COURT FILE NO.: CV-17-572002 and CV-17-572791

DATE: 20201102

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

COURT FILE NO. CV-17-572002

WESLEASE 2018 OPERATING LP

Plaintiff

– and –

EASTGATE PHARMACEUTICALS INC., PROACTIVE SUPPLY CHAIN SOLUTIONS INC., SALVATORE MANCUSO, CHRIS PEARCEY, GIANCARLO STAFFIERI

Defendants

And Between:

Court File No. CV-17-572791

WESLEASE 2018 OPERATING LP

Plaintiff

-and-

EASTGATE PHARMACEUTICALS INC., PROACTIVE SUPPLY CHAIN SOLUTIONS INC., SALVATORE MANCUSO, CHRIS PEARCEY, GIANCARLO STAFFIERI and ANNA GLUSKIN

Defendants

David Winer, lawyer for the plaintiff in both actions

Matthew R. Harris, lawyer for the defendants, Salvatore Mancuso, Chris Pearcey, Giancarlo Staffieri and Proactive Supply Chain Solutions Inc., in both actions

Eastgate Pharmaceuticals Inc., not represented, defendant in both actions.

Anna Gluskin, not represented, defendant in Action No. CV-17-572791

HEARD: In writing

G. DOW, J.

REASONS FOR DECISION

[1] The plaintiff, Weslease 2018 Operating LP (“Weslease”) seeks summary judgment on a Lease and General Security Agreement it took an assignment of from Weslease Income Growth Fund Limited Partnership (“WIG”) against the defendants. There are two actions, the first being court file CV-17-572002 and the second, court file CV-17-572791. The second action involves all of the parties with the exception of the defendant Anna Gluskin whose signature in the Lease has her as the CEO of Eastgate Pharmaceutical Inc. Further, she appears to have signed the General Security Agreement personally (as a “Debtor” on the first page) and as CEO of Eastgate Pharmaceutical Inc. The General Security Agreement is dated August 24, 2015.

[2] Procedurally, counsel for Anna Gluskin and Eastgate Pharmaceutical Inc. removed themselves as solicitor of record in September, 2019. No intention to act in person or order permitting someone other than a lawyer present the corporation has occurred. Neither of these two entities served any material in response to these motions.

[3] It does not seem disputed the Lease and General Security Agreement were with regard to equipment the defendants used to manufacture nutraceuticals (also known as compounds with added nutritional value), likely from food and for consumption.

[4] The Lease dealt with three specific pieces of equipment for a period at 60 months at $7,786.71 per month. Title to the equipment remained with WIG until the conclusion of the Lease at which time the equipment could be purchased for an agreed on nominal amount.

[5] The General Security Agreement identified other pieces of equipment owned by the defendants. After the defendants failed to make the required payments, as of August, 2016, the plaintiff attempted to repossess the equipment. This included a motion before and an order of Master McAfee directing same along with other relief. The recovery order did not include what I would describe simply as a Vector Laboratory Roller Compactor or a Table Top High Sheer Granulator with accessories because of confusion over modest differences in the description of the equipment in the Lease or General Security Agreement and the Statement of Claim. Weslease has attempted to clarify the discrepancy and seeks an order for possession of these items as part of summary judgment.

[6] The bailiff attended April 18, 2017 at the defendants’ premises and repossessed the three pieces of equipment subject to the Lease and two of the pieces of equipment identified in the General Security Agreement.

[7] The outstanding two pieces of equipment are important as the plaintiff entered into and reached an agreement to sell the equipment, all seven pieces, for $60,000.00. It has received funds which would mitigate the amount claimed, as of July 18, 2019 which is $391,806.72. This represents missed payments including interest.

[8] If the two additional pieces of equipment are not located and turned over to Weslease, the sale would be aborted and the funds returned. There was no evidence as to the value of the equipment repossessed separately.

[9] Subsequent to the failure to make the requisite Lease payments and repossession, there were discussions between the parties which the defendants alleged resulted in a draft written agreement but not signed by both parties. The defendants alleged a binding oral agreement. The plaintiff disputes any oral agreement and points to various provisions of the proposed agreement to deliver partial funds (which never occurred) in support of same.

Analysis

[10] The parties do not dispute the test for summary judgment is contained in Rule 20 and subject to the direction given in Hryniak v. Mauldin, 2014 SCC 7, 2014 S.C.C. 7. First, is there a genuine issue requiring a trial? Beyond that, is there sufficient evidence which allows the judge to make the necessary findings of fact, apply the law to those facts and provide a more expeditious and less expensive means to achieve a just result. This may involve enhanced fact finding powers.

Issue – Judgment against Eastgate Pharmaceuticals Inc. and Anna Gluskin

[11] A Statement of Defence has been served by these defendants. It alleges Anna Gluskin is not a party to or liable to the plaintiff on the basis her involvement was restricted to that of an officer of the corporation. I agree with the plaintiff that is not what the Lease and General Security Agreement indicates. The Lease with Proactive Supply Chain Solutions Inc. also identifies the individual defendants “acting jointly and severally” as Lessees.

[12] Neither of the defendant Eastgate Pharmaceuticals Inc. or Anna Gluskin tendered any evidence or made written submissions to support their position. As a result, based on the evidence submitted, I conclude the plaintiff is entitled to judgment against these defendants.

Issue – Judgment against the remaining defendants

[13] The remaining defendants purport all of the items involved in the Lease and General Security Agreement were seized. However, they admit none of the individual defendants were present. There was affidavit evidence from the bailiff, Neil Emerson and he was cross-examined.

[14] No direct attempt to undermine Mr. Emerson’s evidence has been made by these defendants. I find Neil Emerson’s evidence to be persuasive of what occurred and support there is no genuine issue requiring a trial. As a result, I conclude the plaintiff is entitled to judgment against these defendants.

Issue – Judgment against the remaining defendants

[15] The remaining defendants do not deny the Lease exists, that they signed it, and it made them jointly and severally liable for the five years of payments which have not been made since August, 2016. Their defence, through the evidence of the defendant, Salvatore Mancuso is that subsequent to non-payment, an agreement was reached which requires dismissal of the motion and the trial.

[16] In support of that position, the defendants tendered “Minutes of the meeting on February 09, 2017” in which there is indication the amount owed was $148,486.94 and that Viacheslaw Slavik Evdosin and Mr. Mancuso proposed to pay $31,000.00 within one month and the balance in five equal monthly payments. Mr. Mcilmurray, on behalf of Weslease, is noted to have “agreed to inform Weslease management regarding this offer”. This apparently led to the response of Weslease of what I would call a signed offer to the transfer of ownership of the seven pieces of equipment “upon full satisfaction of the Leases 1508212 and 1508212A”. Further, the letter states “Until such time as the leases are paid out in full, ownership will remain with Weslease”. There is no evidence relied on by the defendants that such payments occurred.

[17] Alternatively, the defendants rely on a letter dated February 22, 2017 of payments to be made by Mr. Evdosin totalling $194,320.97 plus HST so that his company, Taken Industries could assume ownership of the equipment. Again, this letter contains the phrase “until such time as the leases are paid out in full, ownership will remain with Weslease”. In response, Mr. Mcilmurray signs a letter dated May 24, 2017 offering to release ownership of the equipment upon receipt of $115,000.00.

[18] In the absence of any evidence such payment was made, I conclude there was no settlement that altered the original terms of the Lease. There is no genuine issue requiring a trial. The plaintiff is entitled to judgment against these defendants.

[19] The amount sought is $391,806.72.

Issue – Quantum of damages

[20] The amount sought, $391,806.72 was not disputed by the defendants aside from their submissions of the settlement reached at a lower amount which I have concluded did not occur. I take note that the 60 payments agreed to in the Lease of $7,756.71 per month totals $465,402.60. It appears payments were made for 12 or 13 months (August 2016) which reduces the outstanding amount by $93,080.52 to $100,837.23. This compares favourably with the evidence tendered by the plaintiff being a schedule attached as Exhibit “E” to the plaintiff’s representative’s affidavit sworn July 19, 2019 which includes a claim for interest up to July 18, 2019.

[21] The plaintiff, with the orders of Master McAfee of March 23 and April 11, 2017 had the bailiff attend and repossess the equipment leased and pledged in General Security Agreement. This occurred on April 18, 2017. However, due to discrepancies and the description of certain pieces, which I again describe as the Vector Laboratory Roller Compactor and the Table Top High Sheer Granulator with accessories was not included or recovered by the bailiff.

[22] The plaintiff’s materials before me have clarified that discrepancy and it seeks possession of the additional pieces of equipment. They do so, in part as they made an agreement to sell the repossessed equipment to Federal Machinery & Equipment Company (“Federal Machinery”) for $60,000.00. In fact, the evidence is the equipment repossessed was forwarded to Federal Machinery and they have paid the $60,000.00 to the plaintiff. This is on condition the remaining equipment be forwarded. If not, the equipment is to be returned and the $60,000.00 repaid. The plaintiff agrees any judgment against the defendants should be reduced by this $60,000.00, if the equipment is delivered. I have no difficulty with same.

[23] The remaining defendants purport all of the items involved in the Lease and General Security Agreement were seized. However, they admit none of the individual defendants were present. There was affidavit evidence from the bailiff, Neil Emerson and he was cross-examined.

[24] No direct attempt to undermine Mr. Emerson’s evidence has been made by these defendants. I find Neil Emerson’s evidence to be persuasive of what occurred and support there is no genuine issue requiring a trial. As a result, I conclude the plaintiff is entitled to judgment against these defendants.

Order Granted

[25] In action no. CV-17-572002, the plaintiff shall recovery judgment against the defendants in the amount of ($391,806.72 minus $60,000.00 equals) $331,806.72. In addition, the plaintiff shall recovery pre-judgment interest at the prevailing rate when the Statement of Claim was issued, being eight-tenths of one percent per year in accordance with Section 127 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and the discretion afforded me under Section 130 of the Courts of Justice Act, supra. The plaintiff shall also recover post-judgment interest at the applicable rate of two percent year. The parties shall attempt to agree on costs within the next 45 days failing which a party seeking costs shall deliver to me their Costs Outline and written submissions, if necessary, not exceeding three double spaced type written pages in a readable font on or before December 21, 2020. Any responding submissions, similarly limited in length and style shall be delivered to me on or before January 11, 2021.

[26] In action no. CV-17-572791, the defendants shall deliver up to the plaintiff the following equipment:

a) Vector Laboratory Roller Compactor Model TF-Mini U050214-01;

b) Table Top High Sheer Granulator Model and GP-HSG 5, together with accessories being:

i) Chopper Assembly;

ii) 1.0 L Bowl with impeller, lid, chopper shaft and lid retainer;

iii) Tulip Bowl, 316 SS, side entry chopper fitting, chopper blade adaptor and corresponding lid.

[27] In the event the defendants fail to deliver up to the plaintiff the said equipment within the next 45 days, the plaintiff shall recover from the defendants the sum of $60,000.00 upon proof it has refunded said amount to Federal Machinery & Equipment Company. The plaintiff shall also recovery post-judgment interest at the rate of 2% per year on the $60,000.00 from the date it has refunded said amount to Federal Machinery & Equipment Company. The parties shall attempt to agree on costs within the next 45 days failing which a party seeking costs shall deliver to me their Costs Outline and written submissions, if necessary, not exceeding three double spaced type written pages in a readable font on or before December 21, 2020. Any responding submissions, similarly limited in length and style shall be delivered to me on or before January 11, 2021.

Mr. Justice G. Dow

Released: November 2, 2020

COURT FILE NO.: CV-17-572002 and CV-17-572791

DATE: 20201102

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

COURT FILE NO. CV-17-572002

WESLEASE 2018 OPERATING LP

Plaintiff

– and –

EASTGATE PHARMACEUTICALS INC., PROACTIVE SUPPLY CHAIN SOLUTIONS INC., SALVATORE MANCUSO, CHRIS PEARCEY, GIANCARLO STAFFIERI

Defendants

And Between:

Court File No. CV-17-572791

WESLEASE 2018 OPERATING LP

Plaintiff

-and-

EASTGATE PHARMACEUTICALS INC., PROACTIVE SUPPLY CHAIN SOLUTIONS INC., SALVATORE MANCUSO, CHRIS PEARCEY, GIANCARLO STAFFIERI and ANNA GLUSKIN

Defendants

REASONS FOR DECISION

Mr. Justice G. Dow

Released: November 2, 2020