COURT OF APPEAL FOR ONTARIO

CITATION: Dean v. Kotsopoulos, 2012 ONCA 143

DATE: 20120307

DOCKET: C52563

Rosenberg and Feldman JJ.A. and Swinton J. (ad hoc)

BETWEEN

RONALD JAMES DEAN and 1083994 ONTARIO INC.

Appellants (Plaintiffs)

and

STEVE KOTSOPOULOS and TED’S RESTAURANT EAST YORK LIMITED

Respondents (Defendants)

Eric Freedman, for the appellants

Alfred S. Schorr, for the respondents

Heard: January 20, 2012

On appeal from the judgment of Justice Romain W. Pitt of the Superior Court of Justice, dated July 30, 2010

Swinton J. (ad hoc):

[1] The appellants Ronald James Dean and 1083994 Ontario Inc. (“108”) appeal from a judgment of Pitt J. in which he found that they had abandoned restaurant equipment and so dismissed their action for damages for conversion of the equipment with costs of $9,300.00. In my view, he erred in finding abandonment, and therefore, the appeal should be allowed.

Background Facts

[2] The respondent Steve Kotsopoulos was the sole owner of the corporate defendant, Ted’s Restaurant East York Limited. For many years, he had operated a restaurant in a building he owned on O’Connor Drive in Toronto.

[3] On January 25, 2006, 108 signed a document called “Offer to Lease and Offer to Purchase Equipment” with Mr. Kotsopoulos and Ted’s Restaurant. According to that document, Mr. Dean, the sole shareholder of 108, agreed to purchase the equipment set out in Schedule A for $40,000.00 paid to Ted’s Restaurant, while 108 agreed to lease the premises for five years. The lease was to commence February 1, 2006.

[4] The equipment listed in Schedule A consisted of used restaurant equipment and included two stoves with burners, two grills, a charcoal broiler, two freezers, chairs and tables, among many other items. The purchase price was paid in full by January 26, 2006. Although the parties contemplated the execution of a standard form offer to lease, none was ever provided to the appellants by the respondents.

[5] Mr. Dean also purchased some new equipment, including televisions, satellite dishes, cash registers and draught lines for beer, which he valued at $16,730.75. He testified that he opened a sports bar for business in April 2006, with the delay in opening caused by the need for maintenance work.

[6] Rent was paid to the end of June 2006. However, during the month of June, 2006, Mr. Kotsopoulos’ lawyer notified Mr. Dean that he was in breach of his obligation to provide insurance, and the lease would be terminated if the breach was not cured by June 30, 2006. Mr. Dean asked Mr. Kotsopoulos to use the last month’s rent he had paid for July rent so that he could pay for insurance. After Mr. Kotsopoulos refused, Mr. Dean began to move equipment and supplies out of the restaurant over the July 1 long weekend. He had also contacted an auction company with the intention that he would sell the equipment at an auction, but the company had no truck available that weekend.

[7] Mr. Dean testified that he made about four trips over the weekend. Sometime on July 2, when he returned to the premises for more of equipment, he found the lock had been changed. Mr. Kotsopoulos denied changing the lock. The trial judge made no finding as to whether the lock was changed.

[8] Mr. Dean and Mr. Kotsopoulos had no contact in the following days. Mr. Dean testified that he left a voicemail message for Mr. Kotsopoulos, which was denied. Mr. Kotsopoulous testified that he made numerous attempts to contact Mr. Dean without success.

[9] On July 6, 2006, Mr. Dean saw a “for rent” sign in the window of the premises. He also saw an advertisement for the sale of the premises in the Toronto Star that day, which said “restaurant and equipment for sale.” Mr. Kotsopoulos admitted that he never told Mr. Dean that he was going to lease or sell the equipment.

[10] On July 13, 2006, Mr. Notzl, a lawyer, wrote a letter on Mr. Dean’s behalf asking for the opportunity to remove the equipment. Mr. Kotsopoulos testified that he never received the letter. The trial judge accepted, albeit reluctantly, that the letter was sent.

[11] On August 2, 2006, Mr. Kotsopoulos listed the property for sale. The listing made reference to the equipment and furnishings.

[12] On August 30, 2006, Mr. Kotsopoulos entered into a new lease for the premises, along with the equipment listed in Schedule A of the new lease. The equipment in Schedule A was almost identical to the equipment that had been purchased by Mr. Dean.

[13] On November 10, 2006, Mr. Notzl sent another letter to Mr. Kotsopoulos on behalf of Mr. Dean, again claiming access to the equipment. Mr. Kotsopoulos’ lawyer responded on November 15, 2006, claiming that the appellants had left the premises vacant without contacting the landlord, and they had abandoned the equipment. There was no reply to this letter from the appellants.

[14] The landlord sold the property in 2007 or 2008. Some of the equipment purchased by the appellants remained on the premises at the time of sale. Mr. Dean, with the assistance of Law Help Ontario, issued a Statement of Claim in June 2008.

The Decision of the Trial Judge

[15] The respondents defended the appellants’ claim for conversion or unjust enrichment on the basis that the appellants had abandoned the personal property.

[16] The trial judge correctly stated that conversion is a strict liability tort. It is no defence that the wrongful interference with the goods of another was done innocently (Northstar Leasing Corp. v. Two Ten Spruce Corp., 2007 8929 (ON SC), [2007] O.J. No. 1068 (S.C.J.) at paras. 13-14).

[17] Abandonment is a defence to an allegation of conversion. The Ontario Court of Appeal adopted the following definition of abandonment in Simpson v. Gowers (1981), 1981 1884 (ON CA), 121 D.L.R. (3d) 709 at para. 6:

“Abandonment” has been succinctly defined in R.A. Brown, in The Law of Personal Property, 2nd ed. (1955), at p. 9:

• Abandonment occurs when there is “a giving up, a total desertion, and absolute relinquishment” of private goods by the former owner. It may arise when the owner with the specific intent of desertion and relinquishment casts away or leaves behind his property ...

[18] A party who alleges abandonment bears the onus to prove, on a balance of probabilities, that the owner intended to abandon the chattels in issue (Simpson at para. 9). Abandonment is a question of fact, turning on factors such as the passage of time, the nature of the property, the conduct of the owner and the nature of transaction (Stewart v. Gustafson, [1998] 4 W.W.R. 695 (Sask. Q.B.) at para. 17).

[19] The trial judge considered each of these factors, starting with the passage of time. He observed that the appellants had made minimal efforts to recover the goods before commencing litigation, consisting of the letters of July 13, 2006 and November 10, 2006. They made no reply to the respondents’ letter alleging abandonment.

[20] Second, the trial judge described the transaction as, in substance, one in which the chattels and equipment were part of a business from which Mr. Dean withdrew. Third, he described the appellants’ avoidance of the landlord. Finally, he stated that “there was no evidence nor reason to believe that the chattels and equipment in a free standing situation had real market value.” Therefore, he concluded that the goods had been abandoned.

Analysis

[21] The appellants argue that the trial judge erred in finding that Mr. Dean had abandoned the property, as he failed to consider evidence showing Mr. Dean’s ongoing intention to claim possession of the property. As well, he improperly found the goods had no real market value in the absence of evidence.

[22] On an appeal, an appellate court will not interfere with the trial judge’s findings of fact absent palpable and overriding error (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 at para. 10).

[23] Mr. Kotsopoulos offered to sell the restaurant premises, along with the equipment, as early as July 6, 2006. By late August of 2006, he had entered into a new lease for the premises in which he leased much of the equipment which Mr. Dean had purchased. The initial question for the trial judge, then, was to determine whether the appellants intended to abandon the equipment before that date - a period of about two months. If not, the respondents are liable for damages for conversion.

[24] The trial judge did not address the fact that Mr. Kotsopoulos had leased the equipment by late August 2006. When discussing the passage of time, he focussed on the two letters sent on behalf of the appellants on July13 and November 10, 2006, the lack of response to the respondents’ letter in mid-November, and then the further delay in bringing the action. In my view, he erred in failing to determine whether the appellants intended to abandon the property in the period up to the end of August 2006.

[25] Moreover, the trial judge failed to consider other evidence that showed Mr. Dean’s ongoing intention to protect his property interest:

• He had an auctioneer inspect the equipment with a view to having it moved and sold at an auction.
• Although he moved some of the new equipment out of the premises over the July 1st weekend, according to Mr. Dean’s evidence, he could not continue moving the property because he was locked out. The trial judge made no finding as to whether this occurred, but he did not reject Mr. Dean’s evidence.
• Mr. Dean caused his lawyer to write the July 13 letter.
• Mr. Dean testified that he became aware that someone else was operating a restaurant in the premises and using the equipment, so he subsequently contacted Mr. Notzl and had the November letter sent.

[26] All of this evidence shows that Mr. Dean did assert an ongoing interest in the property.

[27] Moreover, the trial judge assumed that the equipment and property were of little value, and this, too, was a factor on which he relied to find abandonment. However, there was evidence going to the value of the property. Mr. Dean had paid $40,000.00 for the used property only five months before and made inquiries about an auction. As well, the lease to the new tenants included the listed property, which they used for a restaurant operation. Even though the rent they paid was less than the rent Mr. Dean and 108 had negotiated, one can infer that there was some value to the equipment leased.

[28] In other cases where abandonment has been found, the trial judge has taken note of the efforts of the defendant to contact the property owner before the property was disposed of and the owner’s lack of response (see, for example, Nash v. Chan (1989), 1989 3372 (AB KB), 93 A.R. 228 (Q.B.) at para. 37). In the present case, Mr. Kotsopoulos gave no notice to the appellants. Indeed, he began advertising the sale of the premises and equipment within a few days after Mr. Dean vacated the premises.

[29] The trial judge also failed to consider whether it made commercial sense for the appellants to abandon the equipment, for which Mr. Deans had paid $40,000.00 only five months earlier. The landlord could not have reasonably believed that the appellants had abandoned the equipment within a few days after the termination of their relationship. Moreover, the equipment left included large items such as refrigerators and freezers which Mr. Dean had been unable to move without a truck.

[30] When all the evidence is considered and with a focus on the relatively short period prior to the disposition of the property, the trial judge erred in finding abandonment prior to the lease of the premises in August 2006. Therefore, given that the appellants did not abandon the equipment, the respondents are liable for damages for conversion because they leased and later sold the premises along with the equipment.

[31] The difficult issue remaining is the quantum of damages. The evidence on the value of the equipment is minimal. The appellants submit that the amount should be $40,000.00 for the used equipment and some $16,000.00 for the new equipment, less depreciation of 5%.

[32] With respect to the new equipment, receipts were filed at trial totalling approximately $4,000.00. However, Mr. Dean testified that he removed some of this equipment, including the television sets and cash registers, so it is unclear what the value of the remaining new equipment was.

[33] The used equipment purchased from Mr. Kotsopoulos that remained on the property consisted, in part, of larger items, such as stoves and refrigerators, that were not easily moved. While this equipment would likely have had some

value at auction, one can reasonably infer that the recovery would be less than the purchase price.

[34] In the circumstances, given the unsatisfactory evidence on valuation, I would award a nominal sum in damages, fixed at $10,000.00.

[35] The appellants also argued that the trial judge erred in failing to order the repayment of the last month’s rent. I would not give effect to this ground of appeal. The landlord reasonably kept this payment after the appellants ceased to carry on their business in the premises.

Conclusion

[36] Accordingly, I would allow the appeal, set aside the judgment of the trial judge and grant judgment in favour of the appellants in the amount of $10,000.00 plus costs of the trial and of the appeal in the agreed amount of $6,700.00, inclusive of disbursements and H.S.T.

Signed: “K. Swinton J. (ad hoc)”

“I agree M. Rosenberg J.A.”

“I agree K. Feldman J.A.”

RELEASED: “MR” March 7, 2012