2105582 Ontario Ltd. v. 375445 Ontario Ltd.

[Indexed as: 2105582 Ontario Ltd. v. 375445 Ontario Ltd.]

Ontario Reports

Court of Appeal for Ontario

MacPherson, Juriansz and L.B. Roberts JJ.A.

December 14, 2017

138 O.R. (3d) 562 | 2017 ONCA 980

Case Summary

Damages — Exemplary damages — Trial judge finding that landlord was liable for conversion as result of preventing tenant from removing trade fixtures from leased premises after terminating lease — Trial judge awarding tenant compensatory damages — Trial judge erring in also awarding exemplary damages — Award resulting in double recovery for tenant.

Landlord and tenant — Distress — Tenant constructing and operating driving range on leased premises — Landlord terminating lease for non-payment of rent — Trial judge not erring in finding that driving range deck, deck canopy, ball shack, driving range barrier net poles, and driving range barrier nets were trade fixtures and that landlord unlawfully detained those fixtures when it prevented tenant from removing them — Distraint not permitted by s. 41 of Commercial Tenancies Act — Landlord liable for damages for conversion — Commercial Tenancies Act, R.S.O. 1990, c. L.7.

The defendant leased land to the plaintiff for the construction and operation of a driving range. When the plaintiff fell into arrears of rent, the defendant terminated the lease, but refused to permit the plaintiff to remove a driving range deck, a deck canopy, a ball shack, driving range barrier net poles, and driving range barrier nets. The plaintiff brought an action for damages for unlawful distraint and conversion. The trial judge held that the assets in question were trade fixtures and that the defendant was liable to the plaintiff for compensatory and exemplary damages. The defendant appealed.

Held, the appeal should be allowed in part.

The trial judge found that the assets could be removed without damage to the premises. He committed no palpable or overriding error in concluding that the assets were removable trade fixtures. There was no merit to the defendant's argument that the assets were leasehold improvements. The defendant's distraint was not permitted by s. 41 of the Commercial Tenancies Act ("CTA"). Section 41 only supplants the common law with respect to the time period in which the distress remedy must be exercised. It allows a landlord to distrain an overholding tenant's chattels within six months following the end or determination of a lease. It does not change the common law rule that a landlord cannot distrain tenant chattels, regardless of timing, if the landlord terminates or forfeits the lease. In any event, the defendant could not rely on s. 41 of the CTA because trade fixtures are never subject to the landlord's remedy of distress. Trade fixtures may only be distrained when they have been severed from the land and resume their nature as chattels.

The landlord erred in awarding exemplary damages. He did not find that the conversion was malicious or high-handed in a manner constituting a marked departure from ordinary standards of decent behaviour. Furthermore, it was not clear whether the trial judge's "exemplary" damages order was meant to be a punitive damages award. The language he used was more consistent with an award of disgorgement damages that was measured based on the defendant's gain from the unlawful use of the converted assets. The plaintiff was fully compensated by the damages awarded in the amount of the market value of the converted assets. The award of "exemplary" damages resulted in double recovery for the plaintiff because the defendant had already "purchased" the converted assets at their market price.

Appeal from Trial Decision

APPEAL from the order of Patterson J., 2016 ONSC 3746 and reasons for costs, 2016 ONSC 5262 for the plaintiff; and from an award of damages.

Counsel:

• Anita Landry, for appellants
• Owen Thomas, for respondents

The judgment of the court was delivered by

JURIANSZ J.A.

A. Factual Background

[1] Hydeaway Golf Club, incorporated as 375445 Ontario Limited, and Nicholas Panasiuk Jr. (collectively, the "appellant") leased land to Performance Plus Golf Academy and D & D Electric, incorporated as 2105582 Ontario Ltd. and 627496 Ontario Ltd. (collectively, the "respondent"), in fall 2006 under an oral agreement. The respondent constructed and operated a driving range on the leased land. The respondent fell into arrears of rent and the appellant terminated the lease on December 6, 2007.

[2] The respondent sought damages for the appellant's unlawful distraint and conversion of its trade fixtures and chattels. The trial judge held that all of the claimed assets were trade fixtures and that the appellant was liable to the respondent for compensatory and exemplary damages. On appeal, the appellant argues the trial judge erred by finding liability for conversion, and in any event, the damage award was excessive.

[3] For the reasons that follow, I would reject the appellant's attack on the finding of liability, but would allow the appeal in part and set aside the exemplary damages award.

Factual Background

[4] The appellant owned and operated a golf course near Tecumseh, Ontario. Around March 2006, the parties began negotiating a lease for a portion of the appellant's land, which adjoined the golf course but was substantially empty and undeveloped at the time. The respondent intended to construct and operate a driving range on the leased lands.

[5] In May through June 2006, the respondent's lawyer prepared drafts of a commercial lease. Ultimately, however, the parties did not execute a written lease. The parties agreed orally that rent would be $3,000 a month, except during winter when it would be $2,000 a month. The tenancy was at will. The lease was governed by the Commercial Tenancies Act, R.S.O. 1990, c. L.7 ("CTA") and the Statute of Frauds, R.S.O. 1990, c. S.19.

[6] The respondent invested approximately $200,000 to construct the driving range and purchase the necessary equipment. The driving range went into operation around September 2006. The parties' relationship deteriorated and the respondent failed to pay rent for September, October and November 2007.

[7] On November 16, 2007, the appellant gave the respondent a notice of default. Then, ten days later, on November 26, 2007, the appellant served a notice of termination of the lease. The notice provided:

Re: "10 Day Prior Written Notice" -- Notice of Termination of Land Lease

Performance Plus Land Lease

Dave:

Due to repeated defaults in rent payments,

Your land lease will terminate 11:59 PM Thursday December 6, 2007.

If you continue to occupy the leased premises after the expiration date, Section 12.2 "Overholding" will apply and legal action will commence.

(Emphasis in original)

[8] On December 3, 2007, via e-mail, the respondent asked to meet the appellant to discuss the lease. The appellant replied the same day:

No good

I have been forced into legal action

And I am meeting with my lawyer Tues after noon to check on my legal options He will advise you as to the action we will take after our meeting.

[9] The respondent replied on December 4, 2007:

Nick: I received your e-mail in which you refuse to meet to resolve this issue therefore I have no choice but to terminate.

Our business relation. I am willing to discuss terms for the sale of the Driving facility, along with the teaching academy.

I only ask that you wait until after the holidays. I am sure this will meet with your approval as it makes good sense.

[10] The respondent vacated the premises and removed certain assets from the property on December 6, 2007. However, the appellant called the Ontario Provincial Police ("OPP") and prevented the respondent from removing other assets that evening.

[11] On December 20, 2007, the respondent's solicitor sent a letter advising the appellant that the respondent intended to return and remove its "fixtures" prior to January 31, 2008, among other things.

[12] The appellant replied to the December 20 letter the next day, stating the respondent would not be allowed on the premises and that their differences would have to be settled in court.

[13] Despite the appellant's letter, the respondent returned to the premises on December 23, 2007 to remove an "Xplornet antenna" that was owned by a third party. While the record shows that an argument ensued between the parties on that date, the appellant nonetheless allowed the respondent to remove the antenna.

[14] The respondent returned to the premises for the second and final time on February 15, 2008. The respondent was accompanied by a work crew and the OPP. During this visit, the respondent attempted to remove the driving range barrier poles and nets. The appellant claimed ownership of the assets and prevented the respondent from removing them. The OPP suggested the respondent leave and obtain a court order for the return of the disputed assets.

[15] The respondent commenced the underlying action by issuing a statement of claim on March 11, 2008.

[16] The appellant operated the driving range with the disputed assets until 2014, when the golf course and driving range went out of business. By the time the trial commenced in May 2016, the golf course and driving range had been closed for two years.

B. The Trial Judge's Decision

[17] The parties agreed on a list of disputed assets, which was attached as Schedule A to the trial judge's reasons.

[18] The trial judge found the appellant terminated the lease on December 6, 2007. He held that all of the assets in Schedule A were trade fixtures. He found that the respondent attempted to remove the trade fixtures, but was prevented from doing so by the appellant on several occasions. Accordingly, he held the appellant unlawfully distrained the trade fixtures and was liable for damages for the tort of conversion.

[19] The trial judge found that the value of the converted trade fixtures was $200,035.28, but reduced that amount by $12,002.11, representing depreciation for the year and a half the respondent had use of them. He ordered $188,033.17 in compensatory damages. In addition, he ordered $80,000 in exemplary damages, calculated as $10,000 per year for the eight years the appellant used the converted assets. The total damages award was $268,033.17.

C. Issues on Appeal

[20] The appellant raises the following issues:

(a) Did the trial judge err by classifying certain assets as trade fixtures or chattels, as opposed to fixtures or leasehold improvements?

(b) Did the trial judge err by holding that the appellant unlawfully distrained the respondent's trade fixtures or chattels?

(c) Did the trial judge err by failing to consider whether the respondent had abandoned its chattels?

(d) Did the trial judge err by awarding exemplary damages in addition to compensatory damages?

D. The Appellant's Position

[21] The appellant submits the trial judge erred by classifying the following assets (the "structural assets") as trade fixtures:

(a) a driving range deck worth $50,499.81;

(b) a deck canopy worth $23,286.58;

(c) a ball shack worth $7,046.56;

(d) driving range barrier net poles worth $32,264.23; and

(e) driving range barrier nets worth $31,747.65.

[22] The appellant describes the deck as a 9,000-square-foot wooden platform, with a permanently attached ball shack, covered by a steel canopy. It was affixed to the land with pressure-treated wood beams and a cement base. In addition, water and electrical wiring ran through the structure. The 60-foot-high barrier poles were drilled 5 feet into the ground and secured with steel anchors. The nets were fastened to the poles with steel clips and cables and were not taken down during winter.

[23] The appellant submits that its distraint of the respondent's assets was allowed by s. 41 of the CTA and further argues the structural assets were not removable trade fixtures. In the appellant's view, the distinction between a removable trade fixture and an immovable fixture is whether the asset is capable of being removed without causing material damage to the premises or the asset. The appellant contends that the structural assets were not removable trade fixtures since they could not be removed without material damage to the land.

[24] In what it advances as an alternative argument, the appellant repeats its position that the structural assets could not be removed without material damage to the lands, and consequently, the trial judge should have found them to be leasehold improvements that remain with the land at the end of a tenancy.

[25] Furthermore, the appellant argues that a tenant must remove its trade fixtures before the lease ends or before they vacate the premises. Otherwise, the appellant submits a tenant must be taken to have abandoned them.

[26] In a similar vein, the appellant submits that many of the assets, such as the 35,000 golf balls, were not trade fixtures at all but chattels. The respondent was aware of the lease termination date and could have removed the chattels by that date but chose to leave them. The appellant notes the respondent removed certain chattels, such as desks and chairs, by December 6, 2007. This, in the appellant's submission, supports the inference that the respondent abandoned the remaining chattels.

[27] Finally, with respect to damages, the appellant submits that exemplary damages should only be awarded in exceptional cases. The appellant argues that courts only award exemplary damages where there is misconduct amounting to a marked departure from ordinary standards of decent behaviour. Since there was no such misconduct in the instant case, the appellant contends the trial judge erred in law by awarding exemplary damages.

E. The Respondent's Position

[28] The respondent submits the trial judge applied the correct law of distress and that all of his findings deserve deference. The respondent submits there is no palpable or overriding error in the trial judge's factual determination that the structural assets could be removed without causing material damage. The respondent recognizes that some of the assets in Schedule A are chattels, but submits the appellant prevented it from removing them.

[29] Finally, the respondent argues that deference also applies to this court's review of the trial judge's discretionary award of exemplary damages.

F. Analysis

(1) The Standard of Review

[30] The Supreme Court set out the guiding principles on standard of review for appeals from judicial decisions in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. Questions of law are reviewable for correctness, and questions of fact or questions of mixed fact and law are reviewable for palpable and overriding error, unless there is an extricable question of law: Housen, at paras. 8, 10 and 36.

[31] The identification of the correct legal standard or test is an extricable question of law, but the application of a legal standard to a set of facts is a question of mixed fact and law: Housen, at paras. 27 and 31. I address the standard of review applicable to each issue in the reasons below with this framework in mind.

(2) Did the Trial Judge Err by Finding the Structural Assets Were Trade Fixtures?

[32] Fixtures are assets that are sufficiently affixed to real property such that they are considered permanent in nature and part of the land. Whether fixtures become part of the land depends on the degree and object of annexation to the land: Stack v. T. Eaton Co. (1902), 4 O.L.R. 335. This case concerns the fate of fixtures upon termination of a lease. The general rule is that fixtures remain with the land following the end of a tenancy; but not all fixtures fall within this rule.

[33] Trade fixtures are assets that are affixed to leased premises by a tenant for trade or commercial purposes. Courts have consistently held that tenants are presumptively allowed to remove trade fixtures at the end of a tenancy so long as the removal does not materially damage the premises: 859587 Ontario Ltd. v. Starmark Property Management Ltd. (1997), 34 O.R. (3d) 43, at p. 54 O.R., at para. 31, affd (1998), , 40 O.R. (3d) 481; Caledonia Service Station Inc. v. Cango Inc., 2011 ONCA 184, [2011] O.J. No. 1045, at para. 14; Newfoundland and Labrador Housing Corp. v. Humby, 2013 NLCA 7, [2013] N.J. No. 20, per Rowe J.A. (as he then was), at paras. 22-27. This exception -- that trade fixtures do not remain with the land post-tenancy -- has a long history in the common law: Warner v. Don (1896), 26 S.C.R. 388, at pp. 391-92 S.C.R., at para. 8; Stack, at p. 338 O.L.R.; and Richardson v. Equitable Fire Insurance Co., [1953] O.R. 493, at p. 586 D.L.R. (C.A.), at para. 8.

[34] Importantly, as this court held in Bank of Nova Scotia v. Mitz (1979), 27 O.R. (2d) 250, at p. 538 D.L.R., at para. 11, there is a distinction in the analysis depending on whether the attempted removal of the disputed asset occurs in the context of a lease versus the sale of real property. In the former case, there appears to be a presumption that a tenant would not have an objective intent to affix an asset on a permanent basis such that it would become part of the real property at the end of the lease: Bank of Nova Scotia, at pp. 538-39 D.L.R. In other words, the object of annexation is presumptively not one of permanence.

[35] The jurisprudence demonstrates that the determination of whether an asset is a fixture or trade fixture upon termination of a lease is highly fact-specific. For example, in Webb v. Frank Bevis Ltd., [1940] 1 All E.R. 247 (E.W.C.A.), the English Court of Appeal held that a 6,750-square-foot shed was a trade fixture and removable by the tenant at the end of the lease. The shed in that case was covered with a corrugated iron roof that rested on wooden posts. The wooden posts, in turn, were affixed to a concrete floor -- but not embedded in the concrete. The court held that the shed could be taken apart without damage to the leased premises and was a trade fixture. By contrast, the concrete floor was not a trade fixture since it could not be removed without damage to the leased premises.

[36] Webb was implicitly affirmed by the United Kingdom House of Lords in Elitestone Ltd. v. Morris, [1997] 1 W.L.R. 687 (U.K.H.L.), at p. 691. In Elitestone, the House of Lords was asked to determine whether a bungalow constructed on leased real property was a chattel or fixture that was part of the land. The House of Lords affirmed the trial judge's conclusion that the bungalow was part of the land because such determinations depended on the facts of each case: Elitestone, per Lord Berwick, at p. 692; and per Lord Clyde, at p. 696. It was also significant that the tenant claiming the bungalow did not construct the bungalow. It existed prior to the tenant occupying the premises.

[37] Justice Rowe of the Newfoundland Court of Appeal (as he then was) found Webb and Elitestone to be persuasive authorities in Humby. Humby concerned a "Butler building", which was a pre-engineered 1,500-square-foot steel-frame building. It was built by the tenant and supported by metal beams that were bolted into a concrete foundation. There was also electrical wiring throughout the structure. Nevertheless, Rowe J.A. held that the building was a trade fixture that could be removed by the tenant at the end of the lease: Humby, at para. 31.

[38] The above cases -- as well as Richardson and Starmark Property -- demonstrate that the determination of whether an asset is a fixture versus a trade fixture or chattel is a question of mixed fact and law. In this case, the trial judge applied the three requisite elements of the legal test for a trade fixture: (i) whether the asset is affixed to the ground by the tenant; (ii) whether the asset is used for the purpose of a trade or commerce; and (iii) whether the asset can be removed without material damage to the premises. Only element (iii) was in question at trial.

[39] The trial judge found the structural assets could be removed without damage to the premises, at para. 29 of his reasons. The trial judge was entitled to reject the appellant's evidence regarding material damage that might result if the structural assets were removed. Indeed, there was evidence the appellant removed the barrier poles and nets at a later date without material damage. The trial judge committed no palpable or overriding error in concluding the structural assets were removable trade fixtures. I would not give effect to this ground of appeal.

(3) Were the Structural Assets Leasehold Improvements?

[40] The appellant's alternative argument that the structural assets were actually leasehold improvements has no merit. The structural assets cannot be simultaneously both trade fixtures and leasehold improvements. The test for whether an asset is a leasehold improvement is the same as the test for whether an asset is a fixture: Caledonia Service, at para. 14. There must be a sufficient degree and object of annexation such that the assets become part of the land. In this sense, a true "fixture" is the same as a leasehold improvement in the context of leases. As explained above, the trial judge made no palpable or overriding error in finding the structural assets were trade fixtures. By necessary implication, he found the structural assets were not leasehold improvements. I see no basis to interfere with this decision.

(4) Was the Appellant's Distraint Permitted by s. 41 of the CTA?

[41] The appellant submits that s. 41 of the CTA allows it to distrain the respondent's assets within six months following the end of a lease even if it chose to terminate the lease. I disagree. Section 41 of the CTA states:

Distress for arrears on leases determined

41. A person having any rent due and in arrear, upon any lease for life or lives or for years, or at will, ended or determined, may distrain for such arrears, after the determination of the lease, in the same manner as the person might have done if the lease had not been ended or determined, if the distress is made within six months after the determination of the lease, and during the continuance of the landlord's title or interest, and during the possession of the tenant from whom the arrears became due.

[42] This section has been passed down largely intact from the original English statute in 1709, 8 Anne c. 14, and has remained in its current form since its adoption into Ontario property law at the turn of the 20th century.

[43] There is a long history of English courts interpreting the section as extending only the time in which a landlord may exercise distress to six months after the end of a lease so long as the tenant is overholding. See, for example, Grimwood v. Moss (1872), L.R. 7 C.P. 360, per Willes and Keating JJ.

[44] The basis for this interpretation is that distress is a landlord's self-help remedy that is only available where there is a landlord and tenant relationship. A landlord who terminates a lease and re-takes possession of the premises loses the right to distrain tenant chattels for rent arrears.

[45] Contemporary Canadian courts have similarly held that s. 41 only supplants the common law with respect to the time period in which the distress remedy must be exercised. It allows a landlord to distrain an overholding tenant's chattels within six months following the end or determination of a lease. It does not change the common law rule that a landlord cannot distrain tenant chattels, regardless of timing, if the landlord terminates or forfeits the lease: Mundell v. 796586 Ontario Ltd., [1996] O.J. No. 2532, 8 O.T.C. 231, at para. 8; and Dubien v. Beechwood Promenade Inc., [1992] O.J. No. 368, at para. 8 (discussing s. 41 of the Landlord and Tenant Act, R.S.O. 1990, c. L.7, which was the precursor to the CTA). See, also, Ian F. Brown Ltd. v. Carling O'Keefe Breweries of Canada Ltd., [1989] A.J. No. 1172, 64 D.L.R. (4th) 710, at pp. 713-14 D.L.R.; Mybrie Investments Ltd. v. Icana Techno Corp., [1997] B.C.J. No. 2475, at paras. 42-43; and C.K. Franchising Inc. v. Kassett, [2012] S.J. No. 63, 2012 SKQB 52, at para. 133. The appellant lost the right to distrain the respondent's assets when it elected to terminate the lease.

[46] In any event, the appellant cannot rely entirely on s. 41 of the CTA because this case involves trade fixtures. This court made clear that trade fixtures, while they remain affixed to the land, are never subject to the landlord's remedy of distress in 859587 Ontario Ltd. v. Starmark Property Management Ltd. (1998), 40 O.R. (3d) 481, at pp. 487-88 O.R., at paras. 13-15, affg (1997), , 34 O.R. (3d) 43. As Doherty J.A. explained in Starmark Property, at para. 9, this is because "distraint runs against the tenant's property found on the land and not against the land itself". Trade fixtures may only be distrained when they have been severed from the land and resume their nature as chattels. The ratio from Starmark Property alone disposes of the appellant's argument that it was entitled to distrain the structural assets.

[47] The trial judge did not err in concluding the appellant engaged in an unlawful distraint in this case.

[48] Nevertheless, the appellant argues that certain assets classified by the trial judge as trade fixtures were in fact chattels. The appellant submits that it did not convert the respondent's assets because they were abandoned. I turn then to analyze these issues.

(5) Did the Trial Judge Misclassify Certain Chattels as Trade Fixtures?

[49] The list of assets in Schedule A includes:

• six custom refuse containers;
• eight outdoor bench tables;
• a number of flower pots and planters;
• a desk and chair; and
• 35,000 recovered golf balls.

[50] As noted, one of the elements of the legal test for a trade fixture is that the asset must be affixed to the ground. It is not surprising that the evidence indicated these assets were not affixed to the ground in any manner. The respondent concedes the trial judge erroneously misclassified these assets as trade fixtures instead of chattels.

(6) Did the Trial Judge Err by Not Finding the Respondent's Assets Were Abandoned?

[51] The appellant submits the respondent abandoned its assets by not removing them before December 6, 2007. Abandonment was raised at trial but was not addressed in the trial judge's reasons. As a result, it falls to this court to determine the issue of abandonment based on the trial judge's findings of fact.

[52] Abandonment is a defence to conversion. It occurs when there is a "giving up, a total desertion, and absolute relinquishment" of one's interest in chattels: Simpson v. Gowers (1981), 32 O.R. (2d) 385, at p. 711 D.L.R., quoting R.A. Brown, The Law of Personal Property, 2nd ed. (Callaghan & Co., 1955), at p. 9. The party alleging abandonment bears the onus of proving, on a balance of probabilities, an objective intent to abandon the chattels. The determination of whether there is a sufficient intent to abandon is a question of fact governed by factors such as the length of time, nature of the chattels, conduct of the parties and context of the case: 1083994 Ontario Inc. v. Kotsopoulos, 2012 ONCA 143, [2012] O.J. No. 1012, at paras. 17-18.

[53] Here, the respondent attempted to either negotiate a sale of his assets to the appellant or a time he could retrieve them. The respondent's lawyer sent letters shortly after the termination of the lease indicating the respondent intended to remove the chattels. The respondent attempted to retrieve the chattels multiple times, each time being thwarted by the appellant. As such, there were no facts to suggest abandonment of chattels or trade fixtures in the instant case.

[54] However, with respect to trade fixtures, the appellant also submits a tenant may not remove them after a lease ends and the tenant has given up possession. I disagree.

[55] There are exceptions to the appellant's otherwise correct articulation of the general time limit in which a tenant may remove trade fixtures. One such exception is where a lease is for an uncertain term or where the landlord's actions create the circumstance that the tenant had insufficient time to remove its trade fixtures. In those cases, absent a contract otherwise, a tenant may remove its trade fixtures within a reasonable period of time following the end of a lease and after possession of the premises has been given up: Devine v. Callery (1917), 40 O.L.R. 505 and Elliott Mortgage & Investment Co. v. Savage, [1979] B.C.J. No. 1153, 14 B.C.L.R. 191.

[56] The appellant terminated the lease with ten days' notice in this case. The appellant also prevented the respondent from removing the disputed assets on December 6, 2007 by calling the OPP. As such, the respondent did not abandon its trade fixtures and was entitled to return to the premises to remove them within a reasonable time following the end of the lease and after it vacated the premises.

(7) Did the Trial Judge Err in Awarding Exemplary Damages?

[57] As alluded to above, I would set aside the order for exemplary damages. To explain my analysis of this issue, I will first review some general legal principles concerning private law damages before turning to the appropriate measure of damages for conversion in this case.

(a) Compensatory Purpose of Private Law Damages

[58] The fundamental principle underlying private law remedies is restitutio in integrum. Private law damages are meant to be compensatory. In tort, the aim is to restore the plaintiff to the position he or she occupied before the tort occurred. Private law damages are generally not intended to punish the defendant, nor are they intended to place the plaintiff in a position better than the status quo ex ante: Milina v. Bartsch, [1985] B.C.J. No. 2762, 49 B.C.L.R. (2d) 33, at p. 78 B.C.L.R., per McLachlin J. (as she then was), affd [1987] B.C.J. No. 1833, 49 B.C.L.R. (2d) 99 (C.A.); Barber v. Vrozos, 2010 ONCA 570, [2010] O.J. No. 3697, at para. 86; and Rougemont Capital Inc. v. Computer Associates International Inc., 2016 ONCA 847, [2016] O.J. No. 5786, at para. 44.

[59] Of course, as the Supreme Court held in IBM Canada Limited v. Waterman, 2013 SCC 70, [2013] 3 S.C.R. 985, at para. 36, there are exceptions to the general compensatory principle of damages in certain circumstances. Some cases call for the additional award of exemplary damages.

[60] Exemplary damages could take the form of punitive damages, which are designed to address retribution, deterrence and denunciation of malicious, oppressive or high-handed conduct: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, at paras. 36 and 43; and Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] 2 S.C.R. 3, at paras. 61-63. Other cases may justify the award of disgorgement damages (i.e., a measure of damages is based upon the tortfeasor's gain as opposed to the plaintiff's loss), which are an alternative to compensatory damages: United Australia Ltd. v. Barclays Bank Ltd., [1941] A.C. 1 (U.K.H.L.); Broome v. Cassell & Co., [1972] 2 W.L.R. 645 (U.K.H.L.), at pp. 675-76, per Lord Hailsham; and pp. 723-24, per Lord Diplock; and Pro-Sys Consultants Ltd. v. Microsoft Corp., 2013 SCC 57, [2013] 3 S.C.R. 477, at para. 93.

(b) Measure of Damages for Conversion

[61] Conversion is a strict liability tort. If established, a tortfeasor will be forced to purchase the converted asset from the plaintiff. The general measure of damages is the market value of the converted asset as of the date of conversion: Asamera Oil Corp. v. Sea Oil & General Corp., [1979] 1 S.C.R. 633, at p. 652 S.C.R.

[62] Conversion is distinct from its companion tort -- detinue. Whereas conversion is a single wrongful assertion of dominion over personal property, detinue is the continuous wrongful detention of personal property: General and Finance Facilities Ltd. v. Cooks Cars (Romford) Ltd., [1963] 1 W.L.R. 644 (E.W.C.A.), at p. 648; Simpson, at p. 711 D.L.R.; Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, [1996] 3 S.C.R. 727, at paras. 31-32; and Musson v. Memorial University of Newfoundland, [2002] O.J. No. 668, at para. 85, affd 2002 CarswellOnt 3336 (C.A.). The general remedy in detinue is the return of the asset (or damages for its market value as of the end of trial) plus damages representing the "rental" of the asset by the tortfeasor during the detention: Asamera, at p. 652 S.C.R.

[63] Nevertheless, the general measure of damages for intentional proprietary torts, such as conversion, may be substituted in certain circumstances. One such circumstance is known as "waiver of tort". Waiver of tort allows a plaintiff to claim disgorgement damages based on the tortfeasor's gain or benefit, instead of compensatory damages based on the loss suffered. However, a plaintiff cannot claim both compensatory damages as well as disgorgement damages since that would result in overcompensation. A plaintiff must elect either compensatory or disgorgement damages: United Australia, at pp. 29-30 A.C.; and Pro-Sys, at para. 93.

(c) Standard of Review on Appeals of Damage Awards

[64] A trial judge's damages award is owed considerable deference: Rougemont, at para. 41. In Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943, at para. 80, the Supreme Court held that an appellate court should only intervene in the award of damages where

. . . the trial judge made an error of principle or law, or misapprehended the evidence, or it could be shown there was no evidence on which the trial judge could have reached his or her conclusion, or the trial judge failed to consider relevant factors in the assessment of damages, or considered irrelevant factors, or otherwise, in the result, made "a palpably incorrect" or "wholly erroneous" assessment of the damages. Where one or more of these conditions are met, however, the appellate court is obliged to interfere.

(Citations omitted)

[65] The failure to apply the compensation principle underlying private law damages is an error of law: Barber, at para. 86. Here, the trial judge's award of both compensatory and disgorgement damages absent factual findings that support such an exceptional order resulted in double recovery for the respondent. As a result, the trial judge's award of damages is reviewable for correctness.

(d) The Award of "Exemplary" Damages in This Case

[66] The trial judge stated, at paras. 32 and 34-35 of his reasons:

In addition to this amount, the plaintiffs are claiming unjust enrichment, loss of use, general damages, punitive damages, exemplary damages, trespass and conversion as the defendants continued to use the trade fixtures of the plaintiffs for a period of approximately eight years. Mr. Panasiuk alleges he did not make money and ultimately the golf course has closed but the fact is he was using the plaintiffs' equipment illegally.

Mr. Panasiuk alleges that the golf course, because of the relocation of certain of the holes to accommodate the driving range, had an adverse impact on the golf course itself which ultimately ended up in it being closed but as I have indicated previously it was he who selected the location of the driving range and it was he who terminated the lease and used the driving range equipment and structures illegally for his own purpose.

In my opinion, the plaintiffs were entitled to additional damages and that $80,000 is the appropriate dollar amount for the exemplary damages claim being $10,000 per year for eight years use.

(Emphasis added)

[67] These reasons do not provide any basis for an award of punitive or disgorgement damages. The trial judge did not find the conversion was malicious or high-handed in a manner constituting a marked departure from ordinary standards of decent behaviour. Rather, the record shows that the appellant had an honest belief that the structural assets did in fact become part of the land and should have remained with the land.

[68] Furthermore, it is not clear whether the trial judge's "exemplary" damages order was meant to be a punitive damages award. The language he used is more consistent with an award of disgorgement damages that was measured based on the appellant's gain from the unlawful use of the converted assets. However, the respondent did not specifically claim disgorgement damages in its amended statement of claim and the trial judge made no factual findings that supports an order of both disgorgement damages and compensatory damages. As such, it was an error to award the additional $80,000 for the conversion of the respondent's assets even if the trial judge intended to award disgorgement damages.

(e) Propriety of the "Exemplary" Damages in This Case

[69] The record before this court shows the instant case was framed in terms of conversion. Moreover, the trial judge's reasons, at paras. 20-22 and 29, indicate he considered the case to be one of conversion and not detinue. As such, the applicable measure of damages was the market value of the converted assets as of the date of conversion. The trial judge found the market value of those assets to be $188,033.17 and awarded compensatory damages in this amount.

[70] The trial judge should not have awarded the additional $80,000 in "exemplary" damages. The respondent's witness' testimony demonstrated that the respondent wanted the return of the assets because the respondent intended to sell them to a buyer. In fact, the respondent's witness testified that the respondent wanted to sell certain assets to the appellant. Therefore, the $188,033.17 damages award, reflecting the market value of the converted assets, fully compensated the respondent in this case.

[71] There was no evidence to suggest the respondent intended to continue operating a driving range business elsewhere or that the converted assets appreciated in value. As such, there was no basis to award additional compensatory damages for consequential lost chance of profits. The respondent's loss of the time value of money due to the conversion is satisfied by an award of pre-judgment interest.

[72] The "exemplary" damages award in this case results in double recovery for the respondent because the appellant has already "purchased" the converted assets at their market price. They became the appellant's assets. Absent an exceptional circumstance as referenced above, any benefit that the appellant might obtain from the converted assets after they were purchased rightly accrues to the appellant.

[73] The respondent was fully compensated by the damages award of $188,033.17 for conversion of the trade fixtures and chattels. The respondent is not entitled to additional "exemplary" damages reflecting the purported benefits obtained by the appellant after the date of conversion in this case.

G. Disposition

[74] I would allow the appeal in part and would set aside the award of the additional $80,000 described as "exemplary" damages. I would dismiss all the other grounds of appeal.

[75] Counsel for both parties agreed that partial indemnity costs of the appeal were approximately $30,000 at the hearing. In light of the appellant's partial success, I would fix costs of the appeal in the appellant's favour at $10,000. I would not disturb the trial judge's costs award for the proceedings below.

Appeal allowed in part.

Notes

1. The record contains no explanation of what s. 12.2 is or where it comes from. It may be the case that s. 12.2 came from one of the draft leases, but the parties admitted at trial that the draft written leases were never signed and were of no force or effect.

2. Schedule A has been attached as a schedule to these reasons as well.

3. Based on the diagram filed in the trial record and in the appeal book and compendium, volume 2, tab 17(F), the square footage of the deck appears to be approximately 7,000 square feet.

4. The appellant also submits that leasehold improvements may not be removed post-tenancy. However, leasehold improvements may never be removed by a tenant, absent a contract otherwise, since they become part of the land. Moreover, the Nova Scotia cases of Frank Georges Island Investments Ltd. v. Ocean Farmers Ltd., [2000] N.S.J. No. 75, 182 N.S.R. (2d) 201, at paras. 69-73 (in Chambers); and Carabin v. Offman, [1988] N.S.J. No. 434, 55 D.L.R. (4th) 135, at pp. 137 and 151 D.L.R., cited by the appellant do not support the appellant's proposition as those cases concerned trade fixtures.

5. The trial judge's award of damages would have also been incorrect assuming he considered the claim to be for detinue. In that case, he should have deducted eight years' worth of depreciation from the value of the disputed assets instead of one and a half.