The owner of the Edinburgh Road property where Abe Erb Brewing Company briefly opened is suing the former tenant for $1.3 million.
Documents filed in the Ontario Court of Justice include allegations of fraud and theft, in part related to money the landlord says it fronted Abe Erb to help prepare the business for opening.
In a statement of claim filed in May, plaintiff Granite Holdings Ontario Ltd., who own The Junction building the restaurant was located in, is claiming more than $1.3 million in damages after it alleged the restaurant and its directors broke the 10-year lease and failed to pay rent at the Guelph location, as well as allegations of theft and fraud.
The allegations have not yet been proven in court and statements of defence have so far been filed by two of the four defendants in the claim, both of whom claim they were not involved and have asked for the action to be dismissed.
Brian Prudham said he was not involved in the management of the company and was not an officer or employee. Frank Halsey said he only became general manager of the Guelph location in February of 2020 and denies any wrongdoing.
Also named as defendants are Alan Ruby and Robert Theodosiou, who have yet to file statements of claim.
Abe Erb Brewing Company opened in August of 2019 then closed in March when the pandemic hit. It never reopened and on Oct. 13 the owners of the company announced all four locations were closing for good.
Prior to the August 2019 opening of the Edinburgh Road South location in Guelph, Abe Erb had been operating locations in Kitchener, Waterloo and Ayr.
According to the claim, in the lead up to the opening of the Guelph location Abe Erb wanted to proceed with opening and operating in The Junction, but needed financial assistance in completing the leasehold improvements, fixturing and for the operation of the restaurant.
Granite said it started to become concerned with respect to the financing terms of the lease in January 2020 after it became aware that suppliers and/or contractors had allegedly not been paid, despite funding advances by Granite.
By February of this year Granite claims it had determined that Abe Erb, through the actions of its directors, had allegedly submitted $179,347.06 in fake or fraudulent invoicing and had accepted payment of fake, inflated or fraudulent invoices.
Granite said Abe Erb submitted invoices for $95,116 for brewing equipment but allegedly did not pay the equipment supplier and converted some or all funds for its own use.
Further, an invoice for $42,375 was submitted by Abe Erb for brewing installation and service, but Granite said it discovered the actual invoice was for only $18,122.94 and just over $2,700 was for work performed at another location.
The lease drafted by Granite included commercial tenancy terms to Abe Erb, but also included financing terms to the tune of $675,000, to be used for leasehold improvements, brewery and kitchen equipment, furniture and light fixtures.
As those improvements were being completed, Granite was committed to making ongoing contributions, paying up to 75 per cent of the invoicing, minus construction lien holdbacks.
A total of 120 monthly instalments were to be paid to Granite to cover the improvement allowance portion of the financing.
The 10-year commercial lease was executed on Dec. 29, 2018, after which Abe Erb took possession of the unit and began fixturing and equipping in order to begin operations.
When Abe Erb opened on Aug. 26, 2019, the unit was incomplete with all or most of the brewing equipment yet to be installed.
On Feb 24, 2020 Granite contacted Abe Erb to advise that a number of contractors had not been paid and four days later Granite advised Abe Erb to the full extent of its financial investigation. At that time Granite requested an immediate resolution.
From March 11 to Apr. 1, Granite attempted to speak with Abe Erb to find a resolution but said in court documents that it did not receive any substantive response.
On April 1, Abe Erb contacted Granite to ask for rent deferral due to the COVID-19 pandemic and the provincial lockdown. Granite advised Abe Erb a few days later that it was not prepared to discuss or negotiate a rent deferral unless the larger financial issues were addressed.
Granite said Abe Erb refused, neglected or otherwise failed to reply to that request.
Abe Erb did not make its lease payment for April or May. A few days after the start of May Abe Erb told Granite it had retained restructuring consultants and was abandoning the Guelph location.
On May 18 Abe Erb confirmed to Granite by text it was abandoning the location, stating ‘anyhow, feel free to enter. It’s all yours.’
The site has since been taken over by Fixed Gear Brewing Co.
