ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-12-444120
DATE: 20120327
BETWEEN:
OMALOKOHO TOSOMBA and ANTOINETTE OKENGE Applicants – and – BASE GENERAL CONTRACTING LTD., 956043 ONTARIO INC. and WILLIAM DAGUANNO Respondents
Arem Karapetyan, for the Applicants
Jordan Druxerman, for the Respondents
HEARD: March 15, 2012
B. P. O’Marra J.
reasons for decision
Issues
[ 1 ] A commercial landlord terminated a lease for arrears of rent by changing the locks on the premises. Does this constitute an illegal or excessive distraint of goods that entitles the tenant to damages and other remedies? If the answer is yes, what level or heads of damages ought to be awarded?
Facts
[ 2 ] In March of 2008 the Applicants leased a commercial premises to operate a retail store specializing in clothing and accessories.
[ 3 ] William Daguanno is the principal of the corporate Respondents who were the landlords.
[ 4 ] The lease was for three years with a month’s net rent of $1,750 plus tax.
[ 5 ] In February of 2011, the parties agreed to extend the lease. The Applicants claim the Agreement was to extend until the end of August 2011. The Respondent claims upon expiry of the original lease it became a month to month tenancy.
[ 6 ] The Respondent claims there were significant and habitual arrears of rent. (Approximately $9,610 from July 2009 to July 2011.) The Applicants claim the arrears did not exceed $5,005 (with an offset of deposit.)
[ 7 ] On July 8, 2011 the Applicants discovered that they had been locked out of the premises. There was a sign on the store entrance door stating as follows:
“Do not attempt to enter the premises. Any attempt to gain access will be dealt with the full extent of the law. The tenant is in arrears with rent. Please contact Bill at (phone #) for inquiries.”
[ 8 ] The Respondent concedes that the changing of the locks terminated the tenancy.
[ 9 ] The Applicants claim that the total value of the inventory, accessories, cosmetics, jewellery, furniture, equipment and other chattels belonging to the Applicants was approximately $50,000. They also claim there were personal items, business and bookkeeping records as well as items owned by third parties (i.e. the alarm system) that were locked inside the premises.
[ 10 ] The Applicants claim that when they found the locks changed on the morning of July 8, 2011 they rushed to William Daguanno’s office in Concord, Ontario. They met with him there and asked why they had been locked out. Mr. Daguanno said they owed $14,000 in rent and that he would not allow them into the premises and would not return any of the property therein until they arrears were paid in full. He then told them to leave his office.
[ 11 ] The Respondent Daguanno claims that shortly after changing the locks and on numerous occasions thereafter he advised the Applicants that they could access the premises to remove any or all of their possessions. He claims the Applicants refused or neglected to attend the premises to return their property.
[ 12 ] The Respondent Daguanno claims that for a significant period of time thereafter he was unable to reach the Applicants to inquire whether they desired entry to remove their property.
[ 13 ] The Applicants claim they tried to contact Daguanno several times on July 9 and 10, 2011 to discuss the issue. They claim that they were finally able to contact him on July 15, 2011 by phone and offered to pay $1,500 immediately and asked him to reopen the store. They claim Daguanno responded that he would not reopen the store or release the property until $14,000 was paid in full.
[ 14 ] On August 15, 2011 a former lawyer for the Applicants contacted Daguanno and obtained a written summary of the rent allegedly in arrears. The total then was $11,638.
[ 15 ] Counsel for the Applicants sent a letter to the Respondents dated August 29, 2011 that included the following:
the claim that the Applicants immediately attended the Respondent’s office in Concord after finding the locks changed and spoke to William Daguanno;
that Mr. Daguanno told them that none of the property would be returned until the $14,000 owed was paid;
that Mr. Daguanno refused to communicate with the Respondents thereafter;
that former counsel for the Applicants received a table from Mr. Daguanno showing $11,638 owing under the lease. That figure included rent for July and August 2011 (totalling $3,955) despite the fact the locks were changed on July 8, 2011;
seeking access to records still in the premises to assist the Applicants in determining how much rent was owed;
the claim of $50,000 as the value of property lock in the premises;
the assertion that the changing of the locks amounted to re-entry and forfeiture of the lease;
that assuming a right to re-enter the respondent was not entitled to distrain the goods and must return them in full; and
that even if the Respondent was entitled to distrain the goods, which was denied, the distress was clearly excessive, unreasonable and illegal.
[ 16 ] The Respondents concede that the changing of the locks on July 8, 2011 terminated the tenancy. Further, they agree that after forfeiture they cannot also distrain goods in the premises. However, they claim that these goods and other contents of the premises were abandoned and that the Respondents have been and continue to be willing to allow the Applicants to retrieve their property from the premises.
The Law
[ 17 ] 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.
Commercial Tenancies Act , s. 55(1)
Rawlins v. Monsour , 1978 CarswellOnt. 1463 (OCA) at para. 3 and 4
[ 18 ] Where goods or chattels are distrained by a landlord for arrears of rent and the tenant disputes the right to distrain in respect of goods or chattels, or disputes the amount claimed by the landlord, the landlord or tenant may apply to a judge to determine the matters in dispute and the judge may hear and determine them in a summary way, or make such order in the premises as he considers just.
Commercial Tenancies Act , s. 66(1)
[ 19 ] A landlord cannot exercise the remedies of forfeiture and distress at the same time. If the does, he may be liable to the tenant in damages for illegal distress. Distress is a landlord’s remedy, peculiar to the world of landlord and tenants. It is available only when the relationship of landlord and tenant exists. Once the relationship is terminated the remedy is no longer available. Distress is inconsistent with forfeiture.
Dubien v. Beechwood Promenade Inc. and Byron Management Inc. , (Ont Gen. Division) 1992 CarswellOnt. 555, 22 R.P.R.(2d) 88 at para. 1 and7 .
[ 20 ] By changing the locks on a rented premises a landlord will effect a forfeiture of the lease.
Lussier v. Denison , 1971 CarswellOnt. 680 (Ont. County Court) at para. 9 .
Dubien v. Beechwood Promenade Inc. et al , (supra) at para. 6.
[ 21 ] Where distress is illegal the tenant may recover from the landlord full damages, including damages for loss of business. Where the distress is excessive, damages will normally be special damages, as an irregularity under the Act . However, where the wrongful distress is very excessive and the landlord’s conduct had been oppressive, the distress may be found to be illegal and subject to a claim for general and special damages. Punitive exemplary damages have also been awarded against a landlord where its exercise of distress was oppressive and there have been aggravating circumstances.
1526183 Ontaro Ltd. v. Grant Equipment Corp. , 2010 CarswellOnt. 1138 (OSC) at para. 37
Analysis
[ 22 ] The Respondents made a choice that they were not entitled in law to make. They chose to forfeit or terminate the lease and to distrain for rent as well. The parties agree there were arrears of rent as of July 8, 2011 but the quantum is in dispute. The Respondents chose to change the looks and use the secured property therein as a powerful bargaining chip to collect arrears.
[ 23 ] Exhibit “A” to the Affidavit of William Daguanno on this motion is a copy of an action commenced by the Respondents in the Small Claims Court for the arrears. This document was prepared by counsel for the Respondents on March 9, 2012. It is unsigned. Paragraph number 11 of that document refers to the landlord taking possession on July 6, 2011 and that the tenants requested to “to be allowed to continue with the lease and re-enter possession of the premises. As a result of habitual arrears the Plaintiffs denied this request, resulting in termination of the lease”.
[ 24 ] The evidence on this motion does not support the assertion by the Respondent that the Applicants abandoned the property within the locked premises.
[ 25 ] There is no evidence of a reply to the letter of August 29, 2011 from counsel for the Applicants seeking access to and return of the items locked in the premises.
[ 26 ] The distress exercised by the Respondent was excessive, wrongful and illegal.
Damages
[ 27 ] The Applicants seek special, general and punitive damages. Counsel for the Respondent advised the Court that all items have been kept intact since July 8, 2011 and can be retrieved by the Applicant. An accurate assessment of damages related to the value of the goods and chattels distrained would require an examination and report back by the Applicants.
[ 28 ] The Applicants damage claim includes lost profits.
[ 29 ] There are certain aggravating circumstances in this matter that warrant an award of punitive or exemplary damages. These include the following:
The property distrained grossly exceeded the rent arrears;
A refusal to communicate or negotiate a resolution of the issue of the secured property from the outset unless the full amount of disputed arrears were paid
Result
[ 30 ] The Applicants have proven that the Respondent illegally distrained goods and chattels belonging to the Applicants.
[ 31 ] The Respondent agrees that the Applicants can retrieve all of their property from within the leased premises at 1508 Eglinton Avenue West, Toronto.
[ 32 ] I direct a trial of an issue restricted to the extent of general and special damages. These figures cannot be accurately finalized until the Applicant have retrieved and examined the goods and chattels. The issue of lost profits will also have to be determined.
[ 33 ] The trial of an issue related to a quantum of general, specific and punitive damages can proceed before me on a date available to counsel and myself. I suggest counsel discuss how long the trial of an issue would take and send potential dates that are available for the trial of an issue. The trial scheduling office can contact my assistant to confirm dates that I am available for this matter.
[ 34 ] Costs are fixed at $6,800 all inclusive and payable within 30 days.
B. P. O’Marra J.
Released: March 27, 2012
COURT FILE NO.: CV-12-444120
DATE: 20120327
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
OMALOKOHO TOSOMBA and ANTOINETTE OKENGE Applicants – and – BASE GENERAL CONTRACTING LTD., 956043 ONTARIO INC. and WILLIAM DAGUANNO Respondents
REASONS FOR JUDGMENT
B. P. O’Marra J.
Released: March 27, 2012