Court File and Parties

COURT FILE NO.: CV-14-513189 DATE: 20170524 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

1694879 ontario inc. Plaintiff

• and - romas krilavicius, william r. rutherford limited, steve sanderson, baffo’s incorporated, ross gray and jennifer gray Defendants

AND RE:

romas krilavicius, steve sanderson and jennifer gray Plaintiffs by Counterclaim

• and – 1694879 ontario inc. and daryl black Defendants by Counterclaim

AND RE:

baffo’s incorporated Plaintiff by Counterclaim

• and – 1694879 ONTARIO INC. and DARYL BLACK Defendants by Counterclaim

Counsel: Krista Chaytor for 1694879 Ontario Inc. and Daryl Black Jamie Sanderson, for Baffo’s Incorporated James Wortzman and John Ventrella for Romas Krilavicius, Steve Sanderson, Jennifer Gray, William R. Rutherford Limited and Ross Gray

HEARD: January 24, 2017

REASONS FOR JUDGMENT

Kristjanson J.

[1] This is a decision on three summary judgment motions and cross-motions relating to the commercial landlord’s claims for fraudulent removal of goods and chattels from Baffo’s restaurant contrary to s. 50 of the Commercial Tenancies Act, R.S.O. 1990, c. L-7, a wrongful distress and conversion counterclaim by Baffo’s Restaurant, and a counterclaim for assault and abuse of process relating to events the evening that chattels were removed from the restaurant.

[2] Baffo’s operated a restaurant on premises leased from the commercial landlord, 1694879 Ontario Inc. Baffo’s was behind on the rent in January, 2014. There is no dispute that goods and chattels belonging to Baffo’s were removed from the leased premises on January 8, 2014. The owner of Baffo’s, Aldo Buccioni (“Aldo”) was present, as were the five defendants Romas Krilavicius (“Romas”), Steve Sanderson (“Steve”), Ross Gray (“Ross”), Jennifer Gray (“Jennifer”), and trucks belonging to William R. Rutherford Limited (“Rutherford”) (collectively “the Personal Defendants”). There were 15 to 20 other unidentified individuals on the premises. Goods were being loaded onto trucks parked outside of Baffo’s restaurant when the Landlord’s president, Daryl Black, and three of Black’s representatives, Tim Ayling, Dave Yellowlees and André Paquette, arrived at the restaurant that evening.

[3] After receiving two phone calls, three officers from the Ontario Provincial Police attended at Baffo’s and brokered an agreement between Aldo and Black which allowed for the removal of goods and chattels that had already been loaded into vehicles, and certain items from the main floor.

[4] The following day, the Landlord and Black retained a locksmith to change the locks, as well as padlocking and chaining the doors, thereby preventing Aldo and Baffo’s from gaining access to the leased premises, or carrying on its ordinary business from the leased premises. At the same time, the Landlord and Black purported to exercise a distress over all of Baffo’s goods, chattels, trade fixtures and leasehold improvements in the leased premises.

[5] Nine months after the lockout and distress, the Landlord accepted an unsolicited offer to buy the leased premises. It sold Baffo’s distrained goods to the buyer for an additional sum of $25,000.

[6] The Personal Defendants have brought a motion for partial summary judgment seeking an order dismissing the Landlord’s action against them for wilfully and knowingly aiding or assisting Baffo’s in the fraudulent removal or concealment of goods and chattels pursuant to section 50 of the Commercial Tenancies Act (“Act”). Baffo’s has brought a cross-motion for summary judgment dismissing the fraudulent removal claim as against it, and for judgment on the wrongful distress/conversion counterclaim against the Landlord and Daryl Black. The Landlord has brought cross-motions for summary judgment seeking judgment against the Personal Defendants and Baffo’s on the fraudulent removal claims. The Personal Defendants brought a cross-motion for summary judgment on the abuse of process and assault counterclaims, while the Landlord and its president, Daryl Black, sought summary judgment dismissing the counterclaims, although these were not argued due to insufficient time allocated for the motions.

[7] I grant summary judgment to dismiss the fraudulent removal claims against the Personal Defendants. I grant summary judgment to Baffo’s on the wrongful distress claim, and direct a reference to a Master for the assessment of damages. I dismiss the fraudulent removal claim against Baffo’s.

Issues

[8] The issues before me are:

(1) What is the test for summary judgment, and is the test met here? (2) Did the Personal Defendants wilfully and knowingly aid or assist Baffo’s in the fraudulent removal or concealment of chattels contrary to section 50 of the Commercial Tenancies Act? (3) Were there arrears of rent owing by Baffo’s, and if so, how much was owing January 8, 2014? (4) Did Baffo’s fraudulently remove goods and chattels contrary to section 50 of the Commercial Tenancies Act? (5) Did the Landlord have the right to distrain against Baffo’s chattels? If so, was the distress wrongful, as alleged by Baffo’s, or reasonable, as alleged by the Landlord and Black? (6) If the Landlord levied wrongful distress, is Baffo’s entitled to damages, and should an accounting or reference be ordered in the circumstances? (7) Is the Landlord liable in conversion? (8) If the distress was wrongful, is Black personally liable? (9) Are punitive damages warranted in the circumstances? (10) Are substantial indemnity costs warranted in the circumstances?

[9] These summary judgment motions are really a trial-in-two-boxes. The seventeen affidavits with exhibits, contained in the seven motion records, cross-motion records and supplementary records include:

• From the Personal Defendants: nine affidavits, two affidavits from each of Romas, Ross, Jennifer, Steve, and an affidavit from a legal assistant attaching documents;
• From Baffo’s: two affidavits of Aldo; and
• From the Landlord/Black: Six affidavits, three affidavits of Black and affidavits of Black’s associates, Dave Yellowlees, Tim Ayling, Andy Paquette.

[10] Ten transcripts of cross-examinations on affidavits were provided to the court, as well as a brief of undertakings, under advisements, refusals and exhibits. There are 29 volumes of material before me, yet the case was scheduled for and argued in a day. There was insufficient time to argue the abuse of process/assault summary judgment motions.

[11] I set out below facts common to many of the issues. In some cases, detailed discussion of relevant facts is contained with the issues, given the volume of materials and consequent complexity of the facts.

Issue #1: Test for Summary Judgment

[12] Rule 20.04(2)(b) of the Rules of Civil Procedure provides that the court shall grant summary judgment if “the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment”. All of the parties agreed that the motions and cross-motions should be determined by way of summary judgment, save for the damages claim by Baffo’s on the wrongful distress/conversion claim, as the extensive evidentiary record would enable the motions judge to decide all issues in dispute. I must determine that the case is appropriate for summary judgment notwithstanding the agreement of the parties: Anjum v. John Doe, 2016 ONSC 7784, 2016 CarswellOnt 19599, at para. 21.

[13] Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the court shall grant summary judgment if: "the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence." In Mayers v. Khan, 2017 ONSC 200, 2017 CarswellOnt 253, Justice Glustein summarized the Hryniak principles as follows at para. 18:

i) Summary judgment must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims. It is no longer merely a means to weed out unmeritorious claims but rather a “legitimate alternative means for adjudicating and resolving legal disputes” (Hryniak, at paras. 5 and 36); ii) An issue should be resolved on a motion for summary judgment if the motion affords a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive process to achieve a just result than going to trial (Hryniak, at paras. 4 and 49); iii) On a motion for summary judgment, the judge must first determine if there is a genuine issue requiring a trial based only on the evidence before the judge and without using the judge’s fact-finding powers. If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the powers under Rules 20.04(2.1) and (2.2) (Hryniak, at para. 66); and iv) The standard for determining whether summary judgment will provide a fair and just adjudication is not whether the procedure is as exhaustive as a trial, but rather “whether it gives the judge confidence that [the judge] can find the necessary facts and apply the relevant legal principles so as to resolve the dispute” (Hryniak, at para. 50). A judge must be confident that he or she can fairly resolve the dispute (Hryniak, at para. 57).

[14] The court has before it a very full evidentiary record, including 17 affidavits and transcripts of ten cross-examinations. A court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200 (ONSC) at paras. 26-27; aff'd 2014 ONCA 878 (Ont. C.A.).

[15] I am satisfied that the record provides me with the necessary evidence in order to adjudicate the dispute in a timely, affordable and proportional manner under rule 20.04(2). I have determined that there is no genuine issue requiring trial, and I am satisfied that I can find the necessary facts and apply the relevant legal principles so as to resolve the motions and cross-motions. For the reasons set out below I grant summary judgment as there is sufficient evidence to fairly and justly adjudicate the disputes, and summary judgment is a timely, affordable and proportionate procedure. I direct a reference on damages for wrongful distress and arrears owing as at January 8, 2014.

Issue #2: Fraudulent Removal – Wilful and Knowing Aid or Assistance

[16] I will first review the facts and law relevant to the Landlord’s claim against the Personal Defendants for wilful and knowing aid or assistance in fraudulent removal of a tenant’s goods and chattels contrary to Section 50 of the Commercial Tenancies Act.

[17] Section 50 of the Commercial Tenancies Act imposes a penalty of twice the value of goods fraudulently removed on persons who wilfully and knowingly aid or assist a tenant in removing its goods from a premise to defeat a landlord’s ability to distrain them. Sections 48(1) and 50 of the Act provide:

48.(1) Where any tenant … of any … lands, upon the demise or holding whereof any rent is reserved, due, or made payable, fraudulently or clandestinely conveys away, or carries off or from the premises the tenant’s goods or chattels to prevent the landlord from distraining them for arrears of rent so reserved, due, or made payable, the landlord or any person lawfully empowered for that purpose by the landlord, may, within thirty days next ensuing such conveying away or carrying off, take and seize such goods and chattels wherever they are found, as a distress for such arrears of rent, and sell or otherwise dispose of them in such manner as if they had actually been distrained by the landlord upon such premises for such arrears of rent.

50. If a tenant so fraudulently removes, conveys away or carries off the tenant’s goods or chattels, or if any person wilfully and knowingly aids or assists the tenant in so doing, or in concealing them, every person so offending shall forfeit and pay to the landlord double the value of such goods or chattels, to be recovered by action in any court of competent jurisdiction. [emphasis added]

[18] Section 50 is a penalty provision imposed upon parties who wilfully and knowingly assist a tenant in removing its goods from a premise to defeat a landlord’s ability to distrain them.

[19] In order to establish liability of the third parties, the Personal Defendants, the burden of proof on the Landlord is to establish, on a balance of probabilities, that:

(a) The tenant is in arrears of rent; (b) The tenant has fraudulently removed, conveyed or carried off the tenant’s goods or chattels; (c) The tenant did so to prevent the landlord from distraining for the arrears of rent; and (d) The third parties willfully and knowingly aided or assisted the tenant in fraudulently removing or concealing the goods and chattels with the intent of preventing the landlord from distraining against them.

[20] With respect to third parties, the Court of Appeal has recognized the “penal nature of section 50 and the stigma of dishonesty flowing from a finding under that section”, and the concomitant requirement for evidence pointing to the third party’s responsibility for the removal and to the third party’s intent to defeat the respondent’s entitlement to rent: 1268227 Ontario Ltd. v. 1178605 Ontario Inc., , at paras 1-2.

[21] Even if a Landlord can establish that the removal of goods from a premises was wilful and in breach of the lease, it does not necessarily follow that the removal of the property was fraudulent: Amexon Property Management Inc. v Unique Benefits Group Corp., 2006 CarswellOnt 3834, at para 70.

[22] Whether or not a party has acted fraudulently or with wrongful intent in breach of Section 50 of the Act is a question of fact based upon all of the circumstances: Nebete Inc. v. Sanelli Foods Ltd., [1999] O.J. No. 525 at paras 50 and 55.

[23] In light of this, I first examine the issue of rental arrears, and then turn to the role of each of the Personal Defendants with respect to the events of January 8, 2014.

Background Facts

(1) Baffo’s and the Landlord

[24] Baffo’s Inc. was owned by Aldo Buccioni. It operated a restaurant, Baffo’s Pizza and Pasta, in Bolton. Baffo’s leased the premises from the 1694879 Ontario Ltd. (the “Landlord”), a company owned by Daryl Black, a defendant by counterclaim. Baffo’s took possession of the premises in 2009, and made extensive renovations and leasehold improvements to the premises between 2009 and 2013. Baffo’s and the Landlord had two leases, expiring in 2019 and 2020.

[25] The Leases provided that the tenant would be in default if it had failed to pay rent for a period of 15 consecutive days, regardless of whether demand for payment had been made (Article 9 of 2009 Lease, Article 10 of 2010 Lease). On default, the Leases provided that the Landlord “shall have the right to terminate this Lease and to re-enter the premises and deal with them as he may choose.” The Leases also provided that if the Landlord chose to waive his right to exercise the remedies available under the leases or at law, “the waiver shall not constitute a condonation of the Act of default, nor shall the waiver be pleaded as an estoppel against the Landlord to prevent his exercising his remedies with respect to a subsequent” act of default, and any waiver must be in writing and signed by the Landlord. The parties entered a Lease Amending Agreement in February, 2013, when the Landlord advanced moneys to Baffo’s, secured by a promissory note.

(2) The Rental Arrears on January 8, 2014

[26] There is a dispute between Baffo’s and the Landlord as to whether Baffo’s was in arrears prior to January, 2104, and if so, the amount of arrears. There is a dispute about cheques cashed with insufficient funds, charges for those cheques, differences on base rent, whether the landlord improperly claims for TMI. The Landlord agreed that it improperly charged HST on the tax portion of the TMI payments under the lease, but has refused to advise the amount. I cannot resolve all these disputes on the written record, but I am able to decide a number of issues on these motions without resolving this dispute.

[27] In the Bailiff’s Notice of Distress dated January 9, 2014, the Landlord claimed for arrears of rent owing in the amount of $97,231.91. However, Black’s first affidavit of February, 2016 swore that the rental arrears were $30,171.56. Black’s second affidavit of June, 2016 then swore that the rental arrears on January 8, 2014 were $36,919.48. Although the Landlord now takes the position that the arrears prior to the January rent were approximately $21,634.05, dating back to October, 2012, it is clear that at all times prior to January, 2014, Baffo’s continued to remit rents to the Landlord, who accepted the rents. There is also no written notification to Baffo’s in the materials before me of rents outstanding, demands for payment, or other indications that as of December, 2013, the Landlord took the position that Baffo’s had rental arrears in the amount of $21,634.05.

[28] Aldo’s evidence is that he believed he was current on the rent, although he acknowledges that the January rent was not paid on time. Aldo understood that the January rent was $14,908.39, but he takes the position that no rent was overdue other than the January rent. For the analysis of the summary judgment motions which I am able to decide, I use the Landlord’s overdue rent figure of $36, 919.48, without accepting that this was the amount of arrears owing as of January 8, 2014.

[29] Baffo’s asserts the Landlord was holding the last month’s rent in the sum of $13,486.95; the Landlord asserts it held $11,163.20. Aldo advised the Landlord that it would be late with rental payment in January, due to CRA seizure of moneys in Baffo’s bank account.

(3) The Events of January 8, 2014

[30] There is no dispute that goods and chattels belonging to Baffo’s were removed from the leased premises on January 8, 2014. The following people were present on at Baffo’s on the evening of January 8, 2014: Aldo; the five Personal Defendants; Black; three of Black’s associates, Tim Ayling, Dave Yellowlees and Andre Paquette; approximately 22 other unidentified persons, and at least three officers from the Ontario Provincial Police who were dispatched after calls from Black and Jennifer (the “Police”), including Constable Sage.

(4) Jennifer Gray

[31] On January 8, 2014, Jennifer decided to run errands. She went to Village Shoe Repair located on Chapel Street adjacent to Baffo’s where she parked in one of the shop’s designated parking spots, and then went to the bank. When she returned to her car, a truck and trailer had parked along Chapel Street and blocked her car in its parking space. At approximately 5:34 p.m. Jennifer telephoned her father, Ross, for assistance in locating the driver of the trailer.

[32] Ross was at in a Rotary Club meeting, and told her to ask Aldo if he could help. Jennifer went to Baffo’s to ask Aldo if he knew the driver of the trailer. He advised Jennifer that he did not know the owner, and requested that Jennifer assist him with putting some dishes into a box while she waited for her vehicle to be unblocked. Jennifer, at Aldo’s request, packaged one box with dishware. Her evidence is that she never removed any goods from the premises. Daryl Black conceded on cross-examination that he never saw Jennifer remove anything from the premises or load any goods into trucks, although he did observe her packing dishes into boxes. While Tim Ayling said in his affidavit that Jennifer “appeared to be actively involved in the loading of goods unto the truck”, on cross-examination he said that he saw Jennifer with one box inside the premises, and he heard her giving directions.

[33] Black arrived at Baffo’s between 5:30 and 6 p.m. When Black arrived, Jennifer learned that the truck trailer was owned or controlled by Black or his representatives. Black refused to remove the truck trailer despite repeated requests, and admitted that he was acting aggressively by screaming and yelling at all those in attendance at the premises, including Jennifer.

[34] There is a dispute, which I do not need to resolve for the purposes of this motion, as to whether Black assaulted Jennifer. However, after the disputed event, Jennifer contacted her father, Ross, at 17:55 and told him she had been assaulted by Black, who refused to remove the trailer that was blocking her car. Ross told her that he would leave the Rotary Club meeting and come to the premises, which he did. Ross advised Jennifer to contact the police by calling 911 if she felt threatened by Black. Jennifer called the police at 17:58 and reported that the Landlord had blocked the gate and was “extremely violent.” The 911 operator told Jennifer that police had already been dispatched to the premises. Black had called the police at 17:48.

[35] Although in his affidavit Black swore that Jennifer never raised the issue of her car being blocked with him or his associate Tim, on cross-examination he agreed that she told him she wanted to move her car, and asked him to move the truck and trailer so she could go home. He instructed Andy Paquette to move it so that she could leave. Once her vehicle was unblocked, Jennifer left the premises and went home, before the agreement with the Police was finalized.

[36] I find that Jennifer attended at the premises on January 8, 2014 by coincidence. Prior to her attendance she had no knowledge of the fact that any items were being removed from the premises, and had not spoken to Aldo or anyone else about their attendance at the premises on that day. She assisted in packing, but did not remove any chattels from the premises. She had no knowledge of Baffo’s financial situation, and did not know that it was in arrears of rent. She did not have the intent required under s. 50 of the Act, and did not knowingly aid or assist in a fraudulent removal. I dismiss the section 50 claim against Jennifer.

(5) The Police and the Agreement

[37] On January 8, 2014, Aldo and Black came to an agreement (with the assistance of the Police) that the items already loaded into the trucks supplied by Rutherford and the goods on the main floor of the premises could be removed from the premises, with the rest of the goods and chattels to remain at the premises until the lawyers for Baffo’s and the Landlord could discuss the matter (the “Agreement”). In accordance with this Agreement the goods on the main floor were loaded, and the Rutherford trucks departed the evening of January 8. Black acquiesced to this and it occurred in his presence and the presence of the Police.

[38] The Agreement as set out in the Police notes states:

“In order to avoid potential conflict [between] parties tonight, suggested that parties deal with matter with lawyers present tomorrow, before property is removed from building. Advised that this is their decision and was up to them on how to handle matter. Both parties agreed that they would contact each other to schedule a meeting with lawyers tomorrow. Agreed that property on main level…could be taken out tonight and that the rest would be dealt with later. Parties were cooperating and understand that Police are not the decision maker to landlord/tenant disputes. Tenants’ workers (15-20) removing property into trucks and landlord present during process.

Parties came to an agreement [with] respect to the items remaining in the restaurant and what can be removed out of the place tonight. [Approximately] 10-15 [people] at location to help move items out. P.C. Sage spoke to both parties. Stood by while items moved out from ground floor restaurant.”

[39] The Agreement was reached through discussions among Aldo, Black, and Constable Sage. Aldo deposed that the terms of the Agreement were that:

(a) Baffo’s was free to remove and all goods and chattels that had already been loaded into vehicles or that were on the first floor of the premises; (b) No further goods would be removed on the evening of January 8, 2014; and (c) Baffo’s and the Landlord would sort the matter out with their lawyers on January 9, 2014.

[40] Black swore that he never entered into the Agreement on the terms expressed by Aldo and in the Police notes, and that during the meeting between him, Aldo and the Police, he was given “limited choice” with respect to the goods and chattels already removed from the premises. Black’s evidence is that the terms of the Agreement were (contrary to Aldo’s understanding and the Police notes) that the doors to Baffo’s would be locked; Aldo would undertake not to return through the night; and nothing would leave the Baffo’s until the parties’ lawyers had the opportunity to discuss the matter.

[41] Black has also denied that he agreed to allow Aldo to remove the goods or chattels that had already been loaded onto the trucks and has asserted that that version of the Agreement as set out by Aldo and Constable Sage was merely their “opinion.”

[42] Even if the position of Black with respect to the terms of the Agreement is accepted, Black has conceded that following the private meeting with Aldo and the Police where the Agreement was reached, he consented to certain items being moved and loaded onto the trucks; he never “raised a stink” or advised the people in attendance that they could not move the trucks or that the “stuff” inside the trucks had to be put back into the premises; he never said that the trucks could not leave the premises; he facilitated the trucks’ departure by removing the vehicles that were blocking them; and he was present when the trucks left.

[43] Black agreed that he saw Constable Sage speaking to Aldo, Romas and Ross, but that he could not hear what Constable Sage was saying as he was not a party to that conversation.

[44] Each of the Personal Defendants, aside from Jennifer Gray who had already left the premises have, under oath, sworn to the fact that (1) any goods removed in their presence on January 8, 2014, were removed in accordance with their understanding of the Agreement, either communicated to them by the Police or by Aldo, and (2) the removal was in the presence of Black and the Police, and without objection by Black. I accept this evidence.

[45] While Black gave evidence that he never consented to or accepted the removal of the goods and chattels that had been loaded onto the vehicles, Black, on behalf of the Landlord, in the presence of the Police, consented to the trucks leaving and instructed his people to move vehicles that were blocking the trucks. Black’s conduct is consistent with the evidence of the Agreement as recorded in the police notes, and the evidence of Aldo, Ross, Steve and Romas.

[46] Romas (and Rutherford) admitted to assisting in the removal of goods from the premises on January 8, 2014, but deny that the removal was done with the wrongful or fraudulent intent required by Section 50 of the Act because the removal was after the Agreement, and the Landlord consented to the removal.

[47] Black has admitted that he does not know who loaded any goods into the trucks and/or what goods were specifically loaded prior to his arrival at the premises. Black has also admitted that following his attendance at the premises on January 8, 2014, no goods were removed out of the parking lot until after the Police arrived. There is no evidence that the Personal Defendants removed goods and chattels from Baffo’s before the police arrived. Therefore, for the purposes of the summary judgment motion brought by the Personal Defendants to dismiss the action against them, the critical time for analysis is the time between the each arrived at the premises and the time they departed the premises, as well as their actions while on the premises. These are described below.

(6) Ross Gray

[48] On the evening of January 8, 2014, Ross was the chair of a Rotary Club meeting to discuss an annual charity golf tournament. The meeting commenced at 17:30 at a restaurant in Bolton. These meetings typically take 2 to 3 hours to conduct and, given Ross’ position as chair, he had no intentions of leaving the meeting that evening. Ross attended at the premises on January 8, 2014 after getting a call from his daughter, Jennifer, who stated that she had been assaulted by Black.

[49] I accept Ross’ evidence that prior to being contacted by Jennifer and his arrival at the premises, he had no knowledge that any goods were being removed or that Aldo planned to shut down Baffo`s. I find he arrived at the restaurant on January 8, 2014, for the sole purpose of assisting his daughter, Jennifer. Ross arrived at about 18:15, and never removed or assisted in the removal of any goods.

[50] Black, on cross-examination, admitted that between his arrival (prior to Ross’ arrival) and the arrival of the Police no goods were removed out of the parking lot and he never saw Ross “put anything in a box or carry anything to a truck or remove any goods from the premises”. Ross’ evidence of his understanding of the Agreement was that the items removed on January 8, 2014 were removed pursuant to the Agreement with the Police, with Black in attendance. He heard the Police announcement that the parties had agreed that all items on the ground floor and the property already loaded in the vehicles could be removed.

[51] Black’s affidavit stated that “Ross assisted in the illegal removal of goods…by challenging my rights as a Landlord in front of the police and provided at least a distraction to enable the other people to continue loading the trucks.” On cross-examination, he agreed that what he was referring to, and the basis for the claim against Ross, was that Ross asked, in the presence of the Police, “How do we know he’s in arrears of rent.” The cross-examination of Black was as follows:

Q: Okay, but are you suing Ross Gray because he had a conversation with a police officer that you feel undermined your authority as the Landlord?

A: Yes.

[52] There is no evidence to suggest that Ross assisted Baffo’s in removing goods from the premises in any manner. He did not have the intent required under s. 50 of the Act, and did not knowingly aid or assist in a fraudulent removal. I dismiss the section 50 claim against Ross.

(7) Steve Sanderson

[53] I accept the evidence of Steve that he was contacted by Romas on January 8, 2014, told for the first time that Baffo’s was moving, and that Aldo needed some assistance. Steve’s evidence is that he arrived about 5-10 minutes prior to the Police.

[54] Steve arrived after Black and at a time when no goods were being removed. Additionally, Black on cross-examination testified he did not see Steve remove any items from the premises, and did not see Steve load anything onto trucks. I accept Steve’s evidence that the only assistance he provided on the night of January 8, 2014 was that, after having been informed by the Police and Aldo that the Landlord and Aldo had reached the Agreement, he moved a television set so that it did not block a pathway and he packaged some dishware into boxes.

[55] There is no evidence that contradicts Steve’s sworn assertion that he was unaware of any rental arrears that Baffo’s may have been in on the evening of January 8, 2014. Black states that in 2013 he told Steve that there were arrears of rent; however, a statement of arrears in 2013 does not give rise to knowledge months later of arrears. Even if Steve found out about the purported arrears on the evening of January 8, 2014, as is suggested by Black, neither Black nor Ayling saw Steve remove any goods from the premises and Steve denies removing any goods. He did not have the intent required under s. 50 of the Act, and did not knowingly aid or assist in a fraudulent removal. I dismiss the section 50 claim against Steve.

(8) Romas Krilavicius

[56] Romas is the owner of the defendant William R. Rutherford Ltd., which is a trucking company. He states that he was contacted by Aldo on or around January 7 or 8, 2014. Aldo requested that Romas provide him with the use of a truck to assist in moving goods from Baffo’s as he knew that Romas had access to trucks through Rutherford. Romas agreed to provide Aldo with a truck after Rutherford’s normal business hours. Romas denied that he was aware that Baffo’s was in breach of its lease with the Landlord or had any arrears in rent.

[57] Three Rutherford trucks were sent to Baffo’s on January 8, 2014. Each truck arrived at a different time as they were sent to Baffo’s once their once their ordinary drivers had finished their daily deliveries. When Romas attended at the premises at approximately 17:30 pm, he witnessed a truck parked at the rear entrance of the premises being loaded.

[58] By the time Black arrived at the premises, one truck had been loaded and a second truck was half loaded. Both trucks were blocked in the Baffo’s parking lot by Black and/or one of the Landlord’s representatives’ vehicles. A third Rutherford truck arrived after the Police were in attendance. None of the trucks provided by Rutherford left the premises until after the Police attended and the Agreement was reached as between the Landlord and Baffo’s.

[59] The only evidence that items were removed prior to the time the Police attended is the hearsay evidence of Tim Ayling, who stated that another person told him that a loaded truck had arrived at 2 p.m. and left before 5 p.m. The Landlord provides no reason why the other person was not called to provide evidence, and I give no weight to that hearsay evidence of an earlier truck.

[60] The evidence before this Court does not support the Landlord’s bald assertions that Romas played an important role in planning the removal of goods from the premises and/or that he had the authority to stop the goods from being removed: O’Laughlin v. Byers, 2014 ONSC 5253, paras 43-44.

[61] I accept the evidence in his affidavit and on cross-examination that Romas did not plan or in any way assist in planning the move and had no knowledge of who may have assisted; did not have any authority over the 15-20 unidentified people in attendance; had no role to play in organizing a flatbed truck and forklift to attend at the premises; and never knew of or saw any trades at the premises.

[62] The affidavit evidence of Romas with respect to his understanding of the Agreement as follows:

Following the meeting, I was advised that the parties (being Aldo and Daryl Black) had come to an agreement with respect to removing certain items from the premises. I cannot recall exactly who advised me of the agreement. In any event, in the presence of the Police, I assisted Aldo in loading certain items into the Rutherford trucks that Mr. Black agreed could be removed from the premises.

[63] Romas admits that he drove one of the Rutherford trucks containing goods from the premises to his warehouse, and that the other trucks also brought goods to his warehouse where they remain. Again, this was done following the Agreement as between the Landlord and Baffo’s and in the presence of the Police and Black.

[64] Just prior to the doors being locked, Romas asked Black and the Police whether the parties could remove some personal items of Aldo’s that were hanging on the walls. Black agreed that the personal items could be removed. Black agreed that he only saw Romas put something on the truck with his express consent, in the presence of the Police. Black arranged for the vehicles that were blocking the Rutherford trucks to be moved as per the Agreement. Black stood by with the Police while the trucks left and never objected. Accordingly, to the extent that Romas removed any goods, in Rutherford trucks, it was with Black’s consent and pursuant to the Agreement.

[65] A dispute as to the terms of the Agreement reached as between the parties does not mean that Romas acted or with the necessary knowledge and intent. There is no evidence before me to suggest that the Personal Defendants were not acting pursuant to the terms of the Agreement as it was communicated to them by either Aldo or Constable Sage. To the extent that there was a disagreement between what Aldo and the Police notes say, on the one hand, and Black, on the other hand, about the Agreement, Black has admitted that he did not express this disagreement to anyone outside of his meeting with Aldo and the Police. Regardless of the actual terms of the Agreement, Romas clearly acted based on his understanding that the goods were being removed on consent. Romas would have had no way of knowing that Black was not consenting to the removal of the goods. Accordingly, he never wilfully or knowingly aided or assisted in the fraudulent removal of anything. As such, I find that the Landlord has failed to establish a section 50 case against Romas or Rutherford, and I dismiss the action against them.

The Distress

[66] In this next section, I will review the facts relevant to the wrongful distress claim as well as the fraudulent removal claim against Baffo’s.

(1) Events of January 9th

[67] The next day, January 9, 2014, Black retained a locksmith to open the door and to change all of the locks of the premises leased by Baffo’s. Aldo was not present when Black gained access to the premises on January 9, 2014 and did not consent to Black or the Landlord gaining access to the premises.

[68] The Landlord changed the locks without providing Baffo’s with a key, and put chains and padlocks on the front door and second level door of the premises. Baffo’s was denied access to the premises. The chains and padlocks shackled around the door handles by Black prevented Baffo’s from carrying on its ordinary business and from gaining access to the Leased premises in the ordinary course.

[69] A Bailiff’s Notice was posted on the door of Baffo’s on January 9, stating that the Landlord had taken distress for arrears of rent owing in the amount of $97,231.91 plus costs. That notice provided in part:

And further take notice that it may be necessary for the protection of your goods and chattels and protection of the Landlord’s right of distress that the locks on the entry of the premises are changed notwithstanding the change of locks by the Landlord for the purpose of protection of said goods and chattels. Your rights as Tenant to the premises continue to be recognized and you may, upon request to the Landlord, or its Bailiff, re–enter the premises and continue to occupy the same and replevy your goods and chattels upon payment of arrears of rent plus costs and charges aforesaid.

This is not a forfeiture of the said tenancy agreement, but a distress against the goods and chattels. For greater certainty, this distress is not intended in any way to terminate the said tenancy agreement.

In the event that the locks are changed, reentry into the premises must be by permission of the landlord or their bailiff and such re-entry will not be unreasonably withheld by arrangement. (emphasis added)

[70] The notice of distress indicated the sum of $97,231.91 was owing for arrears of rent, and that access would be provided once the arrears were paid, with costs. However, this contradicts the Landlord’s current position that the sum of $36,919.48 was owing for arrears of rent as of January 8, 2014. Although there is a disputed claim for accelerated rent due to arrears, and a claim for payment of a promissory note, it appears that payments were made regularly until January, 2014, and there is no evidence that the Landlord exercised any options prior to January 9 to require payment. In addition, the Landlord’s factum on the summary judgment motions clearly asserted that the arrears of rent were $36,919.48 and not the $97,231.91 asserted in the January 9, 2014 Bailiff’s Notice.

[71] The Landlord seized all of the goods on the premises on January 9, 2014, including all trade fixtures, and did not sell the goods or fixtures until October 3, 2014 (approximately nine months later).

(2) Events After January 9, 2014

[72] On January 30, 2014 (approximately 21 days after purporting to levy distress and before any seized goods were sold), the Landlord applied to the Alcohol and Gaming Commission of Ontario to have Baffo’s liquor licence transferred to the Landlord. On March 14, 2014, Baffo’s liquor licence was transferred to the Landlord. As of March 14, 2014, Baffo’s could no longer carry on business at the premises as a licenced restaurant because its liquor licence had been transferred to the Landlord. This action is inconsistent with a landlord exercising the remedy of distress (which is based upon a continuing tenancy), but is consistent with a landlord who has terminated the tenancy.

[73] On February 1, 2014 (approximately 23 days after purporting to distress and before any of the seized goods had been sold), the Landlord listed the Leased premises for lease on MLS. The Landlord advertised that Leased premises had “$500K of leasehold improvements in place plus $120K in equipment” in its MLS Listing posted by its agent. The Landlord was attempting to lease the premises for $14.00 square foot, which was approximately $2.10 per square foot more than he had been receiving from Baffo's under the Lease (which averaged $11.90 per square foot).

[74] There was no auction or other attempt to sell the goods seized from Baffo’s. Rather, the Landlord seized all of the goods, including fixtures, on the premises on January 9, 2014. The Landlord accepted an unsolicited bid for sale of the building containing the leased premises where Baffo’s had been located. All of Baffo’s goods, chattels, equipment, fixtures and leasehold improvements were sold to the buyer of the building for $25,000.00 on October 3, 2014 (approximately nine months after the distress was levied).

(3) No Inventory or Notice of Costs of Distress

[75] The Landlord admitted that on January 9, 2014, the date of the distress, neither the Landlord nor its bailiff prepared an inventory of the goods seized, contrary to section 53 of the Act. The Landlord admitted during cross-examination that it did not provide Baffo's with notice of an inventory of the goods seized. The Landlord undertook to advise whether Baffo's was given written notice of the costs and expenses of the distress. As the Landlord did not answer this undertaking, I draw an adverse inference that such notice was never given to Baffo's contrary to the Costs of Distress Act, R.S.O. 1990, c. C.41, as amended, s. 6(1).

(4) The Appraisals

[76] No sworn appraisals were obtained or provided to Baffo’s. Black has appended to his affidavit two unsworn appraisal reports valuing the chattels that remained at the premises following the Landlord’s termination of the Lease. The Commercial Tenancies Act, section 53, provides that appraisals must be sworn. The first appraisal report prepared by Turnbull Appraisals and Liquidations set fair market value at $95,000 and liquidation value at $17, 285.

[77] The second appraisal report prepared by Restaurant Auction Service dated January 16, 2014, also unsworn, set value in place at $48,000, and liquidation value at $26,000. I note that this report is incomplete as it is missing pages.

[78] It is Aldo’s evidence that the Landlord’s two appraisals did not include the following, which the Landlord has agreed were located on the premises and subject to the distress:

• Elevator (dumb waiter system) with a value of approximately $40,000;
• New A/C roof unit with a value of approximately $19,000;
• New A/C wall unit with a value of approximately $3,000;
• New heating + A/C system downstairs with a value of approximately $10,000;
• Two finished fully functioning marble top bars with a collective value of $60,000; and
• Five awnings with a collective value of approximately $19,000.

[79] Some of these appear to be trade fixtures, others fixtures, and others may be chattels. I find that the appraisals failed to include these additional chattels and fixtures. The Lease provided in para. 7(6) that:

If the Tenant has complied with his obligations according to the provisions of this Lease, the Tenant may remove his Trade Fixtures at the end of the Term or other termination of this Lease…

[80] Aldo in his affidavit states that the Landlord improperly distrained assets properly belonging to Baffo’s, including fixtures and trade fixtures, with an acquisition value of approximately $319, 500.

Issue # 3 & 4: Arrears and Fraudulent Removal by Baffo’s

[81] As noted above, the burden is on the landlord to show:

• Arrears of rent owing or reserved and not paid by the tenant, and
• Fraudulent intent to remove chattels to defeat landlord’s right of distress.

[82] The right of distress extends only to the value of the rental arrears. While it is disputed, the value of rental arrears now claimed by the Landlord is $36, 919.48 which I accept for the purposes of these motions.

[83] The Landlord’s evidence as to the value of distrained goods is from two unsworn appraisal reports, one of which is on its face incomplete (only 6 of 8 pages are in the motion record), and both of which are attached as exhibits to Black’s affidavit. They are classic hearsay reports, as the authors were not made available for cross-examination. While information and belief evidence is permissible on summary judgment motions, I must consider the quality of evidence on this key issue put forward by the parties. I note that the issue is of the Landlord’s making, as it did not comply with two key requirements of the Commercial Tenancies Act – the duty to provide an inventory, and the requirement to provide sworn appraisal evidence. Aldo, the owner who ran the restaurant, has filed evidence as to the value of chattels remaining on the premises at $240,500 (excluding trade fixtures of the full service bars, $60,000, and the five awnings, $19,000). The Landlord agrees that the items in Aldo’s list were at the premises on January 9, 2014, but does not agree that the values ascribed to them are accurate, or that the items were Baffo’s.

[84] On cross-examination of Black the parties sought an undertaking for production of the full Turnbull appraisal file; the answer to undertaking states that the Landlord/Black “have been unable to obtain the entire Turnbull file.” The parties on cross-examination also sought production of “the entire Restaurant Auction Service Report including all pages and attachments”; the answer was that “the entire Restaurant Auction Service report is not available at this time.” The parties also sought a copy of the entire Restaurant Auction appraisal file; the answer was that the Landlord/Black “have been unable to obtain” the entire file.

[85] In Sanzone v. Schechter, 2016 ONCA 566 the Court of Appeal held that:

As a general rule, when a party seeks to adduce expert evidence on a summary judgment motion, the evidence of the expert must comply with rule 53.03, unless the opinion evidence is based on the witness’ observation of or participation in the events in issue, as explained in Westerhof v. Gee Estate, 2015 ONCA 206, 310 O.A.C. 335, at paras. 60-62. A party can file either an affidavit from the expert containing his or her opinion or an affidavit from the expert with the report attached: Danos v. BMW Group Financial Services Canada, a division of BMW Canada Inc., 2014 ONSC 2060, [2014] O.J. No. 1802, at para. 29, aff’d 2014 ONCA 887.

[86] Providing unsworn reports on this key issue as exhibits to the Landlord’s affidavit immunizes the authors from cross-examination on a critical issue on this motion; the failure to produce the entire Restaurant Auction Report, or either appraisal file, compounds the issues regarding the reliability of the appraisal evidence. Rule 20.02(1) provides that the court may “draw an adverse inference from the failure of a party to provide the evidence of any person having personal knowledge of contested facts”, and I do so in the present case. I give no weight to that evidence. The only other evidence of value is that the goods (including trade fixtures) were sold in an unsolicited bid, nine months after the distress, to the purchaser of the property for an additional $25,000. I do not find this to be reliable evidence of the value of goods distrained, given the circumstances of the disposition. I note as well that on February 1, 2014, the Landlord listed the premises for lease on MLS. The Landlord advertised that premises had “$500K of leasehold improvements in place plus $120K in equipment” in the MLS Listing posted by its agent.

[87] On the evidence before me I accept that the value of goods and chattels remaining on the premises according to Aldo’s evidence were far in excess of the $36,919 claimed as rental arrears.

[88] There cannot be a fraudulent removal within the meaning of s. 50 of the Act with respect to goods that could not have been subject to the landlord’s right of distress at the time of the removal: Cowie Industries Developments v. National Clearance Warehouse, 1999 O.J. No. 1386, 1999 CarswellOnt 1083 (Ont. C.A.) at para. 7. Removing items from the premises in itself does not constitute fraudulent intent, since the focus is on a deliberate intention to deprive the landlord of the goods for the purposes of distress against rental arrears. As the goods remaining far exceeded the rental arrears, there was no fraudulent removal.

[89] In addition, the goods and chattels were removed in the presence of Black and the Police, and pursuant to the Agreement. As such, there was no fraudulent removal: Amexon Property Management Inc. v. Unique Benefits Group Corp., 2006 CarswellOnt 3834 at paras. 69-70; Novacrete Construction Ltd. v. Profile Building Supplies Inc., 2000 CarswellOnt 2553, [2000] O.J. No. 3179 (Sup. Ct.) at para. 101.

[90] I grant summary judgment to Baffo’s dismissing the fraudulent removal claim against Baffo’s.

Issue # 5: The Landlord Exercised Wrongful Distress

[91] Distress is a self-help remedy which gives a landlord the right, where a tenant is in arrears, and without impairing the ongoing tenancy, to seize goods and chattels of the tenant and to sell those goods to satisfy rental arrears. There is no supervision by the courts of the distress process. For this reason, distress must be exercised in strict compliance with the many rules governing its use. If a landlord exercises distress in contravention of the governing rules, the tenant may have a claim against the landlord for damages suffered: Excellent Fashion v. Namdev Property Management, 2003 O.J. No. 422, 2003 CarswellOnt 426 (SCJ) at para. 14.

[92] A fundamental principle is that termination of a lease and distress are mutually exclusive remedies. As stated by Campbell J. in Malka and Circle Inc. v. Vasilladis and Lugassy, 2011 ONSC 5884, 2011 CarswellOnt 10627 (SCJ) at para. 133:

The law is clear that when a tenant defaults in the obligation to pay rent, the landlord has two mutually exclusive legal remedies, and must elect which remedy to pursue. The landlord can elect to enter the premises and distrain the goods owned by the tenant for purposes of satisfying the debt owed by way of rent, but with a view to continuing the lease. Alternatively, the landlord can elect to re-take possession of the premises and terminate the lease, and potentially pursue other additional remedies. (citations omitted)

[93] Distress is an affirmation of the lease, and the lease cannot be terminated while a distress is ongoing. If a landlord exercises distress in a manner to exclude the tenant from possession of the premises, from carrying on its ordinary business on the premises or gaining access to the premises in the ordinary course, it may have the effect of terminating the lease: S. Graff and B. Kenworthy, in H. Haber, ed., Tenant’s Rights and Remedies in a Commercial Lease, A Practical Guide, 2nd ed. (Toronto: Canada Law Book, 2014) at p. 299.

[94] A distress may be illegal, irregular, or excessive. An action in damages for conversion exists in all cases of wrongful distress, whether illegal, excessive or irregular. An illegal distress occurs where the proceedings are improper from the outset because the landlord or its agent has breached one or more of the fundamental principles regulating the remedy of distress; an illegal distress entitles the tenant to recover all damages sustained as a result of the distress: S. Graff and B. Kenworthy, in H. Haber, ed., Tenant’s Rights and Remedies in a Commercial Lease, A Practical Guide, 2nd ed. (Toronto: Canada Law Book, 2014) at p. 301.

[95] The Landlord submits that it was entitled to enter the premises with the assistance of the locksmith in the face of Baffo’s abandonment. It also says that in changing the locks, the Landlord was merely protecting the goods from further removal and was not conducting a termination of the lease, relying on the Bailiff’s Notice of Distress. In this case, however, through a combination of the forced entry, changing of locks, affixing padlocks and chains on the doors, seizing all goods and fixtures, and making the right of re-entry conditional on payment of a grossly inflated statement of arrears, the Landlord terminated the lease during the distress. The effect was not avoided by the Bailiff’s Notice stating that this was not a forfeiture of the tenancy agreement: Church of Our Lady of Fatima v. Equity Three Holdings Inc., 2010 ONSC 5143 (SCJ) at paras. 7-8; S. Graff and B. Kenworthy, in H. Haber, ed., Tenant’s Rights and Remedies in a Commercial Lease, A Practical Guide, 2nd ed. (Toronto: Canada Law Book, 2014) at pp. 298-299.

[96] In this case I find that the distress is illegal and that the proceedings were improper from the outset. I find that the Landlord:

• made an unlawful forced entry onto the premises with the assistance of a locksmith;
• changed the locks on the premises and subsequently padlocked and chained the front door and second level door, thereby interfering with Baffo’s ability to carry on its business;
• posted a Bailiff’s Notice of Distress claiming that $97,231.91 was owing for arrears of rent, and that access would be provided once the arrears were paid, with costs, when the Landlord’s current position is that rental arrears were $36,919.48;
• improperly seized all of Baffo’s chattels, fixtures and improvements in the course of the distress: Illegal distress has been found where a landlord seizes a tenant’s fixtures and improvements: 859587 Ontario Ltd. v. Starmark Property Management Ltd., , 1998 CarswellOnt 2937 (C.A.) at para. 9. In this case, having illegally distrained and concurrently forfeited the lease, the Landlord retained the value of all of Baffo’s trade fixtures and improvements; and
• engaged in an unreasonable delay of nine months in completing the distress: The landlord must sell the goods within a reasonable time after the seizure: Excellent Fashion v. Namdev Property Management, [2003] O.J. No. 422, 2003 CarswellOnt 426 (SCJ) at para. 16.

[97] During the nine-month distress period, the Landlord took significant actions inconsistent with the subsistence of the lease in addition to the points noted above. These include:

• On January 30, 2014 (approximately 21 days after purporting to levy distress and before any seized goods were sold), the Landlord applied to the Alcohol and Gaming Commission of Ontario to have Baffo’s liquor licence transferred to the Landlord, and it was transferred to the Landlord on March 14, 2014. As of March 14, 2014, Baffo’s could no longer carry on business at the premises as a licenced restaurant because its liquor licence had been transferred to the Landlord. This action is inconsistent with a landlord exercising the remedy of distress (which is based upon a continuing tenancy), but is consistent with a landlord who has terminated the tenancy.
• On February 1, 2014 (approximately 23 days after purporting to distress and before any of the seized goods had been sold), the Landlord listed the Leased premises for lease on MLS. The Landlord advertised that Leased premises had “$500K of leasehold improvements in place plus $120K in equipment” in its MLS Listing posted by its agent.
• There was no auction or other attempt to sell the goods seized from Baffo’s for rental arrears. Rather, the Landlord seized all of the goods, including fixtures, on the premises on January 9, 2014 and did not sell them until October 3, 2014, in response to an unsolicited offer (approximately nine months later).

[98] I have also found that the distress is irregular. A distress will be characterized as irregular where the landlord acts in breach of the technical requirements pertaining to a distress or where the statutory formalities have not been fully complied with after seizure: S. Graff and B. Kenworthy, in H. Haber, ed., Tenant’s Rights and Remedies in a Commercial Lease, A Practical Guide, 2nd ed. (Toronto: Canada Law Book, 2014) at pp. 302-303. Section 54 of the Act provides that any irregularities which occur after the distress has taken place do not make the distress unlawful, but they give the aggrieved party a right to claim against the landlord for damages suffered. The Landlord has acted in breach of technical requirements and failed to comply with statutory formalities, including:

• failing to obtain appraisals under oath in accordance with section 53 of the Act,
• neither the Landlord nor the bailiff made an inventory of the goods seized at the time of seizure, and they failed to provide the tenant with a notice setting out the inventory of goods seized as required by section 54 of the Act: S. Graff and B. Kenworthy, in H. Haber, ed., Tenant's Rights and Remedies in a Commercial Lease, A Practical Guide, 2nd ed. (Toronto: Canada Law Book, 2014) at pp. 295, 302,
• failing to give a copy of the demand or a statement of the costs and expenses of the distress to the tenant as required by the Costs of Distress Act, R.S.O. 1990, c. C.41, as amended, s. 6(1).

[99] In this case there were a number of illegalities and irregularities in the execution of the alleged distress that in my view contribute to a finding of wrongful distress and bear upon damages, including punitive damages, and the liability of Black. Because distress is a highly intrusive self-help remedy, it is critical that a distraining landlord strictly comply with the applicable statutory and common law provisions.

Issue #6: Punitive Damages and Reference on Damages for Wrongful Distress

[100] Section 55 of the Act provides:

55. (1) A distrainor who takes an excessive distress, or takes a distress wrongfully, is liable in damages to the owner of the goods or chattels distrained.

(2) Where a distress and sale are made for rent pretended to be in arrears and due when, in truth, no rent is in arrears or due to the person distraining, or to the person in whose name or right such distress is taken, the owner of the goods or chattels distrained and sold, the owner’s executors or administrators are entitled, by action to be brought against the person so distraining, to recover full satisfaction for the damage sustained by the distress and sale.

[101] I have found the distress to be irregular and illegal, and as an extreme case, subject to a claim for general and special damages as set out in 1526183 Ontario Ltd. v. Grant Equipment Corp., 2010 ONSC 928 at para. 37:

Section 43 of the Commercial Tenancies Act provides that distress is to be reasonable. Section 55 of the Act provides that a landlord who takes an excessive distress, or takes a distress wrongfully, is liable in damages to the owner of the goods distrained. For a distress to be reasonable, the landlord must not seize and sell more goods than are reasonably necessary to satisfy the rent arrears. Where the distress is illegal, the tenant may recover from the landlord full general damages, including damages for loss of business. Where the distress is excessive, the damages will normally be special damages, as an irregularity, under s. 54 of the Act. However, where the wrongful distress is very excessive and the landlord’s conduct has been oppressive, the distress may be found to be illegal and subject to a claim for general and special damages. Punitive or exemplary damages have also been awarded against a landlord where its exercise of distress was oppressive and there have been aggravating circumstances. (See: Posen “The Tenant’s Remedies for Wrongful Distress”, pp. 134-137, in Haber ed. Distress, A Commercial Landlord’s Remedy (Aura, Ont. Canada Law Book 2001).

[102] In this case, I find the Landlord’s actions to be illegal, very excessive, and oppressive and find Baffo’s entitled to general and special damages for the distraint.

[103] Baffo’s also seeks punitive damages against the Landlord, in light of what it says was a “deliberate and flagrant breach of the landlord-tenant relationship to obtain a financial benefit” for the Landlord at the expense of Baffo’s. Baffo’s submits that the Landlord had a choice: it could exercise distress and return the premises to Baffo’s or it could have terminated the leases (and set aside Baffo’s chattels for return), but the Landlord intentionally chose both, to the financial detriment of Baffo’s. Baffo’s also relies on the illegal and irregular distress, reflecting that the distress was “nothing more than a fiction created by the Landlord and Black to suit their purposes.”

[104] As noted above, in 1526183 Ontario Inc. v. Grant Equipment Corp., Justice Shaw held that punitive or exemplary damages may be awarded against a landlord where its exercise of distress was oppressive and there have been aggravating circumstances.

[105] In Hodgkinson v. Rodd, Ferguson J. awarded punitive damages against a landlord, taking into consideration the landlord’s inconsistent exercise of both forfeiture and distress and the fact that the landlord had, by its conduct, prejudiced the tenant’s ability to prove his damages. Punitive damages were $7,500, where the tenant’s damages were assessed at $8,275: Hodgkinson v. Rodd, 1996 CarswellOnt 1491 (Gen. Div.).

[106] I have found that the Landlord terminated the Leases and exercised illegal and irregular distress at the same time, and its actions were illegal and oppressive. I find punitive damages are appropriate for the Landlord’s deliberate, illegal and wrongful distress, and set those damages in the amount of $20,000.00.

[107] Rule 20.04 includes various mechanisms for quantifying damages where the court is satisfied that this is the only genuine issue which cannot be determined on a summary judgment motion. Section 20.04(3) provides:

20.04(3) Where the court is satisfied that the only genuine issue is the amount to which the moving party is entitled, the court may order a trial of that issue or grant judgment with a reference to determine the amount.

[108] Baffo’s evidence is that the distrained goods had an original value of approximately $319,500 and that collectively the goods, chattels, trade fixtures, equipment and leasehold improvements distrained had an original value of approximately $1,100,000. The failure of the Landlord to render a proper inventory at the time of the alleged distress, the failure to provide the appraisal affidavit evidence required under the Commercial Tenancies Act, and the decision to sell Baffo’s trade fixtures together with its chattels on an unsolicited bid as part of a package of sale of the leased premises makes the issue of damages determination more difficult.

[109] In Baffo’s counterclaim, it has sought an accounting with respect to its damages. I direct that Baffo’s damages for wrongful distress pursuant to section 55(1) of the Commercial Tenancies Act should be determined on a reference to a Master. The issue of rental arrears must also be determined on the reference, as the Landlord has a set-off for rental arrears to January 9, 2014, the date that it terminated the Leases. Baffo’s is also entitled to damages for conversion, if there is a difference between damages under s. 55(1) of the Commercial Tenancies Act and damages for conversion.

Issue #7: The Landlord is Liable for Conversion

[110] The elements of tort of conversion are as follows: Murray v. Toth, 2012 CarswellOnt 12711 (Ont. S.C.J.) at para. 22:

(e) The plaintiff has a possessory interest in the property; (f) The personal property is identifiable or specific; (g) The defendant intentionally committed a wrongful act in respect of the property inconsistent with the plaintiff’s right of possession; and (h) The plaintiff suffered damages.

[111] An action for damages for conversion exists in all cases of wrongful distress, whether illegal, excessive or irregular: S. Graff and B. Kenworthy, in H. Haber, ed., Tenant’s Rights and Remedies in a Commercial Lease, A Practical Guide, 2nd ed. (Toronto: Canada Law Book, 2014) at p. 304. I find that the Landlord is liable for conversion, as well.

Issue # 8: Black is Personally Liable

[112] Where officers or directors of corporate landlords have been personally involved in directing an illegal distress, they may be held personally liable for their tortious actions: Beaver Steel Inc. v. Skylark Ventures Ltd., 1983 CarswellBC 223 (Sup. Ct.) at paras. 23-30; Sigrist v. McLean, 2011 CarswellOnt 14424 (SCJ.) at para. 139-141.

[113] In Beaver Steel Inc. v. Skylark Ventures Ltd., where the bailiff was involved in an illegal distress by virtue of using a locksmith to gain access to the premises, Davis J. held that the president of the corporate landlord was personally liable as he knew the bailiff did not have a key to the premises and that entry would have to be gained by picking or forcing the locks.

[114] I accept the following facts to find that Black should be held personally liable for the actions of the Landlord:

(1) Black was the sole owner/shareholder, officer, director and president of the Landlord; (2) Black admitted during cross-examination that he was the guiding/operating mind of the Landlord; (3) Black alone dealt personally with Baffo’s and Aldo throughout. The relationship of landlord-tenant was with Black and Aldo; (4) Black admitted during cross-examination that the Landlord was simply a single purpose ownership vehicle for the Leased premises; (5) The actions and conduct of the Landlord and Black vis-à-vis Baffo’s and Aldo, including the lockout and the distraint, were the acts of Black acting personally and also as the sole owner/shareholder and the Landlord; and (6) Black’s actions were motivated by self-interest. Black stood to gain personally by terminating the tenancy and distraining all of Baffo’s property in the Leased premises.

COSTS

[115] The Personal Defendants and Baffo’s seek costs on a substantial indemnity basis. Generally, costs are awarded on a partial indemnity basis. There are, however, circumstances where elevated costs awards are required and justified. One such circumstance is where a party has made baseless or unproven allegations of fraud or deceit as against another.

[116] Justice Lax in Manning v. Epp, [2006] O.J. No. 4239 (Sup. Ct.) discussed the rationale for an award of costs on a substantial indemnity basis where unproven allegations of fraud have been made, at paras. 7-8:

Costs on the higher scale can be awarded as a form of chastisement and as a mark of the court's disapproval of a litigant's conduct. This is intended to punish as well as to deter others from engaging in similar conduct. Unproved allegations of fraud frequently attract awards on the higher scale. Unproved allegations of breach of trust, conspiracy, misrepresentation, breach of fiduciary duty, and the like, may also attract this kind of award: Beaver Lumber Co. v. 222044 Ontario Ltd. (1997), 5 C.P.C. (4th) 253 (Ont. Gen. Div.) at p. 256.

Cost sanctions are imposed for these kinds of unproved allegations because they are rooted in assertions of dishonesty and deceit and go to the heart of a person's integrity: Bargman v. Rooney (1999), 30 C.P.C. (4th) 259 (Ont. Gen. Div.) at pp. 268-269; Dyer v. Mekinda Snyder Partnership Inc. (1998), , 40 O.R. (3d) 180 (Gen. Div.) and see cases referred to at pp. 184-185. . . .

[117] The Landlord brought a claim of knowingly aiding and assisting in fraudulent removal against the five Personal Defendants. Section 50 is a penal provision, and imputes a finding of dishonesty. This is a claim which includes an element of deliberate misfeasance and acts in furtherance of fraud. The Landlord was wholly unsuccessful in this claim. Given the nature of the claims, I find that substantial indemnity costs are warranted in the circumstances. The motions and cross-motions were hard fought, with many affidavits and out-of-court cross examinations. The Landlord claimed $100,000 from each of the Personal Defendants, for a total cost of $500,000. The Personal Defendants seek substantial indemnity costs in the amount of $152,808/25; partial indemnity costs would have been $104,814.90. Taking into consideration the factors set out in Rule 57.01, I award the Personal Defendants substantial indemnity costs in the amount of $140,000.00 inclusive of fees and disbursements, as an amount that is just and reasonable in the circumstances.

[118] Baffo’s also seeks substantial indemnity costs, for the same reasons. It seeks substantial indemnity costs in the amount of $85,872.47, and would have sought partial indemnity costs in the amount of $59,604.38. Taking into consideration the factors set out in Rule 57.01, I award Baffo’s substantial indemnity costs in the amount of $78,000.00 inclusive of fees and disbursements, as an amount that is just and reasonable in the circumstances.

Seized of Future Summary Judgment Motions

[119] If there are additional summary judgment motions in this file, they should be brought before me as I am seized of this matter.

Kristjanson J.

Released: May 24, 2017

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

1694879 ontario inc. Plaintiff

• and - romas krilavicius, william r. rutherford limited, steve sanderson, baffo’s incorporated, ross gray and jennifer gray Defendants

AND RE:

romas krilavicius, steve sanderson and jennifer gray Plaintiffs by Counterclaim

• and - 1694879 ontario inc. and daryl black Defendants by Counterclaim

AND RE:

baffo’s incorporated Plaintiff by Counterclaim

• and - 1694879 ONTARIO INC. and DARYL BLACK Defendants by Counterclaim

REASONS FOR JUDGMENT

Kristjanson J.

Released: May 24, 2017