Petroline Petroleums Inc. v. 1040695 Ontario Inc. [2010] O.J. No. 3991

Petroline sold petroleum products to 1040695 Ontario Inc. (“104”) with security taken over the receivables and contract rights of 104, and a guarantee from Mr. Merheb. Petroline was owed some $162,000 for supplied products.

104 leased its premises, including a convenience store, car wash and gas bar to third parties, and sold to them the inventory of the convenience store and the petroleum products for some $43,000. 104 did not comply with the Ontario Bulk Sales Act ("BSA") on the inventory sale.

Petroline brought a motion for summary judgment against 104 and Mr. Merheb for the unpaid products, seeking an order under the Ontario PPSA that the lessees be ordered to pay the rent to them, and seeking the inventory sale to be declared void for breach of the BSA.

The Court held that:

  • under the Ontario PPSA, the third party lessees were ordered to pay the arrears of rent and the future rent to Petroline under its security interests;
  • the sale of the inventory was subject to the BSA and void, but as there would be other creditors of 104, and no specific request for payment of the $43,000 had been made by Petroline, and this was relief in the alternative to the PPSA security, no further order would be made.