Bayshore mortgagee added to $15M lawsuit
Mortgage company has also been prevented from selling the land
The company suing Bayshore, the owner of the former GM property in St. Catharines, is alleging the firm and the property’s mortgagee are involved in a multimillion dollar conspiracy.
A superior court judge has ordered mortgagee 2496582 Ontario Inc. to become a defendant in the $15 million suit launched in May 2017 by Attar Metals against Bayshore Groups, Bayshore International, 2390541 and 2202180 Ontario Ltd. and Bayshore principals Chiara and Robert Megna.
The judge also prevented the mortgage company from selling the land.
A written endorsement by Judge Thomas McEwen found there were circumstances in which there was “prima facie” evidence — meaning on first impression — to support a conspiracy claim by Attar.
Attar is alleging the mortgage company’s sole shareholder Aaron Collina provided mortgages in excess of the value of the Ontario Street lands, while at the same time allowing the Megnas to live at their Fenwick home while he covers all of their home’s mortgage payments and property taxes.
The allegations have not been proven in court. They have been denied by lawyers for the mortgage company and Collina.
The judge’s Dec. 31 endorsement, plaintiff and third-party factums and other court documents were obtained by The Standard from the Superior Court of Justice commercial list in Toronto.
Attar Metals, a family-owned, Mississauga-based business that specializes in handling and processing scrap metals, has alleged in its civil suit that Bayshore didn’t honour a contract worth millions of dollars related to the property at 282-285 Ontario St.
A motion related to the suit was before a Toronto judge in December when Attar sought an interlocutory injunction to prohibit the mortgagee from selling the lands. It also wanted the mortgagee added to its lawsuit and have related financial documents turned over.
Collina claimed Bayshore’s mortgage on Ontario Street was in default. A power of sale was pending and a deal was set to close Jan. 15.
His lawyers sought a court order to discharge the certificate of pending litigation registered on the property title by Attar Metals so it could sell the property.
But Attar’s lawyers argued the former GM property is the only substantial asset of the Megnas
and is key for their suit.
“Attar has been wronged by Bayshore and its only way of recouping its loss of $5.74 million is from the Property,” they wrote in the Dec. 19 factum of the plaintiff. “If the Property is sold pursuant to a power of sale proceeding on Dec. 20, 2018, Attar will recover nothing.”
The property was purchased by Bayshore in June 2014 for $12.5 million. Attar alleges more than $15 million in equipment and scrap metal has since been removed.
The mortgagee said the appraised value of the property as of Oct. 30, 2018 is $9.3 million.
The lawsuit between Attar and Bayshore stems from a business deal made in 2014.
In a statement of claim from May 2017, Attar said it entered into a contract with Bayshore on Oct. 21, 2014 that gave Attar Metals 50 per cent of the revenue generated from the sale of all metals at the former GM plant as well as all proceeds of sale from all other assets and real estate on site. In exchange for $2.6 million, Attar says it also acquired exclusive rights to market, sell and collect revenues from all metals.
The company alleges that less than a month after the contract was executed, Bayshore mortgaged the property in the amount of $5 million and then mortgaged it again in March 2017 for $20 million without telling Attar.
Attar also claims Bayshore removed on-site assets and sold them at auction and used its corporate accounts for unrelated projects like setting up a boxing gym and buying life insurance for Chiara Megna.
It claimed Bayshore “misdirected” the money it contributed.
Bayshore denied the allegations in court documents and filed a counterclaim.
In its statement of defence, Bayshore said Attar was supposed to pay an equal share of operation expenses, failed to do so and therefore voided the letter of understanding.
Bayshore claimed any money paid by Attar to Bayshore has been forfeited and Attar is no longer entitled to benefits under the letter of understanding.
In the Dec. 19, 2018 factum for its motions, Attar claims Collina’s company provided mortgages not only for the Ontario Street plant but for other Bayshore properties and projects, along with the homes of Chiara and Robert Megna, their daughter, Chiara’s father, a cottage and others.
“The mortgagee is familiar with the Megnas,” it says.
The document says Collina stated during cross-examination that he is not a registered or licenced mortgage broker
It alleges the Megnas make no property tax or mortgage payments on their Fenwick home. According to the factum, when asked about it during an examination, Chiara Megna said they have an agreement with the mortgagee and in return they “do mortgages with them on all of our projects,” including the Ontario Street site. She claimed it was a verbal agreement and that Robert Megna didn’t know about it.
The factum states Collina directly contradicted that in his examination, stating that there was no such agreement and the mortgages were in substantial arrears.
The lawyers for the mortgage company and Collina wrote in their factum that allegations of conspiracy by Attar are “at best scattered and incoherent.”
“There is no evidence whatsoever to support any acts of collusion or conspiracy,” they wrote.
The mortgagee’s factum says the allegation that Collina and Bayshore were acting in concert is not corroborated by anything. It argues that allegations against Collina are unparticularized and says it is difficult to understand exactly what type of concerted activity is being alleged.
The mortgagee also argued that Attar does not have a legal interest in the land. It added that Attar isn’t planning to redeem the mortgage, so it is not entitled to indefinitely suspend the mortgagee’s rights to take action on the default.
In his decision, the judge wrote it was true that Attar does not seek to redeem the mortgage, “but in circumstances where Attar has pled conspiracy and there is prima facie evidence to support the claim I do not see the refusal to redeem as being fatal.
“This is particularly so when there are allegations that the mortgages far exceed the value of the lands.”
The judge wrote that the letter of understanding between Bayshore and Attar provided Attar with suitable interest to seek the interlocutory injunction.
He also wrote that it was well known to all that Attar had been attempting for about a year to obtain documents about the mortgages given to Bayshore. Bayshore failed or refused to comply with previous orders and the mortgagee refused to produce the documents without a court order.
He ordered the mortgagee be added to the lawsuit and turn over the financial documents.
Bayshore did not provide a factum for the latest motion but the judge wrote they generally supported the position taken by the mortgage company and Collina.
Attar said in its December factum that Bayshore’s failure to pay project expenses has resulted in the large liens on the property from Canada Revenue Agency, the City of St. Catharines for property taxes and a consultant hired for a development proposal for the property.