Maurice's Service Centre Limited APPLICANT And: Wood Products Industries Limited First Respondent And: Euro Invest Inc. Second Respondent, 2018 NLSC 74

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Maurice's Service Centre Limited v. Wood Products Industries Limited , 2018 NLSC 74 Date : April 9, 2018 Docket : 201501G6197 Between: Maurice's Service Centre Limited APPLICANT And: Wood Products Industries Limited First Respondent And: Euro Invest Inc. Second Respondent Before: Justice Gillian D. Butler Edited Transcript of Oral Reasons for Judgment Place of Hearing: St. John’s, Newfoundland and Labrador Date(

s) of Hearing: April 6, 2018 Date of Oral Judgment: April 6, 2018

Summary:

Application for a Recovery Order under Rule 27, granted. Appearances: Matthew V.W. Moulton Appearing on behalf of the Applicant Sarah J. Clarke Appearing on behalf of the Respondents Authorities Cited: CASES CONSIDERED: Rizzo v. Rizzo Shoes, (SCC), [1998] 1 S.C.R. 27; Marsh v. Kulchar, (SCC),[1952] 1 S.C.R. 330; Bowaters Newfoundland Ltd. v. Pelley Enterprises Ltd. (1977), 12 Nfld. & P.E.I.R. 251, [1977] N.J. No. 15 (C.A.);American Reserve Energy Corp. v. McDorman (1999), (NL SC), 174 Nfld. & P.E.I.R. 217, 87 A.C.W.S. (3d) 904(Nfld. S.C. (T.D.)) STATUTES CONSIDERED: Conveyancing Act, R.S.N.L. 1990, c.

C-34; Sale of Goods Act, R.S.N.L. 1990, c. S-6 RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D REASONS FOR JUDGMENT Butler, J.: INTRODUCTION [1] This was an oral decision relative to the Plaintiff’s Interlocutory Application for a Recovery Order pursuant to Rule 27 of theRules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch.

D. [2] I am satisfied that the Applicant is entitled to the Recovery Order sought but consider it appropriate to provide the followingoral reasons for the Order which will be approved. history [3] By way of history, although the lease has not been entered into evidence in this proceeding to date, it is understood that onMarch 17, 2000, Wood Products Industries Limited (WPI) leased property which became known as 24 and 28 Major’s Street,Roddickton, from the Crown for purposes of a particle board plant.

It was not established but it is believed that there were twocontainment tanks on the property at this time. [4] By June 2000, WPI had borrowed $700,000 from Enterprise NL Corp. and gave it a fixed and floating charge over all itsproperty and assets (the “Assets”) by means of a debenture. [5] On April 1, 2002, Enterprise NL Corp. became Business Investment Corporation (BIC). [6] On November 26, 2003, Maurice’s Service Centre Limited (the Plaintiff) purchased two tanks from Irving Oil Limiteddescribed as “two containment tanks situate at the premises of Wood Products Industries, in Roddicton [sic], Newfoundland andLabrador”.

The consideration for this portion of the assets purchased was indicated to be $12,000. [7] In November 2004, the Plaintiff registered the tanks with the Department of Environment. [8] Between 2003 and 2010 the pleadings support that the principal of the Plaintiff (Maurice Simmons) was aware of theattempts by WPI (and its two principals, Julian Eiter and Monika Sauermoser) to get the particle board plant up and running. It isapparent that the two containment tanks were intended to hold product which would be used for fuel supply to the particle board plant’s

operations. [ 9 ] In 2006, WPI defaulted on the terms of the debenture and in May of that year a demand was made by BIC. [ 10 ] Related file 201101G3200, which contains pleadings relevant to matters referenced by the Defendants, reflects that in January 2007 there was a forebearance agreement, that proceedings were ultimately initiated by BIC and a Receiver appointed. This file also references an Order permitting Julian Eiter and Monika Sauermoser to purchase their residences on the property.

The same file confirms counsel for the Defendants’ position that the Receiver attempted a sale but was unable to obtain Third Party interest for a price of 75% of the appraised value of the Assets. [ 11 ] In this regard, file 201101G3200 confirms that Fitzpatrick’s Auctioneering Services had, on April 7, 2010, reported to the Receiver from an inspection performed on the equipment and accessories of the particle board plant and provided a partial list of equipment. There is no reference to the containment tanks on this list.

However, in a separate report referenced by Fitzpatrick’s Auctioneering Services and submitted by Herbert Pike, the narrative references “outside the building, there are fuel storage tanks that are so deteriorated, they most likely would never be approved for future use.” [ 12 ] Maurice Simmons alleges that in 2010 he requested access to the two fuel tanks that were the subject of the Bill of Sale from Irving Oil Limited and that this access was denied. [ 13 ] Following Application by BIC, on May 2, 2011, this Court approved the terms of a Consent Order pursuant to subsection 9(3) of the Conveyancing Act , R.S.N.L. 1990, c.

C-34 reading, “The Assets including but not limited to real property located at Roddickton, in the Province of Newfoundland and Labrador, be sold at the price of the current offer of $400,000, despite that offer being less than 75% of the appraised value of the assets.” [ 14 ] The next event, chronologically speaking, was the execution of a Bill of Sale on September 21, 2011 between BIC and Euro Invest Inc. (the Second Defendant herein) for $80,000.

Schedule A to this Bill of Sale referenced a list of equipment including fuel tank, serial D108146C and a fuel tank, 1202. [ 15 ] Unaware of this Bill of Sale, and coincidentally on September 30, 2011, the Plaintiff requested through its solicitor, access to the tanks which were the subject of its Bill of Sale from Irving Oil Limited. This, too, was denied. [ 16 ] In 2015 the Plaintiff once again requested access to the tanks and on refusal, issued the Statement of Claim on November 26, 2015 seeking

a) access to the Defendant’s premises to take possession and remove the oil tanks, and

b) damages as a result of the deterioration of the oil tanks, loss of opportunity to sell or use the oil tanks, and related to the unlawful detention of the oil tanks. [ 17 ] Once knowledge of the Bill of Sale to Euro Invest Inc. was supplied to the Plaintiff, it added Euro Invest Inc. as the Second Defendant to this action. [ 18 ] The evidence supports that Monika Sauermoser of the Town of Roddickton was a Director of WPI and is a Director of Euro Invest Inc.

Rule 27 – Removal Order General [ 19 ] Pursuant to Rule 27.02, the Plaintiff is required to provide an Affidavit describing the property it seeks to recover, indicating its value, outlining facts showing ownership, supporting that the assets are unlawfully detained, that a demand has been made and that the Plaintiff has been advised by its solicitor that he believes the Plaintiff is lawfully entitled to recover possession. In addition, Rule 27.03 requires that the Plaintiff post a bond for one and a half times the estimated value of the property.

Description of the Assets [ 20 ] Some of the requirements of Rules 27.02 and 27.03 are contested by counsel for the First and Second Defendants. Firstly, it is suggested that it is not sufficient to reference the property simply as “two tanks located on the property of WPI” and related thereto, counsel for the Defendants references inconsistent descriptions of these tanks by means of serial numbers in various documents. [ 21 ] In this regard, I am satisfied that the description is sufficient for two principle reasons: 1.

The evidence establishes that there are only two tanks present on the property and here, I specifically rely on

Schedule A to Monika Sauermoser’s Affidavit filed April 2, 2018; and 2.

The Director of WPI which leased the land on which it is alleged the two tanks were already present in 2000, is also a Director of Euro Invest Inc. who claims to have purchased the assets from BIC in 2011. [ 22 ] These facts are important because Monika Sauermoser cannot argue that she is unfamiliar with the history or the existence of the containment tanks given that she has been involved with the property from 2000 to 2018. [ 23 ] If a sheriff attends on the property to enforce the Recovery Order which I am satisfied to give, it should therefore be obvious what the property is to be recovered.

Value [ 24 ] Counsel for the Defendants’ also contests the issue of “value”. She suggests that the original Bill of Sale to the Plaintiff had a

consideration of only $12,000 whereas Maurice Simmons now suggests that the tanks have a value of approximately $53,600. [25] The provisions of a statute (or Rule) are required to be read in their entire context, in their grammatical and ordinary sense,harmoniously with the scheme and object of the Rule, and the intention of the legislature (Rizzo v. Rizzo Shoes, (SCC),[1998] 1 S.C.R. 27). [26] I conclude that the requirement of proof of value referenced in Rule 27.02 is related to the requirement of the bond to be postedunder Rule 27.03. It is, therefore, posted for the protection of the Defendants.

It is to the Defendants’ benefit that the Plaintiff believesthat it is required to post a bond in the amount of $62,500 which would, from the Defendants’ perspective, far exceed the value of thetanks. [27] Further, as suggested by counsel for the Plaintiff in his Reply argument, on equitable principles, it would be inappropriate topermit the Defendants to rely on their denial of access to the tanks for the suggestion that Mr. Simmons’ estimated value is inappropriatebecause he did not have had access to the tanks.

Ownership/Possession [28] As to facts supporting a conclusion of ownership, the Plaintiff has provided an executed copy of the Bill of Sale from Irving OilLimited to the Plaintiff.

This, in my opinion, represents primary evidence of “substantial grounds to conclude the Plaintiff is the lawfulowner of the tanks”, particularly in light of the First Defendant’s failure to provide proof that the tanks were included in the terms of thelease from the Crown in 2000 or that WPI subsequently purchased the tanks from another party. [29] Defendants’ counsel relies on possession as proof of the Second Defendant’s right to ownership. However, I agree withcounsel for the Plaintiff that the context is particularly relevant here.

Within the service and supply of oil products industry, it iscommon knowledge that furnaces and oil tanks are often leased and/or placed on property of third parties who have no right ofownership in the assets. [30] The Defendants rely for their argument (on possession as proof of ownership) on the decision of Marsh v. Kulchar, (SCC), [1952] 1 S.C.R. 330, and suggests that this decision (together with Bowaters Newfoundland Ltd. v. Pelley EnterprisesLtd. (1977), 12 Nfld. & P.E.I.R. 251, [1977] N.J.

No. 15 (C.A.), stands for the principle that “because ownership usually includes theright of possession, possession is presumed to be proof of title unless there is evidence to the contrary”. [31] However, on close review, I agree with counsel for the Plaintiff that the Marsh case addresses obvious exceptions to thisgeneral rule.

In addition to the industry practice I have already referenced, the Marsh case cites theft or removal for purposes of aperson’s own convenience representing a wrongful taking as other examples. [32] It is clear that the Plaintiff in this case never actually possessed the tanks because they were always identified as being tanksthat were on third party property. However, in this particular case, primarily due to the context, that is not conclusive of ownership. [33] Defendants’ counsel also supports the claim for ownership by the floating charge in the Debenture.

It is undeniable that therewas a floating charge in the debenture executed in favour of BIC and that as a result of the default and demand, this floating charge“crystallized”. However, it can only crystallize over assets that WPI owned. [34] This is confirmed in the debenture itself. In paragraph 5Bc, (the affirmative covenant section), WPI gave a pledge to BIC’spredecessor, that it had good and marketable title to the Assets which were defined in paragraph 2 as “all property and assets of thecompany”. [35]

Section 23 of the Sale of Goods Act, R.S.N.L. 1990, c.

S-6, also supports this principle when it provides that “the buyeracquires no better title … than the seller had…”. [36] Although the Defendants rely on the statutory exception to this principle stated in section 27(1), I am not convinced that thissection applies and once again I rely on the chronology of events. [37] There is no evidence that the tanks were listed or referenced on the lease to WPI; it is clear that the tanks were not referencedspecifically in the debenture. [38] The first reference to the tanks appears in the narrative of a report associated with the work of Fitzpatrick’s AuctioneeringServices at the request of the Receiver in 2011 but the tanks were not on the list of equipment for the plant. [39] No explanation has been provided for how the tanks then became the subject of a Bill of Sale from BIC to Euro Invest Inc. [40] Euro Invest Inc. and WPI are related companies and have at least one principal/Director in common, namely MonikaSauermoser.

Euro Invest Inc. was not an “arm’s length” purchaser from BIC.

Monika Sauermoser would be fully familiar with thehistory of the tanks between 2000 and 2018 and would also be in the very best position to explain how two tanks not established ashaving been listed on the Crown lease, not referenced on the debenture and for which ownership has not been supported by a separateBill of Sale to WPI, came to be referenced in the appraisal related report of Fitzpatrick Auctioneering Services for the Receiver andthereafter included for Euro Invest Inc.’s benefit in the Bill of Sale from BIC to Euro Invest Inc. [41] In such circumstances, I would not conclude that the subsequent transfer to Euro Invest Inc. was unlawful, but I am satisfiedthat the circumstances give rise to several questions. [42] As was the conclusion of Adams, J. in American Reserve Energy Corp. v.

McDorman (1999), (NL SC),174 Nfld. & P.E.I.R. 217, 87 A.C.W.S. (3d) 904 (Nfld. S.C. (T.D.)), I am satisfied that the Plaintiff has established “substantial groundsto conclude that the Plaintiff is the lawful owner” of the tanks and that the subsequent transfer is questionable.

Limitations Period [ 43 ] Finally, as to the limitations issue, counsel acknowledge that the appropriate limitation period is six years but disagree on its commencement date. Counsel for the Plaintiff suggests that from 2003 to 2010 there were ongoing discussions with WPI and that the Plaintiff was willing to leave the tanks where they were while WPI determined that the business would get “up and running”.

The earliest evidence of demand is in fact 2010. [ 44 ] Counsel for the Defendants argues instead that the limitation period arises when the tanks were purchased by the Plaintiff in 2003 and that the action is therefore statute barred. [ 45 ] I need not determine this question because it is a substantive question to be determined on the hearing of the claim itself.

Instead, as I noted during the argument of the Defendant, I would think that if, as alleged by the Plaintiff, the limitation period arises as of 2010, its claim for damages as a result of deterioration, loss of opportunity to sell or use and damages relating to unlawful detention, can only relate to the period post the demand. conclusion [ 46 ] For these reasons, I am satisfied that the Plaintiff has made out the requisite elements of the requirements of Rules 27.02 and 27.03 and I will initial the Order which was provided with the Application. _____________________________ Gillian D. Butler Justice