Court File and Parties

COURT FILE NOs: CV-18-00602802

DATE: 2019-11-13

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 2281610 Ontario Inc. and Ford Motor Company, Plaintiffs

– AND –

2620466 Ontario Limited, Bradley Nullmeyer, Timothy Quocksister, 2093150 Ontario Inc. carrying on business as Engineered Automotive and Steve Hudson, Defendants

BEFORE: E.M. Morgan J.

COUNSEL: Hugh DesBrisay and Corey Groper, for the Plaintiffs Christopher Belsito, for the Defendant, Timothy Quocksister

HEARD: November 12, 2019

MOTION TO SET ASIDE INJUNCTION

[1] This action is a dispute over a $1.5 million sports car. It is an extraordinary vehicle, produced and sold by the Plaintiffs, Ford Motor Company and 2281610 Ontario Inc. (together “Ford”), as a tribute to the extremes of automotive engineering and design.

[2] The Defendant, Timothy Quocksister, seeks to set aside an interlocutory injunction granted by Koehnen J. on August 29, 2018. The injunction prevents the conveyance or transfer of a Ford GT “super car” (VIN #2FAGPCW4JH100071) (the “Vehicle”) pending trial of this action.

[3] Counsel for Quocksister submits that the Plaintiffs have failed to make out a prima facie cause of action in civil conspiracy, as pleaded. Documentary discovery has been completed. Counsel for Quocksister advises that everyone relevant to the claim against his client has been examined under Rule 39 or has filed an affidavit in the motion and been cross-examined.

[4] Ford’s evidence is that very few “super cars” like this are manufactured and that it is very selective about who can buy this kind of Vehicle. A very expensive automobile like this is often sold to dealers and collectors who use it for promotional purposes.

[5] Ford negotiated to sell the Vehicle to the Defendant, Steven Hudson (“Hudson”), who is (or was at the time) a car dealer for a sale price, with tax, that came to $700,000. That sale was to be on terms which imposed a restriction on its re-conveyance. The restriction, which required that the Vehicle not be re-sold or conveyed to anyone else for 24 months following its purchase from Ford, was clearly written on the Revised Order Confirmation Form (the “Confirmation Form”) provided by Ford and signed by Hudson.

[6] The detailed specifications for the Vehicle were further discussed by Ford with a business associate of Hudson’s, the Defendant, Bradley Nullmeyer (“Nullmeyer”). Ford transferred the Vehicle to the Defendant, 2620466 Ontario Limited (“262”), a company controlled by Nullmeyer and his son, Andrew Nullmeyer, on April 10, 2018. Ford was apparently unaware that the transfer was to a company controlled by Nullmeyer, in which Hudson had no interest.

[7] The title transfer documentation for the Vehicle did not repeat the restriction on further transfer that was contained in the Confirmation Form between Ford and Hudson. In his Rule 39 examination, Nullmeyer conceded that he was aware of the restriction in the Confirmation Form given to Hudson. However, he claims to have been of the view that the restriction did not apply to the Vehicle since Ford had in fact transferred it to 262, and not to Hudson. It was only Hudson, and not 262 or Nullmeyer, who signed the Confirmation Form containing the relevant term restricting re-sale.

[8] Quocksister, who is also a car dealer, bought the Vehicle by purchasing the shares of 262 on May 1, 2018. The purchase price was $1.5 million, thereby making more than a 100% profit for Nullmeyer and his son. This was only 20 days after the acquisition of the Vehicle by 262, but still several months prior to the injunction issued by Justice Koehnen. Quocksister did the standard due diligence for purchasing a luxury vehicle and acquired the documentation confirming its title. The Car Proof Report for the Vehicle showed “No lien records found”. The Ontario vehicle registration for the Vehicle showed the owner as being 262.

[9] Quocksister claims that he is a bona fide purchaser for value without notice of the 24-month restriction on sale. Ford claims that Quocksister was aware of the restriction on transfer of the Vehicle and that he conspired with Hudson and Nullmeyer to circumvent Ford’s rights under the terms of sale. Although the evidence does not show that Quocksister and Nullmeyer knew each other previously or that they premeditated a scheme to undermine Ford’s rights, the record contains evidence that casts some doubt on Quocksister’s claim to not have had notice of the restriction on re-sale that Ford thought accompanied the Vehicle.

[10] Quocksister was introduced to the Vehicle and purchased it through the assistance of an automobile broker, Jeffrey Seigel (“Seigel”). Quocksister concedes that the package of materials provided to him by Seigel contained a copy of the Confirmation Form with Hudson’s signature on it. He also acknowledges that the restriction on transfer was printed on the Confirmation Form. However, he says that he made no further inquiry about why this document was included in the package of documents.

[11] It is Quocksister’s position that as far as he knew, he was buying from Nullmeyer and his son as the principals of 262, and not from Hudson. In an email to Seigel dated April 20, 2018, Quocksister outlined some standard inquiries that a purchaser of this kind of high-end Vehicle would make, including whether there were any “agreements which prohibit the sale of the vehicle which Ford may have had signed when the car was ordered.”

[12] Siegel did not answer this question in writing. However, in his Rule 39 examination Seigel specifically stated that he discussed the restriction on transfer with Quocksister.

[13] Counsel for Quocksister submits that Seigel is not a credible witness, which may well be the case. Seigel was caught in his examination trying to hide the fact that he knew or had any direct dealings with Andrew Nullmeyer, but it turns out that he had been paid a secret commission of $200,000 by Andrew Nullmeyer on the sale to Quocksister and submitted an invoice directly to Andrew Nullmeyer for that amount.

[14] Catching a witness in a lie like that does give me pause, but it does not entirely convince me that I should take Quocksister’s word over Seigel’s. Seigel testified that anyone in Quocksister’s position would have known about the restrictions on re-sale of this type of Vehicle. As he put it, “I think if you’re a car person at all, never mind in the car business, you know the restrictions.” Given the notoriety of these rare, ultra high-end cars among car dealers, Seigel’s statement makes a certain amount of sense. One does not pay $1,500,000 for an automobile without knowing a little something about it.

[15] In any case, the sale of 262 to Quocksister was done by formal written agreement dated May 1, 2018. Each side was represented by counsel. The Agreement contained a representation and warranty by Andrew Nullmeyer that the shares being transferred are “free and clear of any…restriction…of any kind.” The Agreement also contained a representation that “The property and assets of the Corporation are owned by the Corporation as the beneficial owner with a good and marketable title, free and clear of all Encumbrances other than the Permitted Encumbrances.” The Vehicle was 262’s only asset.

[16] This Agreement was, as indicated, brokered by Seigel. Nullmeyer deposed that during the course of negotiating it, he did speak directly with Quocksister about the deal. According to Nullmeyer, they discussed, among other things, the question of restrictions on re-sale placed on the Vehicle by Ford. Nullmeyer’s description of this conversation, however, makes no sense. He insisted that it was Quocksister, the purchaser, that assured Nullmeyer, the seller, that the Vehicle was free and clear to be sold. Nullmeyer stated under oath, “The issue came up but he [Quocksister] discussed with me, and was quite adamant that this was bought under a purchase and sale agreement, an OMVIC agreement and has no restrictions on it.”

[17] Quocksister re-sold the Vehicle to a Vancouver-based car dealer, SR Auto Group (“SR Auto”), on May 1, 2018, the same day as he bought it. The sale price for that quick flip was $1.35 million (U.S.), making for a tidy profit for Quocksister once the currency exchange rate is taken into account. SR Auto registered its title in the British Columbia vehicle registry on May 29, 2018. It then re-sold the Vehicle to an undisclosed buyer from Hong Kong. All of these sales, including the final one in the chain to the Hong Kong investor, appear to have pre-dated the injunction Order of August 29, 2018.

[18] Quocksister testified in his cross-examination that, having gotten notice of Justice Koehnen’s injunction, SR Auto is holding him responsible for breach of warranty of title. As he explained it when examined, SR Auto has not commenced litigation to press its claim as Quocksister and SR Auto have a good working relationship; however, SR Auto fully expects Quocksister to make it whole in respect of Ford’s claim.

[19] Quocksister and SR Auto were not initially parties to this action. When first commenced, Ford was unaware that 262 had been sold to Quocksister or that the Vehicle was subsequently sold to SR Auto. By the time of the injunction motion, however, the chain of sales had become clearer to Ford. Accordingly, Quocksister received notice of the injunction motion as the corporate registry showed him to be president of 262. Having already unloaded the Vehicle on the next purchaser, Quocksister opted not to participate in the motion.

[20] SR Auto also received notice of the injunction motion. It responded by registering a lien against title to the Vehicle on August 9, 2018. That registration is public knowledge, as it appears on the updated version of the Vehicle’s Car Proof Report.

[21] Justice Koehnen’s Order of August 29, 2018 identified 262 as the “current owner” of the Vehicle. That was incorrect. Public records show that 262 had already been sold by Nullmeyer to Quocksister, who had then sold the Vehicle to SR Auto, who had sold it to the Hong Kong purchaser. Since Quocksister had made a conscious decision not to respond in any way to Ford’s motion, it is not surprising that this chain of re-sales escaped Koehnen J.’s attention.

[22] As indicated, Quocksister now seeks to vacate the injunction. This is not a task that can be accomplished lightly. The Federal Court of Appeal has observed that a court should only set aside an interlocutory injunction in exceptional circumstances: Business Depot Ltd v Canadian Office Depot Inc., 2000 CarswellNat 2023 (Fed CA), para 4. The burden is on the applicant to satisfy the court that there has been an unforeseen and previously unknown change in circumstances since the injunction was issued: DaKow Ventures Ltd. v. Daski Contracting Ltd., 2018 BCSC 2128, para 5. That burden has been characterized by the courts as a very heavy one: Jack Digital Productions Inc. v Comex Foreign Exchange Inc., 2007 CarswellOnt 6656, para 10.

[23] As McEwen J. explained in Canadian National Railway v Holmes, 2015 ONSC 1476, para 5, there must be new facts that “are substantially different from the facts upon which the original order was given.” Without this it would be open to applicants to move to set aside an interlocutory injunction multiple times as the case moves through discoveries to trial: Abbotsford (City) v Shantz, 2014 BCSC 2385, para 27.

[24] Counsel for Ford submits that there is nothing new since Koehnen J. issued his injunction, and that consequently there are no grounds on which to vacate it. Their position is that everything that is known now, after all of the affidavits and examinations, was known at the time of the injunction. The only reason some of the facts may have escaped the court’s notice is that the Defendant, and those like Quocksister who were put on notice refused to participate.

[25] Indeed, even Quocksister’s position does not really establish anything new. Put at its highest, Quocksister’s argument is that all of the evidence that has now been collected fails to prove Ford’s case. In other words, it is not that the evidence in the record before me today has produced anything new, but rather that it has failed to produce anything new.

[26] I agree that if a party given notice of an injunction has relevant information that it wants to put before the court, it behooves it to do so. It does not serve the interests of justice for that party to wait until after the injunction has been granted and then move to set it aside based on the evidence that it could have provided in the first place.

[27] I am also skeptical about Quocksister’s more fundamental point that there is no evidence to support Ford’s claim of civil conspiracy. As Ford’s counsel points out, to be a participant in a conspiracy one does not have to participate in every aspect of the conspiracy. If Hudson and Nullmeyer conspired against Ford in engineering the initial purchase by 262, and if Quocksister was aware of their undermining of Ford’s rights and entered into his own deal with Nullmeyer in which he profited from the initial conspiracy, he too may be a co-conspirator.

[28] Counsel for Quocksister cites Shostman-Steinburg Ltd v 2049669 Ontario Inc., [2009] OJ No 2380, para 39 for the proposition that the Statement of Claim must particularize “the agreement between the defendants to conspire, and state precisely what the purpose or what were the objects of the alleged conspiracy, and it must then proceed to set forth, with clarity and precision, the overt acts which are alleged to have been done by each of the alleged conspirators in pursuance and in furtherance of the conspiracy; and lastly, it must allege the injury and damage occasioned to the plaintiff thereby.” These particulars are not hard to find in Ford’s pleading.

[29] In fact, they can almost be stated in a sentence. Paragraph 55 of the Amended Statement of Claim states:

Quocksister acquired the Hudson GT from Nullmeyer, when he knew that the vehicle had been unlawfully acquired by 2621466. He participated in a transaction which he knew to be unlawful for his own financial gain.

[30] Those allegations have not been proved by Ford on this motion, but there is certainly sufficient evidence in the record to make them triable issues.

[31] In my view, Quocksister’s argument that the injunction must be vacated because Ford has not proved its claim against it is, in effect, a disguised summary judgment motion. If Ford cannot make out its conspiracy claim, the entire action should be dismissed as against Quocksister, not just the injunction.

[32] That approach, however, would tread on the dangerous ground of partial summary judgment. The other Defendants would still be left in the action. It is altogether possible that at trial findings contrary to those in respect of Quocksister would be made in respect of those other Defendants.

[33] There is also too much information missing from the record to ground summary judgment. We do not know what position SR Auto or the Hong Kong purchaser will ultimately take, since they have not been involved in the motion before me. What we do know is that Quocksister’s counsel would have me conclude today that Quocksister did not conspire with Nullmeyer, whereas a trial judge in Nullmeyer’s case down the road might conclude that Nullmeyer did conspire with Quocksister.

[34] Quocksister’s approach to the injunction therefore raises precisely the kind of partial summary judgment problem that the Court of Appeal has admonished against – i.e. it gives rise to a potential for conflicting findings at two different stages of the action. As the Court of Appeal put it in Mason v Perras Mongenais, 2018 ONCA 978, para 23, Ford’s claim against Quocksister is “inextricably linked” to the balance of the claim – in particular to the potential findings about whether Quocksister truly is a bona fide purchaser without notice or whether he was parasitic on, and thus a form of participant in, a conspiracy to deprive Ford of its rights.

[35] Under those circumstances, this is not a case in which to make a ruling with respect to the ultimate viability of Ford’s claim against Quocksister. That remains to be seen at trial, along with Ford’s claims against the other Defendants.

[36] In terms of the remedy that Ford seeks in the action, its counsel explains that the injunction supports its claim for rescission of the sale of the Vehicle to 262. That made sense over a year ago when the matter was before Koehnen J. However, as time marches on it is destined to become ineffective and irrelevant.

[37] The terms of sale to which Hudson originally agreed restricted re-sale of the Vehicle for 24 months. That period will expire at the end of the day on April 9, 2020. Unless Ford brings its own summary judgment motion, this action is unlikely to be resolved within that time frame. Starting on April 10, 2020, Ford’s claim will by all logic be for damages only. As far as I understand it, at that point the injunction will serve no further purpose.

[38] I do not have to decide that issue now since April 2020 is still 5 months away. However, I foresee the question of the lingering injunction looming on the horizon. The very rationale for the injunction may disappear well in advance of a trial being scheduled.

[39] There is nothing new here and Ford’s claim is supported in the evidence at least to the extent that it is an issue that requires a trial. For those reasons, I would dismiss the motion by Quocksister. But I do so without prejudice to his bringing it again after April 9, 2020.

[40] Ford deserves costs of this motion. Its counsel has submitted a Costs Outline in which it seeks a total of $52,131.05 on a partial indemnity basis. This is roughly double the $26,793.21 that Quocksister’s counsel would seek according to his Costs Outline. I will confess that at first blush the amount sought by Ford seems rather high given the size of the record (one bound volume for Quocksister and two bound volumes for Ford) and the three hour hearing.

[41] Counsel for Ford explains that his team conducted four Rule 39 examinations, which required a substantial amount of preparation time. That explains why Ford’s costs are significantly higher than Quocksister’s costs. On the positive side, this effort will also have the effect of reducing Ford’s costs of the action going forward, since it will no doubt allow some of the discoveries and, ultimately, trial preparation time, to be consolidated or dispensed with. Accordingly, what is paid now may be saved in the future.

[42] Costs are discretionary under s. 131 of the Courts of Justice Act. This discretion is to be exercised in accordance with the criteria set out in Rule 57.01 of the Rules of Civil Procedure. These include, among other things, the principle of indemnity for the successful party [Rule 57.01(1)(0.a)] and “the amount of costs that an unsuccessful party could reasonably expect to pay…” [Rule 57.01(1)(0.b)].

[43] With no disrespect intended, it seems to me that parties who can spend $1.5 million on a car can probably expect to spend $50,000 or so fighting about it on a motion. Although Ford’s costs were substantially higher than Quocksister’s, they were justified in the greater scheme of the case. I will exercise my discretion to order the costs sought by Ford, with a slight rounding down.

[44] Quocksister shall pay Ford costs in the all-inclusive amount of $50,000.

Date: November 13, 2019 Morgan J.