIO SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

BETWEEN:

MELROSE PROPERTY DEVELOPMENT INC.

Plaintiff

• and -

ROYAL BANK OF CANADA, BDO DUNWOODY LIMITED, and PLATINUM ASSET SERVICES INC.

Defendants

Marek Z. Tufman, for the Plaintiff

J. Ross MacFarlane, for the Defendants

HEARD: November 13, 2018

REASONS FOR DECISION

MCEWEN J.

1. The defendants bring this motion for summary judgment pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to dismiss the plaintiff's claim.

2. For the reasons below I grant the order sought and the claim is dismissed.

OVERVIEW

3. The plaintiff, Melrose Property Development Inc. ("Melrose"), was a property management company.

4. Its claim relates to certain coating equipment (the "Disputed Equipment") that it alleges was in the possession of the defendants and disposed of by them during a bankruptcy proceeding.

5. The defendant, Royal Bank of Canada ("RBC"), had earlier loaned money to a company called Starwood Flooring Inc. ("Starwood"). Starwood became bankrupt and the defendant BDO Dunwoody Limited ("BDO") became the court-appointed trustee in respect of Starwood. The defendant, Platinum Asset Services Inc. ("Platinum"), carried out a court-supervised and court­ approved sale of the assets of Starwood.

6. Melrose asserts that the Disputed Equipment was at the Starwood premises and was unlawfully sold by the defendants, thereby unjustly enriching RBC. Melrose therefore commenced this claim in the amount of $1,800,000 for damages, plus punitive and exemplary damages in the amount of $500,000.

7. The defendants specifically deny that the Disputed Equipment belonged to Melrose, that the Disputed Equipment was ever located at Starwood's premises, or that the Disputed Equipment was ultimately sold by Platinum.

8. It bears noting that the court-approved sale price for the equipment, which allegedly included some of the Disputed Equipment, was $10,000.

THE LAW

9. In Hryniak v. Mauldin, 2014 SCC 7, the Supreme Court made it clear that a trial is not always necessary if a summary judgment motion can achieve a fair and just result. As is well known, the· Supreme Court stressed that the trial courts were to find more proportionate, expeditious and less expensive means to determine claims short of trial, if it could be done on a fair and just basis.

10. In my view, for the reasons below, this is one of those cases.

ANALYSIS

Preliminary Issues

11. Both Melrose and the defendants raised preliminary arguments that I would quickly dismiss.

12. First, the defendants claim that Melrose's only remedy should be a claim under s. 81 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the "BIA"), and that s. 81(5) of the BIA is a complete bar to the action since Melrose failed to attach its Demand for Repossession of Goods to an affidavit as required by s. 81(5) of the BIA.[^1]

13. I do not believe that the defendants can meaningfully rely upon these provisions. It is uncontested. that a Form 75 was provided. It was, however, unattached to an affidavit. BDO did not, in any way, shape or form, respond to the request and insist upon an affidavit or any clarification. Melrose, or the related company was, therefore, never under the impression that its Demand was improperly made and not in compliance with the BIA. This was raised, presumably for the first time, at this motion.

14. I would therefore not dismiss Melrose's claim on this very technical basis since BDO raised no objection in July of 2009 when the Demand was received and provided no opportunity to correct any deficiencies.

15. Second, Melrose submits that this motion should be dismissed relying upon the equitable doctrines of issue estoppel, cause of action estoppel, delay and abuse of process.

16. In support of this submission, Melrose relies upon the fact that the defendants brought a motion before Justice Dunphy approximately two years ago to have the action dismissed. That motion, however, was based upon the provisions of Rule 21 of the Rules of Civil Procedure. Furthermore, there was no determination on the merits. The action, pursuant to Justice Dunphy's endorsement, was simply transferred to the Commercial List. In these circumstances the doctrines of issue estoppel, cause of action estoppel, and abuse of process cannot apply.

17. Melrose also submits that the defendants have had several years to bring the motion and the action has been outstanding since the Notice of Action was issued in July 2011. In my view, nothing turns on the timing of this motion. I see nothing in the record that would suggest there has been untoward delay on behalf of the defendants. No authority was provided to me to support the submission that at some point in time it would be simply too late to bring a summary judgment motion in the context of this case. No trial date has been set and certainly Melrose could have taken steps to move the action along quicker should it have seen fit to do so.

Was the Disputed Equipment in the possession of the defendants?

18. Mr. Adam Moskowitz, the president of Platinum, and Mr. Vince Siciliano, a senior vice president of BDO, have both deposed that they do not believe that any of the Disputed Equipment was ever in the possession of the defendants by way of it being stored at Starwood.

19. This evidence is supported by an email exchange between Mr. Moskowitz and the ultimate purchaser of the equipment, Mr. Eugene Bourcier of Web Mechanical.

20. On the other side of the coin, both Mr. Frank Rosso, president and director of Melrose, and Mr. Aivor Khourkine, the president of Starwood, have deposed that the Disputed Equipment was at Starwood.

21. At their cross-examinations, Mr. Rosso and Mr. Khourkine reviewed certain photographs and gave somewhat contradictory accounts of exactly what comprised the Disputed Equipment. This did not assist the Melrose's case.

22. That being said, however, the record is unclear and there are obviously credibility issues at play between the affiants. Neither side called evidence from the former employee of BDO, Mr. Les Fulton, that was handling the Starwood matter at the relevant time and may well be in the best position to opine on the issue of possession of the Disputed Equipment.

23. Based on the record that was put before me, I am of the view that there is a genuine issue for trial with respect to the issue of whether the Disputed Equipment was in the possession of the defendants and sold by them.

Did Melrose own the Disputed Equipment?

24. It is on this basis that I grant summary judgment. The court is empowered to exercise its discretion and decide genuine issues for trial pursuant to the Rules where to do so is not contrary to the interests of justice: Hryniak at para. 66.

25. I am satisfied that the evidence allows me to fairly and justly adjudicate the ownership dispute. Although the record regarding possession is not entirely clear, a determination on the ownership issue can be achieved in a fair and just fashion. It will also dispose of this straightforward action. The parties have had every opportunity to adduce evidence by way of affidavit, documentation and upon their cross-examinations.

26. Based on the evidentiary record before me, there is no credible and reliable evidence to support Melrose's position that it owned the equipment. The only evidence in this regard of any significance is the bald affidavit evidence of Mr. Rosso, which is unsupported by the documentation, and undermined by the fact that he did not answer undertakings concerning ownership. In my view, the affidavit evidence viewed in context lacks the necessary "air of reality" and does not create a genuine issue requiring a trial: Royal Bank v. Tie Domi Enterprises Ltd, 2011 ONSC 7297.

27. Melrose has failed to put its best foot forward. It has offered different and contradictory evidence as.to the basis of its claim for ownership of the Disputed Equipment. In my view, there is no documentation that reliably establishes ownership.

28. I have come to the above conclusions for a number of reasons, primarily as follows:

• As noted in paragraph 13 above, a Form 75 was delivered to BDO. Of interest is the fact that the Form was delivered on behalf of "Melrose". The attached Schedule which set out the list of Disputed Equipment bore the name "Melrose Prefinished Floors Inc.". Melrose Prefinished Floors Inc. was another company owned by Mr. Rosso that went out of business in 2008. The Form 75, therefore, appears to have been submitted on behalf of Melrose Prefinished Floors Inc. and not Melrose.

• In its statement of claim, Melrose pleads that Starwood held the Disputed Equipment as bailee and that Melrose had lent the Disputed Equipment to Starwood. Of note is the fact that Melrose attached to its statement of claim a list of the Disputed Equipment as Schedule A. Of further significance is the fact that Schedule A is the exact same Schedule as that referred to above that was provided to BDO with the Form 75. The problem, however, is that Schedule A was admittedly edited by Melrose to delete the name of Melrose Prefinished Floors Inc. Clearly, this was done to do away with evidence that would suggest that the Disputed Equipment was not owned by Melrose but was rather owned by the related company Melrose Prefinished Floors Inc. Mr. Rosso has also admitted that Melrose Prefinished Floors Inc. used the Dispute Equipment.

• Melrose has taken various and contradictory positions concerning the issue of ownership. In the above-noted pleading it claims that it lent the equipment to Starwood. At Mr. Rosso's cross-examination, however, he testified that Melrose owned the property by way of a possessory lien and that Melrose had taken the Disputed Equipment from another one of Mr. Rosso's related companies, Hardwood Flooring Centre Inc. Documentation subsequently produced by Melrose discloses that Mr. Rosso, on behalf of Hardwood Flooring Centre Inc., obtained a loan from the Business Development Bank of Canada to purchase equipment. If this documentation is to be accepted, the equipment was sold to Hardwood Flooring Centre Inc. and not Melrose. Interestingly, the documentation provided by the vendor discloses that it was sold to "Hardwood Flooring Centre Inc. - In Trust". Melrose, however, has failed to produce any documentation to support that it was purchased in trust for Melrose. The loan and subsequent sales transaction took place in 2003. Hardwood Flooring Centre Inc. was another company of Mr. Rosso's that went bankrupt in 2008.

• Notwithstanding having been afforded every opportunity to adduce evidence to establish ownership by way of documentation,[^2] Melrose has failed to provide any credible and reliable documentary evidence that it owned the equipment. It has not been able to provide any documentation such as purchase invoices, financial statements, repair documentation or similar documents. Of significance is the fact that the Disputed Equipment was never included in any of Melrose's financial statements or financial reports prior to the sale. Mr. Rosso has provided no explanation as to why there is no supporting documentation.

• At Mr. Rosso's cross-examination, he undertook to provide documentation to support the claim of ownership, or relating to the trust and assignment alleged by Melrose. None of those documents were produced prior to the hearing of the motion and no explanation was given as to why this significant undertaking was not complied with. In these circumstances I am prepared to draw an adverse inference against Melrose for failing to answer this undertaking, which went to the critical issue of ownership.

• Presumably in an effort to buttress its position concerning ownership, the day before the motion Melrose delivered a two page affidavit from Mr. Rosso attaching documentation in support of Melrose's claim. The affidavit, however, provides no context whatsoever with respect to alleged payments made involving the Disputed Equipment. Further, the payments referred to in the documentation only began in 2010 - a year after the Disputed Equipment was sold.

29. Given all of the above - primarily the lack of supporting documentation, contradictory evidence as to the Melrose's basis on which it claims ownership, failure to answer undertakings and the bald unsupported statements of Mr. Rosso - I am satisfied that the defendants have established on the balance of probabilities that the property was not owned by Melrose.

30. The defendants submit that it is likely that the contradictory and vague ownership information produced by Melrose concerning the Disputed Equipment was designed to protect the equipment from creditors. I make no definitive finding in this regard but, in my view, this theory is more plausible than Melrose's theory of ownership. It is also much more sensible that the Disputed Equipment would have been owned by either Melrose Prefinished Floors Inc. or Hardwood Flooring Centre Inc. as opposed to Melrose. Both of the companies were in the flooring business while, as noted, Melrose was a property management company.

31. In dismissing Melrose's claim, I am cognizant of the fact that it is implicit in my findings that I have not found Mr. Rosso to be particularly credible or reliable witness. As per the decision in Hryniak and the powers provided in Rule 20.04(2.1), I am allowed to evaluate the credibility of a deponent in suitable circumstances. In this instance, I am not weighing Mr. Rosso's credibility against another witness, but rather his credibility with respect to the issue of ownership in circumstances where there is no reasonable supporting documentation. It is in this circumstance that I find him not to be credible. Melrose, through Mr. Rosso, has been given every opportunity to put its best foot forward. Other than Mr. Rosso's own self-serving evidence that Melrose owned the equipment, there is no other persuasive evidence. Furthermore, the documentary evidence supports the conclusion that the Disputed Equipment was not owned by Melrose but more likely by Melrose Prefinished Floors Inc. or Hardwood Flooring Centre Inc.

32. Given the above, I believe that I am in as good a position as a trial judge would be to determine this issue. It is therefore not in the interests of justice to subject the defendants to expensive trial and there is no genuine issue requiring a trial.

Disposition

33. For the above reasons the claim is dismissed.

34. The defendants are entitled to their costs of the action. Although they seek costs on a substantial indemnity basis, it is my view that partial indemnity costs are reasonable. I have reviewed the bill of costs and agree with the defendants that the amount of $35,000 inclusive is reasonable for the costs incurred in defending the action and bringing the motion.

McEwen J.

Released: December 11, 2018

[^1]: The defendants also dispute that it was in fact Melrose that submitted the Form 75 as opposed to another related company. I will deal with that argument below.

[^2]: I originally adjourned the motion when it was scheduled for July 16, 2018 to allow Melrose an opportunity to adduce documentary evidence to support its claim of ownership.