Bayshore in $ 15M scrap with recycler
Bayshore Groups is accused of not honouring a contract worth millions of dollars related to the former GM property on Ontario Street.
Metal recycler Attar Metals Inc. of Mississauga claims in a $ 15- million civil suit that it entered into a revenue- sharing deal with Bayshore, but Bayshore secretly mortgaged the property, sold assets behind its back and is using corporate accounts for unrelated projects like the incorporation of a boxing club and equestrian centre.
“Rather than utilizing the property for its intended purpose — the processing of scrap metal for profit, demolishing structures and environmentally rehabilitating the property — since the date of execution of the contract, Bayshore has used the property for its personal benefit,” the statement of claim filed in Superior Court May 9 says.
None of the allegations have been proven in court.
Bayshore has denied the allegations in court documents and filed a counterclaim.
Attar Metals is seeking $ 15 million for breach of contract, breach of fiduciary duty and conversion in the statement of claim against Bayshore Groups, Bayshore International 2390541and 2202180 Ontario Ltd. and company principals Chiara and Robert Megna.
The claim says Attar entered a contract with the defendants on Oct. 21, 2014. Under the contract, Attar would get 50 per cent of revenues generated from the sale of all metals at the former GM plant at 282- 285 Ontario St. as well as all proceeds of sale from all other assets and real estate on site.
Attar says it also acquired the exclusive rights to market, sell and collect revenues from all ferrous and non- ferrous materials ( those with and without iron) at the the St. Catharines property in exchange for a $ 2- million payment for property rights and $ 625,000 for marketing rights.
But on Nov. 5, 2014, less than a month after the contract was executed, Attar says Bayshore mortgaged the former GM plant property in the amount of $ 5 million without asking Attar and then mortgaged the property again on March 16, 2017, for $ 20 million.
“Attar is not aware of the funds Bayshore received in connection with these mortgages, or to what use that those funds were put,” the statement of claim says.
By “improperly and unilaterally” obtaining the mortgages, Attar claims Bayshore has “significantly decreased” the value of the property. It says Bayshore failed to meet its “good faith duty” and has “obtained a benefit to its sole use, to the detriment of Attar.”
The metal recycler also takes issue with Bayshore setting up its headquarters in one of the former GM buildings which it says would otherwise have been demolished and sold for scrap revenue. It says Bayshore uses the adjacent parking lot for its personal benefit and has rented out some of the property for commercial use.
“Bayshore’s accounting that has been produced to Attar to date is wholly inadequate and appears inaccurate,” the statement of claim says.
“Bayshore has not listed any revenue within its accounting other than revenue earned in connection with scrap metal sales. Even in that regard, the entries relating to scrap metal sales are not complete.”
And Attar claims Bayshore uses its corporate account for “personal, or other inappropriate, expenses unrelated to the demolition project with the Attars.”
Those expenses allegedly include a “horse run project,” the incorporation and organization of “Bayshore Equestrian Centre Inc.” and “Bayshore Boxing Fight Club Inc.,” a boxing ring onsite for “Irwin Bayshore Boxing,” Chiara Megna’s life insurance, boat expenses and storage, various expenses related to travel and other properties and professional fees related to the sale of the former Kellogg property in London, Ont.
“Attar subsequently learned that many of the claimed operational expenses turned out to be improper, or have no connection whatsoever to the project,” the claim says.
A statement of defence filed in June says the letter of understanding with Attar was with Bayshore International, or 2202180 Ontario Ltd, and not the other defendants.
Bayshore claims Attar was supposed to pay an equal share of operational expenses and that it failed to do so.
As a result, Bayshore says the letter of understanding is void. Any money paid by Attar to Bayshore has been forfeited and Attar is no longer entitled to benefits under the letter of understanding, it says.
The defence statement says the reason for the letter of understanding with Attar was to “demolish a significant portion of the GM factory on the property, remediate the property and sell the property for a profit.”
But Bayshore says Attar has left it to cover all of the tens of millions of dollars of operational costs of the project by itself.
Bayshore says the project is a significant one that has taken years and will likely take years more. The project has already cost in excess of $ 5 million, not including the purchase of the property, Bayshore says.
Mortgages were necessary to fund ongoing operational expenses, the defence says. Bayshore claims Attar was well aware it was mortgaging the property for $ 5 million to partially fund the project and pay for a required $ 2- million environmental remediation fund agreement bond. It claims Attar would not contribute towards the bond. Similarly, the property was mortgaged for $ 20 million, of which $ 750,000 has been advanced and used for operational expenses, it says.
Bayshore says Attar agreed and understood a section of the property had a functional office tower that would not be demolished. Demolition would cost more than $ 1 million with no significant return for scrap metal while the tower is worth in excess of $ 2 million re- purposed, it says. As well, it says Attar has always known and understood on- site space would be required to facilitate the ongoing operations of the project.
Bayshore says the defendants have not used the property for their own personal or business use and there is no rental income to report. It says they provided Attar full access to their books which include comprehensive accounting of all costs.
But Attar claims it has given all funds from metal sales to Bayshore for project expenses and Bayshore appears to be using the money for unrelated expenses.
“Contributions from Attar appear to have been misdirected; to satisfy the other debts of Bayshore.”
Further allegations include that Bayshore removed on- site assets and sold them at auction, failed to pay a company demolishing scrap metals on the property so Attar had to and has discussed the sale of scrap metal with two other companies despite the contract giving Attar exclusive rights.
Attar wants the court to appoint a receiver and manager over the assets, property and undertakings of Bayshore and an order requiring the defendants to provide “detailed, up- to- date and mutually agreeable accounting of all costs and earnings.”
Bayshore alleges that Attar breached the letter of understanding by selling scrap from the property for under market value and refusing to disclose the price at which it’s selling scraps or submit revenues.
It also alleges Attar has “refused assistance” from Bayshore to obtain the highest market value of the metals its selling. Bayshore says those actions have resulted in a reduction of revenues of more than $ 1 million, which was to be shared equally between Bayshore and Attar and used toward operational expenses.
The company alleges Attar was supposed to apply all revenues from scrap sales to operational costs first, but failed to do so and now owes approximately $ 90,000 to Bayshore.
Bayshore has filed a counterclaim that, among other things, seeks damages in the amount of $ 15 million or more for breach of contract, breach of fiduciary duty, unjust enrichment, defamation and/ or conversion and $ 1 million in punitive and or exemplary damages.