Executive Summary: Key Legal and Evidentiary Issues

• Oxford Rollform Inc. sought summary judgment against 2490023 Ontario Inc. and its sole director, Shoane Thomas, over the sale of an encumbered bulldozer.
   
• Justice Bezaire granted partial summary judgment, finding no genuine issue for trial on the breach of contract and unjust enrichment claims against 249 Inc.
   
• Section 13 of the Sale of Goods Act was central to the analysis, since the sale carried implied conditions of a right to sell and freedom from encumbrances.
   
• Credibility disputes surrounding fraudulent misrepresentation and piercing the corporate veil were found unsuitable for resolution on a paper record.
   
• Requests for an adverse inference based on missing bank and employment records were declined after Garson J. had already accepted the defendants' compliance efforts.
   
• Costs were left to be determined in the cause following trial, reflecting divided success on the motion.
   

Facts of the case

In September 2022, Oxford Rollform Inc. purchased a 2022 CAT D2 mini bulldozer from 2490023 Ontario Inc. for $216,960 inclusive of HST. Shoane Thomas is the sole shareholder and director of 249 Inc. Oxford took possession in October 2022 and used the bulldozer without issue until September 2023, when a bailiff advised that Caterpillar Financial Services Limited held a security interest in it under a Lease Agreement between Caterpillar and 249 Inc. Mr. Thomas had signed that Lease Agreement on behalf of 249 Inc. in December 2021, committing to 60 months of payments running to December 2025. To avoid repossession, Oxford paid Caterpillar the outstanding balance of $151,247.12. Oxford then sued 249 Inc. and Mr. Thomas jointly and severally for breach of contract, fraudulent misrepresentation, and unjust enrichment, and sought to pierce the corporate veil, alleging Mr. Thomas personally directed the wrongful sale of a bulldozer he knew to be encumbered. The defendants denied making any representations or warranties about the bulldozer, with Mr. Thomas maintaining he believed the Lease Agreement had been paid in full and that 249 Inc. had itself been defrauded by his former business partner, Franco Serratore.

Policy and legislative provisions at issue

The Lease Agreement between 249 Inc. and Caterpillar contained a clause, at paragraph 7(f), prohibiting 249 Inc. from selling, assigning, or allowing any lien, claim, security interest, or encumbrance to exist over its rights under the agreement or any leased unit. Because the sale between Oxford and 249 Inc. was verbal, the court turned to section 13 of the Sale of Goods Act, which implies into a contract of sale a condition that the seller has the right to sell the goods, a warranty that the buyer will enjoy quiet possession, and a warranty that the goods are free from any undisclosed charge or encumbrance. Rule 20.04(2) of the Rules of Civil Procedure, governing summary judgment, and the framework from Hryniak v. Mauldin also shaped how the motion was decided, including the court's discretion under rule 20.04(2.1) to weigh evidence and draw inferences.

Reasoning and analysis

Applying the Hryniak framework, Justice Bezaire found the record was sufficient to resolve the breach of contract and unjust enrichment claims against 249 Inc. without a trial. She rejected Mr. Thomas's evidence that he was unaware Oxford was the purchaser, noting he personally wrote the invoice in Oxford's name and received the full purchase price into 249 Inc.'s account. She accepted the evidence of Oxford's representative, Daniel Milton, that Mr. Thomas told him he "owned" the bulldozer without disclosing any encumbrance, and found this consistent with Oxford's purchase price closely matching Caterpillar's original purchase price for the equipment. The judge also rejected the defendants' argument that the bulldozer was sold "as is," finding no evidence Oxford was ever advised of any encumbrance. On the debt itself, Mr. Thomas acknowledged on examination that the Caterpillar payoff figure was accurate, and the court found 249 Inc. had not repaid the amount owing. However, the judge declined to extend summary judgment to the fraud and corporate-veil claims, holding that determining what Mr. Thomas knew, whether he intended to deceive Oxford, and whether he personally benefited required credibility findings only achievable through viva voce evidence at trial. She also declined to draw an adverse inference from the defendants' failure to produce certain records, noting Garson J. had already found the defendants took reasonable and diligent steps to comply with their undertakings.

Ruling and overall outcome

Justice Bezaire granted partial summary judgment in Oxford's favour, ordering 249 Inc. to pay Oxford $151,247.12 plus pre-judgment interest for breach of contract and unjust enrichment, representing the amount Oxford paid to Caterpillar to clear the encumbrance. The remaining claims against both defendants, including fraudulent misrepresentation, personal liability of Mr. Thomas, and piercing the corporate veil, were dismissed from the motion and directed to proceed to trial, along with the question of whether Oxford may pursue a derivative action against Mr. Thomas on behalf of 249 Inc. Because success on the motion was divided and the summary judgment process was found inconsistent with the efficiency goals of the simplified rules, the judge did not fix costs immediately, indicating instead that costs would presumptively be determined in the cause after trial, subject to the parties' option to make submissions if settlement offers had been exchanged.