2011 CarswellOnt 7862, 2011 ONSC 4433
Public Cash & Carry Ltd. v. Stephen-Mitchell Realty Ltd.
Public Cash & Carry Ltd., Applicant/Tenant and Stephen-Mitchell Realty Limited, Ledbrow Investments Ltd. and Yorkdale Contract Interiors Limited carrying on business as Burmave Developments, Respondents/Landlord
Stephen-Mitchell Realty Limited, Ledbrow Investments Ltd. and Yorkdale Contract Interiors Limited carrying on business as Burmave Developments, Applicants in Cross-Application/Landlord and Public Cash & Carry Ltd, Lynn Murphy, Joe Boroni and Anthony Solhi, Respondents in Cross-Application/Tenant Lynn Murphy/Indemnifier/Tenant
Ontario Superior Court of Justice
Heard: May 30, 2011
Judgment: August 3, 2011
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Counsel: No one for Applicant / Respondents in cross-application, Public Cash & Carry Ltd.
L.W. Keown, for Respondents / Applicants in cross-application, Stephen- Mitchell Realty Limited, Ledbrow Investments Ltd.
No one for Respondents / Applicants in cross-application, Yorkdale Contract Interiors Limited carrying on business as Burmave Developments
No one for Applicant / Respondent in cross-application, Joe Boroni, Lynn Murphy, Anthony Solhi
1 The applicant, as tenant, and the respondents, as the landlord (the “landlord”), entered into a lease on or about October 29, 2009 with respect to certain commercial premises located in Mississauga, Ontario.
2 As it was alleged by the landlord that the applicant, as tenant was in breach of this lease, the applicant brought a motion for relief from forfeiture under the terms of the lease returnable on April 9, 2010 before van Rensburg J.
3 van Rensburg J. ordered that:
(1) the keys to the leased premises would be returned to the tenant only upon payment of $30,000 to be held as security for costs pending a further order of the court;
(2) the tenant’s inventory shall remain on the premises and the tenant shall account for any sales and inventory to be only “in the ordinary course” (without prejudging what the ordinary course is at this time”); and
(3) at the time the tenant gains access to the premises, it was also to provide the landlord with a list of inventory on the premises within 24 hours.
4 Other than for a payment by the applicant relating to hydro and gas charges made to the landlord on April 14, 2010, the applicant made no further payments with respect to rent under the terms of the lease.
5 As a result of the applicant’s failure to pay rent, the landlord retained the services of a bailiff to attend at the premises to retake possession on June 17, 2010. As the person in charge of the premises refused to allow re-entry to the premises on that date, the landlord applied for and obtained an ex parte order of Seppi J. on July 13, 2010 allowing the landlord to terminate the lease with the assistance of police.
6 The bailiff retained by the landlord attended at the leased premises on July 16, 2010, with police assistance, to effect termination of the lease and to retake possession.
7 On July 20, 2010, the parties returned to court before Kruzick J. and obtained directions for the removal of the goods within the premises and payment of rent.
8 The application returned to court on September 1st, 2010, at which time the applicant abandoned the application. Counsel for the landlord wished to proceed with claims involving the determination of minimum rent that may be payable, a determination as to the landlord’s entitlement to damages and unpaid rent along with payment of costs. As no cross-application was brought for this relief, it was directed that a cross-application be instituted and served upon the applicant and the non-parties who have now since been added to the cross-application.
9 Following service of the cross-application and supporting material, this matter returned to court on February 28th, 2011. No material was filed by the applicant, or by the cross-application respondents. The respondent on the cross-application Anthony Solhi appeared, without counsel, and advised the court that he was a bankrupt and that he required an adjournment to seek legal advice. He was directed to file any responding material on or before April 30, 2011. The landlord’s cross-application was adjourned to May 30, 2011.
10 Upon the return of the cross-application on this date, no one appeared except counsel for the landlord on the cross-application. No material had been filed on behalf of any respondent on the cross-application including the respondent Anthony Solhi as had been ordered.
11 In accordance with minutes of settlement filed on May 30, 2011, the cross-application as against the respondent on the cross-application, Joe Boroni was dismissed with costs of the cross-application payable to him by the applicants on the cross-application.
12 Upon the return of this cross-application, the court was asked to determine three matters:
(1) the Minimum Rent Commencement Date, as referred to in paragraph 20.1 (5) of the Offer to Lease and was the leased premises “open for business in February, 2010”;
(2) is the applicant liable to the landlord pursuant to its undertaking with respect to damages given in support of the interlocutory order of van Rensburg J. on April 9, 2010?; and
(3) are the respondents on the cross-application, Lynn Murphy (Murphy) and Anthony Solhi, as officers or agents of the applicant corporation, personally liable, as a result of the undertaking with respect to damages given by the applicant in support of the interlocutory order?
Issue 1: Minimum Rent Commencement Date
13 As to the first issue, namely the determination of the Minimum Rent Commencement Date, the lease provides in section 20.1 (5) that the Minimum Rent Commencement Date is the date which is the earlier of May 1, 2010 or the date the premises or any part of the premises opens for business.
14 The evidence offered by the landlord’s leasing agent, Rudy Masci (Masci), which is un-contradicted, shows that in the period of November and December of 2009, upon attending at the leased premises, he noted a sign on the premises indicating “open for business.” The tenant’s representative, Anthony Solhi indicated to him that the business was not open.
15 Upon attending at the premises again on December 21, 2009 Masci noted a sign “open for business” on the door of the premises.
16 The landlord’s property manager, Gary Mosca offered evidence in his affidavit sworn July 7, 2010, regarding attendances he made at the premises during the period of January and February 2010. In his affidavit he notes that he observed people attending at the premises and loading their cars with purchases from the tenant.
17 Based on the un-contradicted evidence as contained in the affidavits referred to, I find that the applicant had opened the premises for business as of February 1, 2010. I reach this conclusion based on the only evidence available and on the ordinary and natural sense of the words contained in the lease as to the Minimum Rent Commencement Date.
18 Having considered the evidence in the affidavit of Jeffrey Winick sworn in April 8, 2010, I find that the rent owing from February 1, 2010 through to the end of April, 2010 is $82,674.51 as set forth in exhibit “G” to the affidavit.
Issues 2 & 3: Liability of Applicant and Murphy and Anthony Solhi
19 With respect to the applicant’s liability on its undertaking to pay damages as offered in support of its application for relief from forfeiture before van Rensburg J., I find that the applicant corporation, as tenant, is liable.
20 Subsequent to the order of van Rensburg J., the applicant paid no rent and from the record, it is evident, that it refused to vacate the premises without the direction of the court and the landlord having the assistance of the police.
21 The applicant, as the moving party, provided an undertaking as to damages in paragraph 22 of the affidavit of Joe Boroni of April 8, 2010 wherein he stated:
Applicant undertakes to abide by any Order concerning damages that this Honourable Court may make if it ultimately appears that the granting of the interlocutory injunction requested has caused damage to the respondents for which the applicant ought to compensate the respondent.
22 I conclude from the evidence offered by the landlord that it has suffered damages as a result of the applicant’s breaches of the lease including its failure to pay rent and vacate the premises when lawfully required to do so.
23 In my view, the damages claimed by the landlord are reasonably foreseeable and flow naturally and directly from the breaches committed by the applicant following of the order of van Rensburg J.
24 I am further of the view that as the applicant did not live up to the terms of the order granting relief from forfeiture and the undertaking made to the court, the tenant has caused damage to the respondents as landlord and as such, I find that the applicant is liable to the landlord for the damages occasioned.
25 Based on the evidentiary record available, I also conclude that the applicant as tenant, engaged in a number of misrepresentations to the landlord with respect to the nature of its business and its intended business plan and that the tenant sought and obtained an interlocutory and interim injunction order granting relief from forfeiture under false pretences knowing that it had no ability or intention to carry on business at the premises or to pay a rent in the ordinary course of business.
26 I find that the order of van Rensburg J. was granted to the applicant tenant based on inaccurate and misleading evidence on behalf of the applicant:
(1) that the tenant had invested considerable funds into leasehold improvements of the premises and had purchased inventory estimated at $1.1 million;
(2) that being locked out of the premises would jeopardize its relationship with suppliers and contractors;
(3) that the tenant was preparing for its “grand opening;” and
(4) that the survival of the business would depend upon the relief being granted.
27 The evidence shows that the applicant paid no further monies with respect to leasehold improvements, failed to pay many of its employees and contractors as well. There was no “grand opening” and the applicant failed to pay any rent whatsoever commencing May 1, 2010 and thereafter.
28 In my view of the applicant misrepresented its position to the court and to the landlord.
29 I accept the evidence as set forth in the affidavit of Kimberley Court dated September 14, 2010 as to the damages suffered by the landlord. As a result of the breaches of the applicant, the landlord lost rent owing under the terms of the lease during the period May through September of 2010.
30 On this record, I also find that the applicant and its principal and indemnifier, Murphy, are jointly and severally liable to pay the landlord cross-applicants’ unpaid rent in the amount of $82,674.51 for the period of February 1st, 2010 to April 30th, 2010.
31 As set forth in the affidavit of Kimberley Court at exhibit “A,” I find that the applicant owes to the landlord the sum of $131,529.64 in unpaid rent for the period of May 1, 2010 to September 1, 2000, inclusive.
32 Further, I am satisfied that the bailiff’s costs incurred in order to have the occupation of the premises investigated, the applicant removed from the premises and the cost to repair the premises after the applicant was removed from the premises were all incurred as a result of the applicant’s breaches. The costs were reasonably incurred by the landlord and are set forth in exhibit “B” and “C” of the affidavit of Kimberley Court. As such, I find that the applicant is liable to the respondents, with respect to these costs in the total sum of $132,681.36.
33 Thus in total, the applicant, Public Cash & Carry Ltd. and Murphy, as indemnifier, are liable to the landlord applicants on the cross-application, Stephen-Mitchell Realty Limited, Ledbrow Investments Ltd. and Yorkdale Contract Interiors Limited carrying on business as Burmave Developments, in the total sum of $264,211.
34 As to the liability of Murphy and Anthony Solhi, for the reasons outlined below, I find that both of these respondents in the cross-application are liable for the damages and rent owing to the applicants in the cross-application.
35 In the Court of Appeal decision of 642947 Ontario Limited v. Fleisher (2001), 56 O.R. (3d) 417, Laskin J. A. speaking for the Court confirmed that where a corporation has provided an undertaking as to damages, the principals of the corporation may be held personally liable if the corporation is unable to fulfill the undertaking. The Court held that where a corporation did not have the income or assets to pay a damage award, the court could hold the principals personally liable.
36 On the record before me, the respondents in the cross-application having filed no material nor appearing at the hearing of the application I am satisfied that the applicant corporation was an alter ego of both the respondents in the cross-application Murphy and Anthony Solhi.
37 I am further of the view that this is an appropriate case for the court to disregard the separate legal personality of the corporate entity as it is being used as a shield for fraudulent or improper conduct.
38 As noted by the court in 642947 Ontario Limited, supra, it is reasonable and appropriate to pierce the corporate veil where:
…not to do so would yield a result too flagrantly opposed to justice, or convenience or the interests of the [parties].
39 In my view, the undertaking as to damages which was given to the court was clearly given in bad faith and there was no intention on the part of the applicant or the respondents on the cross-application, Murphy and Anthony Solhi to live up to the terms of that undertaking.
40 I further find that both Murphy and Anthony Solhi knew of the improper conduct in which the applicant corporation was engaged. Both of these individuals knew that the corporation would not continue to carry on business throughout the course of the lease or even beyond the granting of the injunction for any significant period of time. Both of these parties knew that the giving of an undertaking for damages to the court was hollow.
41 As to the respondent on the cross-application, Murphy, I find on the record that she was intimately and primarily involved with the corporation and that she was one of its controlling minds. She was the first director of the corporation commencing in January 2009.
42 Murphy was the primary principal of a corporation who was engaged in the negotiation of the lease in question.
43 Murphy undertook to be an indemnifier on the lease on behalf of the applicant corporation and as part of her agreement to be the indemnifier, she provided the applicants on the cross-application with a full statement of her personal assets and liabilities. I find that the landlord applicants on the cross-application relied upon that information and that it represented an inducement to enter into the lease with the applicant corporation.
44 Murphy was the signing officer and director who executed the lease and executed the lease in her personal capacity and as indemnifier.
45 There is extensive evidence in the record that Murphy was actively involved in the operation of the applicant and in particular with respect to its occupancy of the leased premises.
46 In December 2009 Murphy advised Masci, that the financial statements provided by the applicant corporation in support of its application for lease were “falsified” and that she had concerns about the legitimacy of the corporation’s business as it was being run by Anthony Solhi.
47 I find that Murphy made false representations to the applicant and the cross-application’s representatives regarding the tenant’s steps to open for business, as well as with respect to the construction of leasehold improvements.
48 In an affidavit sworn by Murphy in June of 2010, she confirmed that she was a director of the applicant corporation and in that affidavit she demonstrated that she had intimate knowledge about the corporation and its business, which is fully particularized in paragraph 14 of that affidavit.
49 I further find that Anthony Solhi was one of the controlling minds of the applicant corporation. He is also known and is “Anthony Reza Solhi,” “Reza Solhi” and “Anthony Sahili” as is referenced in the record and in particular in the affidavit of Shawna Sosnovich sworn in June 14, 2011. On this evidence, I find that these individuals are all one and the same person.
50 On the record, I conclude that Anthony Solhi used these aliases in the course of his business activities.
51 Further, on the record, I find that Anthony Solhi was involved in all of the day-to-day management and affairs of the applicant. Having considered the record and the supplementary factum of the cross-applicants, I find that Anthony Solhi was a directing mind of the applicant and that it was his alter ego and that he acted in a course of conduct involving deception and misrepresentation to the landlord and its representatives.
52 I am further satisfied that this is a just and proper case for a finding of personal liability on the part of Anthony Solhi also known as “Anthony Reza Solhi” and “Anthony Sahili.”
53 In my view, the applicant has been used as a shield by Murphy and Anthony Solhi for various improper conduct including:
(1) the making of fraudulent or intentional misrepresentations to the cross-applicants with respect to the nature and extent of the financial status of the corporation, thereby inducing the landlord into entering into the lease agreement;
(2) making misrepresentations to the cross-applicants with respect to the nature and extent of the leasehold improvements;
(3) fraudulently misrepresenting the intention of the tenant to continue to occupy its prior business premises when in fact the tenant had vacated those premises as a result of conflict with its landlord;
(4) the applicant was engaged in transferring of corporate names between “Restaurant Depot, Public Cash & Carry Ltd., and Warehouse Depot” all designed to defeat creditors and confuse the public as to the true nature of the businesses;
(5) the legitimacy of the applicant’s business itself, was improper and it engaged in the practice of ordering vast amounts of supplies from inventory suppliers and then refusing or failing to pay for that inventory or alternatively by paying invoices by the issuance of fraudulent cheques;
(6) the applicant flagrantly disregarded the Mareva injunction order of van Rensburg J. dated August 6, 2010 granted in favour of Arvco and in particular it intentionally sold pizza boxes on the same day as being served with that order; and
(7) the applicant attempted to thwart the landlord’s rights of termination of the lease by refusing to vacate the premises thereby requiring the forcible removal by court order and with police assistance.
54 Anthony Solhi has a lengthy history of fraudulent activity and of misrepresenting facts for his benefit or the benefit of corporations under his control as is evidenced in five decisions of the court namely in:
1. Scott v. 3 for 1 Pizza and Wings (Canada) Inc., 2003 CarswellOnt 3790 (Ont.S.C.J.);
2. , 2005 CarswellOnt 2246, 11 C.B.R. (5th) 292 (Ont. S.C.J. Commercial List);
3. Ali v. Triple 3 Holdings Inc., 2002 CarswellOnt 3986, (Ont. C.A.);
4. Five Star Brands Distribution Ltd. v. Streit (Kenderry) Limited, 2008, CANLII 53837 (Ont. S.C.J.); and
55 As Anthony Solhi indicated on the one occasion when he appeared in court on this matter that he was a bankrupt, counsel for the applicants in the cross-application filed further affidavit material in the form of the affidavit of Shawna Sosnovich of June 14, 2011, wherein it was confirmed that Anthony Solhi had not been declared bankrupt, however, there is evidence that “Reza Solhi” had filed for bankruptcy in November, 2009.
56 Although I have concluded that Anthony Solhi and Reza Solhi are one and the same person, I am of the view that the bankruptcy of this individual has no impact on these proceedings as the cause of action giving rise to this cross-application did not arise until April 6, 2010 when the undertaking for damages was given to the court, or on September 1, 2010 when the undertaking for damages became actionable as a result of the abandonment of the application by the applicant. The proceeding against this individual was not commenced until October 2010, when the cross-application was issued.
57 If a discharge bankrupt has incurred debt obligations after the day on which the bankrupt became bankrupt, the debt or obligation is not a provable claim and therefore is not stayed by the bankruptcy proceedings: Lacroix v. Valois,  2 S.C.R. 1259; Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended at s. 69 (1), and s. 121 (1).
58 As a result, I conclude that the respondents on the cross-application Lynn Murphy and Anthony Solhi, also known as “Anthony Reza Solhi” and “Anthony Sahili” are jointly and severally liable with the applicant for the payment to the applicants on the cross-application, of unpaid rent in the sum of $134,529.64 for the period of May 1, 2010 to September 1, 2010 along with damages as a result of the breached undertaking given to the court, in the sum of $132,681.36.
59 As to costs of this cross-application, I have received and considered submissions on behalf of the applicants on the cross-application and in my view, given the conduct of and misrepresentations made by the applicant and its representatives Murphy and Anthony Solhi, this is an appropriate case for the awarding of costs on a substantial indemnity basis. These parties have made misrepresentations to the court and have flagrantly breached an undertaking to the court. Costs have previously been awarded up to and including September 1, 2010. Having considered the costs outline submitted, and recognizing the complexity of the proceeding, the number of steps required and the time spent, I am satisfied that costs on a substantial indemnity basis including disbursements in the sum of $16,419.82 are fair and reasonable and represents a sum that the respondents on the cross-application could reasonably have expected to pay if unsuccessful.
60 Judgment shall therefore issue as follows:
(1) the title of proceedings in the cross-application shall be amended to add the words “also known as Anthony Reza Solhi and as Anthony Sahili” immediately following the name of the respondent Anthony Solhi in the title of proceedings;
(2) it is ordered and declared that the applicant opened for business on February 1, 2010 and accordingly, pursuant to the terms of the lease, the Minimum Rent Commencement Date is February 1, 2010;
(3) the applicant, and its principal and indemnifier, Lynn Murphy, shall pay to the cross-applicants unpaid rent in the amount of $82,674.51 for the period of February 1, 2010 to April 30, 2010;
(4) the applicant and its principals Lynn Murphy and Anthony Solhi, also known as Anthony Reza Solhi and as Anthony Sahili shall pay to the cross-applicants, pursuant to the undertaking for damages, unpaid rent in the amount of $131,529.64 for the period May 1, 2010 to September 1, 2010;
(5) the applicant and its principals Lynn Murphy and Anthony Solhi, also known as Anthony Reza Solhi and as Anthony Sahili shall pay to the cross-applicants, pursuant to the undertaking for damages, the sum of $132,681.36 with respect to bailiff, security guard, private investigator and cleanup costs related to the removal of the applicant from the premises;
(6) the applicant and its principals, Lynn Murphy and Anthony Solhi, also known as Anthony Reza Solhi and as Anthony Sahili shall pay to the cross-applicants cost of this cross-application and of this motion fixed in the amount of $16,419.82 payable forthwith.
61 An order to shall issue accordingly.
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