OSHAWA COURT FILE NO.: CV-20-3594
DATE: 2022 08 15
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DENT-X CANADA
Soloman Ross Fischoff for the Plaintiff ross@smartlitigation.ca
Plaintiff
- and -
HACCPONE CO., LTD. BLACK IDEA INC., KINGSLEY CATO, DAVID SHELDON YARMUS and HOWARD SETNOR
Julian Binavince for the Defendant Haccpone Co., Ltd. jbinavince@levyzavet.com
Defendants
A N D B E T W E E N
HACCPONE CO., LTD.
Plaintiff by Counterclaim
- and -
VERONA MEDICAL GROUP INC. cob as DENT-X CANADA, ANAIDA DETI and JAMES EMMS
Defendants by Counterclaim
HEARD: May 13, 2022
REASONS FOR DECISION
LEIBOVICH J.
[1] Haccpone Co., Ltd. (“Haccpone”) has brought a motion pursuant to s.104 of the Courts of Justice Act. Haccpone claims that they delivered mask-making machinery to Dent-X. The cost of the machinery was $165,000. Haccpone submits that the amount has not been paid and a term of the contract allows Haccpone to seize possession of the equipment in the event of non payment. In the circumstances, especially given the length of time Dent-X has used the equipment, Haccpone no longer requests possession of the equipment. Rather, Haccpone requests that Dent‑X pay security into Court equal to twice the value of the equipment. Haccpone has stated that its purpose in seeking a remedy pursuant to s.104 is to force Dent-X to resolve the matter. Dent-X states that Haccpone has failed to meet the requirements set out in section 44 of the Rules of Civil Procedure and has failed to show that there are substantial grounds that it would succeed at trial.
[2] Both parties have filed significant amount of material. Affidavits have been filed and cross-examinations have been conducted. After the oral hearing, Haccpone and Dent-X filed additional material on the law of agency.
[3] In my view, for the reasons set out below Haccpone has failed to meet its onus. While Haccpone may succeed at trial it has not shown substantial grounds for its claim. To decide otherwise would require me to embark on a trial of the issues raised.
Law and Analysis
[4] S. 104 of the Courts of Justice Act states:
(1) In an action in which the recovery of possession of personal property is claimed and it is alleged that the property,
(a) was unlawfully taken from the possession of the plaintiff; or
(b) is unlawfully detained by the defendant, the court, on motion, may make an interim order for recovery of possession of the property.
(2) A person who obtains possession of personal property by obtaining or setting aside an interim order under subsection (1) is liable for any loss suffered by the person ultimately found to be entitled to possession of the property.
[5] Rule 44.01(1) of the Rules of Civil Procedure states that:
An interim order under section 104 of the Courts of Justice Act for recovery of possession of personal property may be obtained on motion by the plaintiff, supported by an affidavit setting out,
(a) a description of the property sufficient to make it readily identifiable;
(b) the value of the property;
(c) that the plaintiff is the owner or lawfully entitled to possession of the property;
(d) that the property was unlawfully taken from the possession of the plaintiff or is unlawfully detained by the defendant; and
(e) the facts and circumstances giving rise to the unlawful taking or detention.
[6] 44.03(1) of the Rules of Civil Procedure sets out a judge’s powers under the section:
On a motion for an interim order for recovery of possession of personal property made on notice to the defendant, the court may,
(a) order the plaintiff to pay into court as security twice the value of the property as stated in the order, or such other amount as the court directs, or to give the appropriate sheriff security in such form and amount as the court approves, and direct the sheriff to take the property from the defendant and give it to the plaintiff;
(b) order the defendant to pay into court as security twice the value of the property as stated in the order, or such other amount as the court directs, or to give the plaintiff security in such form and amount as the court approves, and direct that the property remain in the possession of the defendant; or
(c) make such other order as is just.
[7] The remedy is a discretionary one. To meet the test, Haccpone must demonstrate that there are substantial grounds to support that they are the legal owner or entitled to possession; there are substantial grounds for the claim that the property is being unlawfully detained, and that the balance of convenience favours the plaintiff. To demonstrate “substantial grounds”, the moving party must demonstrate a high degree of assurance that they will be successful at trial. That the party has a probability of success or is more likely to succeed is not enough. While the test is on substantial grounds, the degree of proof required is less than that of a summary judgment because a final disposition is not being made. The Court “should not embark upon a trial of the issues raised.”; Clark Door of Canada Ltd. v. Inline Fiberglass Ltd., [1996] O.J. No. 238, 45 C.P.C. (3d) 244; *1316223 Ontario. v. Giancoulas*, 2018 ONSC 5603 at paras. 65, 73; *Thorpe v. Rinneard*, 2020 ONSC 656, [2020] O.J. No. 388 at paras. 6-16, *Higher Ground LLC v. Langstaff*, 2010 ONSC 4108.
[8] In Clark Door of Canada Ltd. v. Inline Fiberglass Ltd., the court considered the plaintiff's claim that it owned dyes used in manufacturing fibreglass doors that the defendant possessed. The court stated at para. 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.
Also see *Higher Ground LLC v. Langstaff*, 2010 ONSC 4108, at paras. 31 and 32.
[9] Haccpone’s position is straightforward. It had a contract to sell the mask-making equipment to Dent-X. Haccpone delivered the equipment but has not been paid the amount owing. The contract allows them to repossess the property for non-payment. The contract is dated August 3, 2020. It contains the following addendum which states:
In the event that payment is not received within Seven (7) business days from the Date of delivery; (no matter the reason for delay) In such event Sellers Agent, Power of Attorney or other representative of Seller shall have full rights to seize the K-100 machine without any further notice to Dent-X Canada/Verona Medical.
[10] It is Dent-X’s position that there never was a contract. Rather, the machine that was shipped on August 22, 2020 was compensation for an earlier failed delivery by Haccpone. [I note that there is no dispute that Haccpone was unable to complete its first transaction with Dent-X]. Dent-X stated that it agreed to pay for only the shipping and duty costs. The August 3^rd^ contract was signed by Mr. Sebastiao who worked for Dent-X. He was Dent-X’s sale manager. It is Dent‑X’s position that he was never authorized to do so on behalf of Dent-X. It is Dent-X’s position that Mr. Sebastiao and the defendant Mr. Cato, who was an independent contractor, worked with others to defraud Dent-X. Haccpone submits that any conspiracy did not involve Haccpone and that the indoor management rule binds Dent-X and they are responsible for Mr. Sebastiao’s actions, even if fraudulent.
[11] Mr. Paesano, a paralegal, filed an affidavit setting out the evidentiary basis for Dent-X’s response. Haccpone has submitted in its factum that Mr. Paesano’s affidavit should be struck because he did not have direct knowledge of the issues, or it should be given little weight and an adverse inference should be drawn. Mr. Paesano did not have a role in acquiring the mask-making machines. For example, Mr. Paesano has no firsthand knowledge that the mask-making machine was compensation for the prior transactions as he was not involved in acquiring the machine. Furthermore, Mr. Paesano is not in a position to say that Mr. Sebastiao was not able to approve the purchase of the machine. Haccpone submits in its factum:
Mr. Emms, Mr. Sebastiao and Ms. Wu have direct evidence/knowledge with respect to the matters that are relevant on the within motion. No explanation was offered as to why Mr. Sebastiao was not summonsed as a witness or why Mr. Emms and Ms. Wu did not give evidence. Accordingly, the Court should draw the inference that their evidence would not be favourable to Dent-X.
[12] I understand counsel’s submissions and, while I agree that the utility of Mr. Paesano’s evidence is limited, the correspondence and documents attached to his affidavit are of assistance and it is these documents which raise concerns about the August 3, 2020 contract and addendum.
[13] On its face, it appears that the moving party has provided the type of clear documentary support that was contemplated in the case law where s. 104 and s. 44 relief is granted. However, in my view, this is anything but a simple straightforward case. There are a number of issues with the purported August 3^rd^ contract which can only be resolved at a trial. They are as follows:
- The date of the contract is August 3, 2020. However, it appears by the material filed that, at least as of September 7, 2020, there was no contract in existence. Filed at this motion is a letter by Haccpone’s president to Dent-X. The letter is dated September 7, 2020. It reads, in part:
I received a report that the installation of K100 is in progress. We will continue to correspond with Dent-X’s engineers for stable settlement and operation. Meanwhile K200 is ready to be shipped….. Although there is no contract, I would like to request payment of k100 and k200 according to the consent based on mutual trust. [emphasis added]
Haccpone’s president, Mr. Chae, who signed the August 3^rd^ contract was examined. He could not provide any details of assistance regarding how or when the contract was signed.
Dent-X responded to the September 7^th^ letter and stated that “I believe it is more prudent to solve the issues with the present machine before payment or shipping of the next machines from Korea…”
It appears from the correspondence filed that both parties were acting as if there was no contract, yet one dated August 3^rd^, 2020 has materialized.
The addendum, which contains the right to seize the machinery for non-payment is only signed by Mr. Sebastiao. It is not signed by Mr. Chae;
The August 3^rd^, 2020 contract does not look like the documentation prepared for the failed April 28, 2020 transaction; and
The addendum refers to present contract number “hd-2008-001” yet the subsequent invoices were for a different invoice number – 200803.
[14] Haccpone submits that a representative of Dent X signed the August 3^rd^ contract and they are bound by it even if that representative acted improperly. Haccpone submits that there is no evidence that they were part of the conspiracy to defraud Dent-X. Haccpone relies on the answer given by Mr. Paesano, during his examination that he was not alleging that Haccpone was part of the “civil conspiracy”.
[15] In my view this does not settle the matter. I am not stating that Haccpone is part of the civil conspiracy but there are sufficient ties between Haccpone and Mr. Cato such that the issue cannot be said to be resolved at this stage. For example:
Mr. Cato stated that he typed the addendum at issue and that he went to see Mr. Sebastiao on August 3, 2020 and he signed the agreement and addendum.
Mr. Cato testified that he was acting as an agent for Haccpone when he sought to seize the equipment from Dent-X on October 27, 2020, and that he was requested to do so by Mr. Chae. Mr. Chae stated that he asked Mr. Cato only to obtain payment, not to seize the equipment. There is some disagreement amongst the parties regarding exactly how this day unfolded but there seems to be no dispute that Mr. Cato attended with two others at Dent-X early in the morning, without advanced notice and loaded up the machinery onto a truck and were only stopped when the police attended. It appears from the photos filed that Mr. Cato tried initially to use a fob key from a Dent-X employee, who had since been terminated, to gain entry[^1].
On September 7, 2020, the same day that Mr. Chae wrote to Dent-X asking for payment, even though there was no contract in place, he signed a deed transferring ownership to Mr. Cato of the machinery sent to Dent-X.
Again, I note that Mr. Chae has not explained why he signed a contract on August 3^rd^, 2020 but then stated a month later that there was no such contract.
[16] The moving party must establish that the balance of convenience favours an order in its favour. It has failed in that regard. Haccpone states at paragraph 64 of its factum:
The balance of convenience in this case favours an order that Dent-X pay security while it maintains possession of the Equipment and continues to use it.
[17] However, Haccpone has not explained why the balance of convenience favours requiring Dent-X to pay twice the costs of the machine. It has merely submitted that it does. In oral submissions, Haccpone has submitted that its desire in seeking the order was to pressure Dent-X to settle the matter. In my view, that is not an appropriate basis to seek the remedy requested.
[18] More critically, having regard to the issues surrounding the purported August 3, 2020 contract, Haccpone has not established that there is a high assurance that it will succeed at trial. Finally, this is a discretionary remedy. Even if the threshold had been met, I would decline to exercise my discretion in favour of granting the remedy. Mr. Cato’s self help remedy in attempting to take the machine at issue should not be countenanced and in my view, also disentitles Haccpone to their request. The motion is dismissed. Dent-X has 10 days from the release of this decision to file their submissions with respect to costs. The submissions should total no more than three pages. Haccpone has15 days from the release of this decision to file a response, again totalling not more than three pages.
LEIBOVICH J
Released: August 15, 2022
OSHAWA COURT FILE NO.: CV-20-3594
DATE: 2022 08 15
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DENT-X CANADA
Plaintiff
– and –
HACCPONE CO., LTD. BLACK IDEA INC., KINGSLEY CATO, DAVID SHELDON YARMUS and HOWARD SETNOR
Defendants
– and –
HACCPONE CO., LTD.
Plaintiff by Counterclaim
– and –
VERONA MEDICAL GROUP INC. cob as DENT-X CANADA, ANAIDA DETI and JAMES EMMS
Defendants by Counterclaim
REASONS FOR DECISION
Leibovich J.
Released: August 15, 2022
[^1]: Mr. Cato filed two affidavits. The second affidavit, while it contests certain things in Mr. Paesano’s affidavit, does not contest that he initially used a Dent-X employee’s fob to gain entry.