2019 QCCQ 4124, 2019 QCCQ 4124

9071-3280 Québec inc. c. Robert 2019 QCCQ 4124 COURT OF QUÉBEC Small Claims Division CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division No: 500-32-702676-174 DATE: March 22, 2019 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ 9071-3280 QUÉBEC INC. Plaintiff v.

RYAN ROBERT et OTTO CHAN Defendants ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] The Plaintiff 9071-3280 Québec inc. doing business under the name of Kostar (“ Kostar ”) sues the Defendant Ryan Robert and Otto Chan on what appears to be, from the drafting of the Claim, an action on a sales invoice for the purchase by the Defendants of two Pioneer CDJ-1000 CD players.

The amount claimed is $ 7,637.42. [ 2 ] The Defendant Robert Ryan contests the Claim asserting that he has no legal relationship to the Plaintiff.

Otto Chan did not contest the claim and allowed the case to proceed by default. [ 3 ] Upon more careful scrutiny of the allegations in the documents and having heard the testimony of Jeff Grosberg, the principal of Kostar, it became clear there was never any sale of equipment to the Defendants; rather Kostar had leased two CD players to 9176-1274 Québec inc., a corporation carrying on business under the name “Arena”. [ 4 ] Otto Chan was a director of that company and Robert Ryan its employee.

Kostar’s assertion is that it provided sound and light equipment to Arena, who operated a night club venue in the old Montreal Forum building. [ 5 ] The interests of Kostar in the equipment were protected by a RDPM registration reserving title. It is not contested that, in the early part of 2014, the Arena venture was failing and Arena could not meet its obligations under the credit leases. [ 6 ] Despite the default, Kostar made an arrangement to accept $1,000.00 per week on account of the arears, but Arena failed to respect this arrangement.

From about June 21, 2014 Kostar’s principal Jeff Grosberg made attempts to get back possession of all equipment that Arena was not using. [ 7 ] His intention was to recover as much of the equipment as he could before Arena went out of business taking it back informally rather than proceeding by legal process. [ 8 ] The only remaining director out of the three who had originally been partners in Arena, Otto Chan, was the person in charge of Arena.

He was assisted in the day-to-day management by Robert Ryan, who acted as a part-time floor manager. [ 9 ] Kostar alleges that the two Pioneer CD players among the products leased were in the hands of an employee and he insisted on the CD players being returned to the premises of Arena, so that they could be given to him. [ 10 ] The testimony and the documentation in the file shows that this employee did return the two CD players. Mr.

Ryan states that he saw them and noted their serial numbers and that two busboys working at the time were instructed by Otto Chan to place them in a storage area that was part of Arena’s premises. [ 11 ] This took place in the final days of July, when the lessor of the premises was in the process of terminating Arena’s occupation pursuant to defaults under the lease.

André Jude, the person in charge for the lessor, explained to the Court that Otto Chan had made personal undertakings together with Arena to leave on the premises, for the benefit of the lessor, any property belonging to Arena used connection with the Arena business prior to the termination. [ 12 ] He also demonstrated, through his testimony and with photographs, that there were in fact two Pioneer CDJ-1000 CD players in the storage space.

They had been there since the closure of the Arena club on August 1, 2014. [ 13 ] The lessor only discovered their presence on the premises in August 2017 when a building operation superintendent searched for

them pursuant to the request of Mr. Ryan who was seeking a resolution to the present proceedings. They were wrapped up and placed in a bag. [ 14 ] Mr. Jude demonstrated that only one of the players has a serial number corresponding to the Kostar RDPM registration. [ 15 ] Mr. Jude renewed at the hearing an undertaking already given to hold on to these two machines to be remitted to Kostar, provided that Kostar would hold the lessor harmless from any claim that could be made by Mr. Ryan and/or Kostar. [ 16 ] According to Mr. Grosberg’s chronology, the last day that he met Messrs.

Ryan and Chan at the club was July 30 th . In the meeting he tried to convince them to, forthwith, give him possession of the CD players. They did not comply. [ 17 ] On July 31 st Kostar brought a seizure before judgment in the premises and recovered a certain amount of equipment but not the two Pioneer CD players. [ 18 ] His claim is based not on the value of these machines, which are highly depreciated, but on a quote for a replacement of them with new equipment of the same nature.

Estimates produced by the Defendant Ryan establish that used Pioneer CD players identical to those that are subject matter of this proceedings would cost approximately $600.00 plus shipping. Issues [ 19 ] There are therefore two issues in the case: 1. Are the Defendants liable for the fact that the two Pioneer CD players that Kostar is claiming were not recovered in the seizure? 2. If so what is the prejudice caused to Kostar? Analysis [ 20 ] It should first be pointed out that the proceedings are quite confusing in that the claim is made as though two Pioneer CD players were purchased by the Defendants.

In reality, the claim is for the failure on the part of Kostar, as a creditor of a corporation, to recover highly depreciated equipment of little value, in a legal process that it instituted on August 31, 2014. [ 21 ] With respect to Robert Ryan, fault has not been established. [ 22 ] Mr. Ryan was a part-time employee of the club whose function was essentially that of a floor manager. He was not involved in the finances of the company nor in the rental of equipment.

When asked by his boss, Otto Chan, to attempt to recover, from another employee, the two machines that were in her custody, he did what he could and was actually successful in having them returned to the company’s possession. [ 23 ] At that point it was not his responsibility to decide what to do with them, this being a decision of his boss, Otto Chan. [ 24 ] The fact that he did not comply with Mr.

Grosberg’s request to give the machines to him is not a fault, he was simply acting in good faith within the confines of his duties as an employee. [ 25 ] With respect to Otto Chan, the situation was more complex because he was in fact, at that time, the directing mind of Arena. [ 26 ] Mr. Ryan’s testimony about the affairs of Arena, at the time of its demise, establishes a certain context. Otto Chan was the last remaining active director and shareholder in Arena at the time that it was going into insolvency.

The situation on the premises were somewhat chaotic as the business broke down, but in the midst of this chaos steps were taken, on his behalf, to have these two CD players that were in the possession of a technician returned to the premises. [ 27 ] When they were returned, Mr.

Chan instructed employees to put them into a storage area. [ 28 ] In circumstances such as this one, Kostar had access to the recourse of a seizure before judgment if the corporation failed to cooperate in a foreclosure. [ 29 ] The obligation of the lessee under the credit lease to give back the property depended on the contract being terminated. [ 30 ] While it is not contested that Arena was in default, this default had been tolerated and it is not at all clear that the contract had provisions that had been triggered to compel Arena to give possession of the equipment back to Kostar. [ 31 ] Even if the contractual situation was such that Kostar could compel the return of the equipment on July 30 th , Mr.

Chan, as a director of the company, could not be faulted for having kept it on the company’s premises. [ 32 ] As it turned out, the RPDM registration mentioned only one of the two machines. Mr. Grosberg surmised that the other machine may have been a replacement item for the second machine listed in the registration, but this is conjecture on his part. [ 33 ] If the bailiff who had conducted the seizure had looked in the storage area, he may well have found them.

This was his role and responsibility in the seizure, acting under judicial authority. [ 34 ] The fact that they were wrapped and put into a bag does not establish that there was, on the part of Otto Chan, any attempt to

conceal them. [ 35 ] On July 31 st , Otto Chan communicated with Robert Ryan, telling him that he should not return to the premises, that his employment was terminated and that the business was closed. [ 36 ] Once the seizure took place, on July 31 st , and premises were taken back by the lessor on August 1 st , there would have been nothing that Otto Chan could have done to help Kostar.

There is no allegation or proof that he impeded the work of the bailiffs by deliberately hiding these two pieces of equipment or in any other way. [ 37 ] A creditor who seeks recovery of property under a reservation of title or a legal hypothec and it is not able, by his own informal means, to settle the matter in a satisfactory way, has legal recourses against the property and should exercise them in a timely manner. [ 38 ] In the Court’s view, the two Defendants were not at fault for the difficulties that the creditor experienced in attempting a more informal means of recovering possession as a prelude to the normal and legitimate use of the Court’s process through the seizure before judgment that it eventually chose to institute.

FOR THESE REASONS, THE COURT: DISMISES the Demand against Robert Ryan; WITH legal costs; DISMISES the Demand against Otto Chan; WITHOUT costs. __________________________ David L. Cameron, J.C.Q. Date of hearing: March 12, 2019