COURT FILE NO.: C-344-09

DATE: 2012-06-19

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Jacqueline Lauzon

Plaintiff

– and –

There It Was Gone Inc., Robert Drummond and Timothy Ellis

Defendant

S. Brogden, for the Plaintiff

R. Drummond, self-represented

HEARD: February 13,14, May 1and 2, 2012

The Honourable mr. Justice D. A. Broad

REASONS FOR JUDGMENT

Parties and Background

[1] The Plaintiff Ms. Lauzon was the owner and proprietor of a retail gift shop in Kitchener, Ontario called “Wycks and Wyshes” (the “business” or “store”). She operated the business from March 2000 to June 2007. The corporate defendant There It Was Gone Inc. (“TIWG” or the”Corporate Defendant”) carried on business as a seller or marketer of goods on the internet, utilizing the online auction website “eBay.” The individual defendants Robert Drummond (“Mr. Drummond”) and Timothy Ellis (“Mr. Ellis”) were the only directors, officers and shareholders of the Corporate Defendant at all material times.

[2] In early 2007, due to financial difficulty affecting the store, Ms. Lauzon decided to liquidate the inventory and close the business. She came across TIWG and entered into discussions with Drummond and Ellis regarding the services TIWG could provide in liquidating the inventory by listing and selling it on eBay. After some delay occasioned by the involvement of the landlord for the store who claimed entitlement to the inventory, Ms. Lauzon ultimately entered into a “Consignment Service Agreement” on or about October 2, 2007 (the “written contract”). The identity of the other contracting party is an issue in the action. Under the written contract TIWG (or Mr. Drummond and/or Mr. Ellis) agreed to take possession of the inventory, photograph it and list it for sale on eBay in exchange for a commission of 33% of the final sale value of the inventory.

[3] With the exception of a small number of items listed and sold on eBay on a “test basis” or directly to third parties, the vast majority of the inventory was never listed or sold by TIWG on eBay. Some of the inventory was sold at a party, some found its way into Mr. Drummond’s personal residence, some of it was displayed for sale in a retail operation in St. Catharines, Ontario that Mr. Ellis had some involvement in, some was displayed for sale in a charity retail store in Kitchener and some was sold by Mr. Drummond at a garage sale. However, the major portion of the inventory was ultimately taken to the municipal dump by Mr. Drummond on or about August 18, 2008 and disposed of. No amount was ever paid to Ms. Lauzon for the inventory that she had placed into the possession of the Defendants, nor was any accounting given to her with respect to what happened to it.

[4] Ms. Lauzon commenced this action on March 23, 2009 claiming an accounting of all amounts received from the sale of the inventory, as well as general, special, aggravated and punitive damages. Although a declaration that the Defendants defrauded the Plaintiff was sought in the Statement of Claim, the claim of fraud was withdrawn by Ms. Lauzon at the commencement of the trial, as were the claims for pain and suffering and future income loss.

[5] At the commencement of the trial, counsel for Ms. Lauzon advised that the action had been settled as against Mr. Ellis and an order was made, on consent, dismissing the claim as against him, together with Mr. Ellis’ counterclaim against Ms. Lauzon. The Corporate Defendant did not defend the action, however it was not apparent from the record as to whether it was noted in default or what became of the claim against it. However, it is apparent that the Corporate Defendant ceased operations in 2008 and may have been dissolved.

[6] On the basis of the foregoing, the trial proceeded with respect to Ms. Lauzon’s claim against Mr. Drummond and Mr. Drummond’s counterclaim against her.

[7] Ms. Lauzon’s claim against Mr. Drummond is based upon negligent misrepresentation, conversion and breach of contract. Ms. Lauzon argues that Mr. Drummond has personal liability, notwithstanding that Mr. Drummond argues that she entered into the written contract with the Corporate Defendant and not with him.

[8] Mr. Drummond advanced a counterclaim against Ms. Lauzon for malicious prosecution arising from a private information prosecution commenced by her against him, as well as for slander. The slander claim was withdrawn by Mr. Drummond during the course of the trial and this was confirmed in final argument.

Issues

The issues for determination are:

a. Who were the parties to the contract?

b. What were the terms of the contract?

c. Were the terms of the contract breached?

d. Is Mr. Drummond personally liable for breach of contract?

e. Did Mr. Drummond make negligent misrepresentations upon which Ms. Lauzon relied to her detriment?

f. Did Ms. Lauzon abandon the inventory?

g. Is Mr. Drummond liable to Ms. Lauzon for conversion?

h. What damages did Ms. Lauzon suffer?

i. Is Ms. Lauzon liable to Mr. Drummond for malicious prosecution?

j. If Ms. Lauzon is liable to Mr. Drummond for malicious prosecution, what are Mr. Drummond’s damages?

Facts

[9] Ms. Lauzon began operating the store in March 2000. Through most of the existence of the operation she had one employee, Marilyn Zurbrigg. The store was described as a “high end” gift shop, selling various items including candles, bath and body products, mirrors imported from Africa, Thai pillows, leather goods, glass imported from Italy and artisan pieces with certificates of authenticity.

[10] Ms. Lauzon operated the store out of premises leased on a month-to-month basis following expiry of the initial 5 year lease term in March 2005.

[11] In early 2007 Ms. Lauzon decided that she wished to get out of the retail business and to sell the store. At the time she was in arrears of rent and provincial sales tax. She began to compile an inventory list to begin preparation for sale of the business in February 2007. The inventory list was prepared by writing down the retail price of each item from the stickers on the items and putting the prices on post-it notes and thereafter transferring the information from the post-it notes to a list. Ms. Zurbrigg assisted Ms. Lauzon with the compilation of the inventory list. It is noted that during the time that the business operation Ms. Lauzon did not take regular or periodic physical counts of the store inventory.

[12] The inventory list was not complete in that it only listed the items on display and not the inventory stored in the storage area in the building.

[13] Ms. Lauzon did not ultimately pursue the sale of the business and sometime in the spring of 2007 made a decision to liquidate the inventory. In or about May 2007 her husband noticed a sign for " There It Was Gone" and alerted Ms. Lauzon, whereupon she contacted Mr. Ellis and discussed with him the prospect of listing the entire store inventory for sale on eBay. Mr. Ellis advised that he would have a look at the inventory and discuss the matter further with her. Ms. Lauzon testified that she had some understanding of how eBay worked. She checked out some items which were similar to her products on eBay and noted that they were selling at higher than their retail prices. She noticed as well that the items had minimum bids.

[14] In June 2007 Mr. Ellis and Mr. Drummond came to the store, and had a discussion with Ms. Lauzon about the process of listing the inventory for sale on eBay. There was disagreement between the parties in their testimony regarding what was said in this meeting and in one or more exploratory meetings which followed. Ms. Lauzon testified that she told Mr. Ellis and Mr. Drummond that she wanted to get the retail prices on the sale of the inventory items and that Mr. Drummond told her that the retail prices would be achieved by setting a minimum price at the wholesale level, being one half of the retail sticker prices. The bidding process would result in the retail prices being reached. When asked what was agreed regarding the sale price Ms. Lauzon stated that she was told by Mr. Drummond that she would “basically get retail or everything in the store" but she was adamant in her discussions with him that she would not take anything less than one half of the sticker prices, being the wholesale prices.

[15] Mr. Ellis testified that there was no discussion on what the inventory would be listed for, indicating that Ms. Lauzon simply said that she needed the inventory sold as soon as possible. He testified that no guarantee was given to Ms. Lauzon regarding what the inventory would sell for, nor that all of it would sell at all. He testified that the best approach to selling on eBay was to list the items at $.99 and then let the auction proceed to move up the price. However there is no evidence that this concept was specifically discussed with Ms. Lauzon.

[16] There was also disagreement on which party would be responsible for cataloguing and packaging the inventory. Ms. Lauzon testified that Mr. Ellis and Mr. Drummond promised to have someone in to catalogue the inventory and to take pictures of each item. She understood that the pictures would be posted on eBay, with the furniture and display units to be listed for local pickup. TIWS would otherwise be responsible for shipping goods to purchasers.

[17] Mr. Ellis testified that Ms. Lauzon undertook to provide an inventory list and to package the inventory. He also testified that he told her that they could not sell the display units nor any glass items on eBay. He offered to try to sell the glass and display units for local sale on Kijiji, a classified ad website. He said that when he and his employee showed up at the store, no cataloging or packaging had been done. He said that he advised Ms. Lauzon that he and Mr. Drummond could inventory and package the goods and they would provide an estimate of what they would charge to do so.

[18] When asked whether she thought she had reached an agreement with Mr. Ellis and Mr. Drummond as a result of the discussions in the store she answered "in part," in that they had established the wholesale prices of the inventory as the minimum bid prices. She testified that she was shown a draft consignment service agreement which provided for a commission to be paid to TIWG on a sliding scale. She believed that Mr. Ellis and Mr. Drummond were partners and testified that no mention was made by them of the existence of a corporation. She was given a business card which stated "There It Was Gone – sold on eBay” with no indication of a corporate name.

[19] An employee of TIWG named Hailey attended at the store three or four times to take pictures and to enter the pictures and descriptions into a computer. Eventually Mr. Drummond advised Ms. Lauzon that this process was too expensive and they would have to take the inventory to the TIWG warehouse to take the pictures and to complete the cataloging process.

[20] In the course of Messrs. Drummond and Ellis removing the inventory, the landlord of premises intervened, claiming possession of the inventory for arrears of rent and changed the locks to the premises. Ms. Lauzon, through her lawyer Stephen Kay, ultimately concluded a written agreement with the landlord permitting the inventory to be sold on eBay, with Mr. Kay to hold the proceeds in escrow, to be applied firstly to discharge the outstanding retail sales tax arrears and thereafter to be applied towards the rental arrears in the sum of some $13,000.00.

[21] Once the arrangements had been concluded with the landlord, Mr. Drummond faxed the written agreement form to Ms. Lauzon to be signed by her. Ms. Lauzon executed it and returned it to Mr. Drummond. This all occurred on or about October 2, 2007.

[22] The form of the written contract differed from the draft which had been previously shown to Ms. Lauzon in June 2007. The services to be provided by "There It Was Gone" under the written contract included the following:

1. Photography and web hosting

2. Set minimum bid price with client per listing plan

3. List on eBay for seven days

4. Provide a search code to client to permit Ms. Lauzon to follow her listings on eBay

5. Receive payments, pay eBay and other auction fees and expenses

6. Package and ship goods to purchasers.

[23] The written contract further provided that TIWG would take possession of the items to be offered for sale and would secure them under its control. TIWG was given the exclusive right to sell each item from the time it took possession until it was returned to the client unsold or it had notified the client of its intention to do so, during which time TIWG would use its best efforts to sell each item.

[24] At paragraph 2.5, the written contract provided that TIWG would compensate the client for any items which were lost, stolen or damaged while in its possession to the extent that the client’s insurance does not do so. Reimbursement for such items would be “as if sold to TIWG at the minimum bid price, with applicable TIWG fees applied”.

[25] It is noted that the written contract did not mention the name of the Corporate Defendant anywhere. The parties were stated to be “Rob Drummond, representative for TIWGONE and Jackie Lauzon.” Ms. Lauzon signed the written contract as “consignor” however there was no signature line for the consignee and no one executed it for TIWG.

[26] The cover fax sheet by which the written contract was faxed to Ms. Lauzon bore the letterhead “There It Was…Gone! Sold on eBay.” The fax sheet stated that it was from “There it was Gone Inc.” and the “comments” section stated “Enclosed is a copy of your wholesale agreement between Wycks & Wishes and There it was Gone Inc. for us to start listing and selling your items on ebay. Please read over, sign and return to There it was Gone. Thank you” and was signed “Rob Drummond, CEO.”

[27] Following the execution of the written contract, little, if anything, was done by Mr. Ellis and Mr. Drummond to list the inventory, which was now in their possession, on eBay. Ms. Lauzon called them repeatedly on their cell phones and was not able to reach them, leaving numerous messages.

[28] Mr. Ellis testified that, although he and Mr. Drummond had had ample time to deal with the inventory at the time of the initial discussions with Ms. Lauzon in June and July, 2007, by the time the issues with the landlord had been resolved they had three new customers and did not have time to deal with Ms. Lauzon’s inventory. Ms. Lauzon’s goods went to the bottom of their priority list.

[29] Mr. Ellis testified that a small number of items were listed on eBay in early 2008 at $.99 per item. However no sales were generated. On cross-examination he described this as a “test listing.” As a result of the test listing he concluded that he was wasting his time and “moved on to other clients.” Because he had other clients he “stopped doing her [Ms. Lauzon’s] stuff for a while.” He did place a few items with a friend to be offered for sale at a party, which generated $265.00.

[30] In late November 2007 Ms. Lauzon and her husband had a chance encounter with Mr. Drummond and Mr. Ellis, at which time they were not able to get any satisfactory response from Mr. Drummond and Mr. Ellis as to what was going on with the sale of the inventory.

[31] Towards the end of December 2007 Ms. Lauzon was successful in reaching Mr. Drummond, however he again did not provide any satisfactory information as to the progress in listing the inventory items on eBay.

[32] In January 2008, Ms. Lauzon and her husband had a further chance encounter with Mr. Drummond at a restaurant, at which time no further information was forthcoming from him. Ms. Lauzon testified that after this meeting she continued to attempt to contact Mr. Drummond by telephone, leaving numerous unanswered messages.

[33] Transcripts of two voicemail messages left by Ms. Lauzon were put into evidence. Indications were that that the first message was left on March 24, 2008, and the second on April 18, 2008.

[34] In the first message Ms. Lauzon stated that she was hoping that all of the items were online but she had serious concerns because some of the items may be out of code [i.e. beyond their approved shelf life] because they had not been put online in a timely manner. She stated that her lawyer was going to check whether the items were online and, if they were not, they would have to make alternate arrangements to have everything picked up. She stated "this is getting serious now and maybe you guys aren’t taking this that seriously". She stated that she expected a callback, leaving her telephone number. She stated further "you're neglecting your contractual obligation to me by having the stuff sitting in the warehouse for eight months" suggesting that Messrs. Drummond and Ellis should have been able to put the goods online a long time ago.

[35] In the second message, almost a month later, Ms. Lauzon accused Mr. Drummond of selling inventory privately to various persons from the warehouse, and not on eBay. She stated "that is none of your merchandise to do that. You have got no direction and no right to do that. I want you to know that I am calling the police, and we are going to sue you, and I'm calling eBay head office.”

[36] Mr. Ellis testified that he listened to the messages, however he made no effort to respond to them. He stated that, on the basis of the first message, he assumed that the contract was at an end and that Ms. Lauzon had decided to pick up her inventory. However he made no attempt to contact Ms. Lauzon at the number left on the message to clarify her intentions, nor did he attempt to contact her lawyer Mr. Kay.

[37] Mr. Ellis testified that the second message, left on April 18, 2008, was received 45 minutes after Ms. Lauzon’s husband attended at his office and told him, with reference to the inventory, that he “didn't want the crap." He stated that as soon as Ms. Lauzon threatened to call the police he thought the contract was at an end.

[38] Mr. Ellis testified that in June 2008, he left TIWG and handed everything over to Mr. Drummond. He indicated that he advised Mr. Drummond at that time that he should simply throw out all of the remaining inventory.

[39] Ms. Lauzon’s husband Ronald Scott testified that he drove to the warehouse premises of TIWG sometime in April 2008. It was confirmed by Mr. Drummond in his testimony that this occurred on April 18, 2008. Mr. Drummond admitted to Mr. Scott that he had not listed the inventory on eBay but that he did sell some of the inventory to others including friends, retailers, dealers and interior decorators. Mr. Scott reported to Ms. Lauzon "I think you had been scammed. I think you better get police involved."

[40] Ms. Lauzon contacted the Waterloo Region Police Services and met with Detective Donald Callahan who carried out what appeared to be a cursory investigation, including an interview with Mr. Drummond. Detective Callahan did not lay any charges, presumably on the basis that he considered it to be a civil and not a criminal matter. Ms. Lauzon subsequently did proceed with laying a private information against Mr. Drummond but ultimately the charge was withdrawn by the Crown Attorney.

[41] Ms. Lauzon testified that as of April 2008, she believed that, based upon the lack of response from her attempts to contact Mr. Drummond and Mr. Ellis, and the report from her husband following his meeting with Mr. Drummond at the warehouse, all of her inventory was gone.

[42] Mr. Drummond testified that following Ronald Scott’s attendance at the warehouse and receipt of Ms. Lauzon’s telephone message on April 18, 2008, he and Mr. Ellis waited for receipt from some direction or request from Mr. Kay, assuming that Ms. Lauzon would have him call them.

[43] By June 2008, Mr. Ellis had left and the business was two months behind in rent on the warehouse. The landlord changed the locks, and by the time Mr. Drummond made arrangements to get back into the warehouse, the inventory had been infested with mice and contaminated with mice feces.

[44] On August 18, 2008 after sorting some of the inventory, Mr. Drummond took much of it to the Regional Municipality of Waterloo landfill site to dispose of it. The receipt from the landfill site indicated that some 550 kg of material was disposed of. Drummond testified that, prior to taking the material to the dump, he called and left a voicemail message with Mr. Kay but did not receive a return call. Mr. Drummond took the position that, based upon the voicemail message left by Ms Lauzon in March, he had the right to do whatever he wanted with the inventory. The balance of material that was not disposed of the dump he took to his home, sold some of it at a garage sale and kept some for display in his home. The proceeds of on the garage sale were used to pay office expenses of TIWG.

[45] Ms. Lauzon testified that in late 2008 she was shocked to view some of her inventory on display in Mr. Drummond's home, depicted on a real estate brokerage website, as well as on display on the website of a consignment store in St. Catharine's Ontario, apparently owned by Mr. Ellis, or with which he had some connection. Ms. Zurbrigg testified that in August 2008 she recognized some of the inventory for sale in a Mennonite thrift shop in Waterloo. Some of the items still had price stickers on them in Ms. Lauzon’s handwriting. She estimated the retail value of the goods that she saw in the Mennonite thrift shop to be approximately $400.

[46] It was acknowledged by Mr. Drummond that no amount was never paid to Ms. Lauzon nor was any accounting given to her of sales or how the inventory was dealt with or disposed of.

Discussion

(a) Breach of Contract

[47] Ms. Lauzon claims against Mr. Drummond on the basis of breach of contract. In the Statement of Claim she alleged that she entered into the Consignment Service Agreement with “the Defendants”, without distinction. It therefore becomes important to determine who the contracting parties were.

[48] As indicated above, the corporate name “There It Was Gone Inc.” was not set forth as a party in the written agreement, nor was it mentioned in the draft Consignment Service Agreement which was given to Ms. Lauzon during the initial discussions between the parties. Moreover, the business card provided to Ms. Lauzon by Messrs. Drummond and Ellis did not set forth the full corporate name. Accordingly the corporation was not in compliance with subsection 2(6) of the Business Names Act, R.S.O. 1990 c. B.17, which provides as follows:

(6) A corporation and such other persons as are prescribed carrying on business under a registered name or, in the case of a corporation, identifying itself to the public under a registered name, shall set out both the registered name and the person’s name in all contracts, invoices, negotiable instruments and orders involving goods or services issued or made by the person. R.S.O. 1990, c. B.17, s. 2 (6).

[49] Subsection 10(5) of the Business Corporations Act R.S.O. 1990 c. B.16 provides as follows:

(5) Despite subsection (4), a corporation shall set out its name in legible characters in all contracts, invoices, negotiable instruments and orders for goods or services issued or made by or on behalf of the corporation and in all documents sent to the Director under this Act. R.S.O. 1990, c. B.16, s. 10 (5).

[50] The Court of Appeal in the case of Truster v Tri-Lx Fine Homes Ltd. (1998) 1998 CanLII 3497 (ON CA), 110 O.A.C. 101 commented, at para. 21, on the effect of non-compliance with these provisions as follows:

Returning to the first component, s. 10 (5) of the Business Corporations Act does not create automatic personal liability if it is not complied with. It is evident that the trial judge was aware of this. He also recognized a principle arising from the case law that persons wishing to benefit from the protection of the corporate veil should not hold themselves out to the public without qualification. They should identify the name of the company with which they are associated in a reasonable manner or risk being found personally liable if the circumstances warrant it: see cases such as Watfield International Enterprises Inc. v. 655293 Ontario Ltd. (1995), 1995 CanLII 7414 (ON SC), 21 B.L.R. (2d) 158 (Ont. Gen. Div.) and Pennelly Ltd. v. 449483 Ontario Ltd. (1986), 20 C.L.R. 145 (Ont. H.C.). This principle properly flows from the fact that incorporation provides corporate officers and shareholders the legal protection thought to be necessary for modern business relations; however, if one expects to benefit from this protection, then others must, at a minimum, be informed in a reasonable manner that they are dealing with a corporation and not an individual. In the last analysis, persons who set up after the fact that they contracted solely on behalf of another bear the onus of establishing that the party with whom they were dealing was aware of the capacity in which they acted: Clow Darling Ltd. v. 1013983 Ontario Inc. (1997), 36 B.L.R. (2d) 137 (Ont. Gen. Div.); Nord Ovest Spa v. Gruppo Giorgio Ltd. (July 20, 1994), Doc. Hamilton 34206/92, 38009/92 (Ont. Gen. Div.).

[51] The caselaw on the question of whether an individual defendant is personally liable on a contract, or is an agent for a corporation, is, as might be expected, quite extensive. Some of the facts which have been identified as relevant to the analysis include the degree to which the corporate name was disclosed in relevant documentation, signage or advertising that might have come to the plaintiff’s attention, the defendant’s non-compliance with applicable business corporation and/or trade names legislation, any oral exchanges between the parties regarding the contracting party’s identity or legal status. One of the factors which has been identified is the relative degree of commercial sophistication between the parties (see Troost v Ewanchuk 2002 ABPC 140, 2002 CarswellAlta 1174 (Alta. Prov. Ct.)).

[52] In the present case Mr. Ellis admitted on cross-examination that there was never a discussion, to which he was privy, with Ms. Lauzon, in which it was mentioned that “There It Was Gone” was a corporation. Mr. Drummond did not indicate in his testimony that he specifically told Ms. Lauzon that the business was incorporated. The only place where the existence of the corporation was mentioned or appeared was on the cover page of the fax transmission from Mr. Drummond to Ms. Lauzon forwarding the draft written contract to her for execution. Mr. Drummond did not provide any explanation as to why, having setting forth the name of the corporation on the cover fax sheet, he did not set forth the name of the corporation anywhere in the written contract which he prepared. I find that each of Mr. Drummond and Mr. Ellis had the advantage of a higher degree of commercial sophistication than Ms. Lauzon. In all of the circumstances Mr. Drummond did not take reasonable steps to identify the name of the corporation in his dealings with Ms. Lauzon in order to relieve himself of the risk of being found personally liable on the contract. Ms. Lauzon testified that, as far as she was concerned, the written contract was with Mr. Drummond personally. This is unlike the recent case of Chandaria Estate v Stewart (2011) 94 B.L.R. (4th) 40 (Div Ct) where it was specifically found that there was no evidence that the plaintiff believed that he was contracting with the individual defendant. I therefore find that Mr. Drummond contracted personally with Ms. Lauzon and was personally responsible for performance of the obligations of “There It Was Gone” pursuant to the written contract.

[53] Under the heading “There It Was Gone Services” in the written contract Mr. Drummond covenanted to list the inventory items which were delivered to TIWG on eBay for seven days and to list them on TIWG’s website on the “Current Auctions” page with links to the eBay auctions pages. He also covenanted to provide a search code to Ms. Lauson to permit her to follow the listings on eBay.

[54] Paragraph 2.3 of the written contract provided that TIWG may decline to list any items, including, but not limited to various types of items listed at subparagraphs 2.3.1 to 2.3.5. It is noted that there was no evidence that Mr. Drummond, or anyone else on behalf of TIWG, communicated to Ms. Lauzon in any fashion that TIWG had elected to decline to list any items, with the possible exception of glass items and the displayers, which Messrs. Drummond and Ellis undertook, on their evidence, to attempt to sell locally on Kijiji.

[55] It is noted that that there was no provision in the written contract for the sale of inventory items by TIWG, by any method other than by listing on eBay and specifically at parties, consignment stores or retail stores.

[56] There was no time specified in the written contract for the listing of the inventory items on eBay to be carried out, however, the evidence was that Ms. Lauzon communicated to Messrs. Drummond and Ellis that she wished it to be done as soon as possible. It is a well-established principle that where a contract does not specify a time for performance, the court will imply a reasonable time for completion. In this case, aside from the limited “test” listing of items on eBay, testified to by Mr. Ellis, the inventory items delivered by Ms. Lauzon were never listed on eBay and therefore Mr. Drummond was in breach of his contractual obligation to do so within a reasonable time.

[57] More importantly for the purposes of this action, as indicated above, paragraph 2.5. of the written contract provided as follows:

TIWGONE will compensate Client for any items which are lost, stolen or damaged while in TIWGONE’s possession to the extent that client’s insurance does not do so. Reimbursement will be as if sold to TIWGONE at minimum list price, with applicable TIWGONE fees applied.

[58] Given that Mr. Drummond prepared the written contract, any ambiguity in it is to be resolved against his interest, pursuant to the contra proferentem rule. In this case the evidence was that the bulk of the inventory was taken by Mr. Drummond to the land fill site after being affected by contamination by mice, some of it was sold at a party put on by a friend or associate of Mr. Ellis, some found its way to a charity thrift store, some to a consignment store in St. Catharines, some sold at a garage sale and some went into Mr. Drummond’s personal residence. In the absence of Mr. Drummond having provided any sort of detailed accounting of what became of the inventory, and upon application of the contra proferentem rule, I find that the phrase “lost, stolen or damaged” is broad enough to encompass what happened to all of the inventory and materials provided by Ms. Lauzon to TIWG, rendering Mr. Drummond liable to her for the “minimum bid price” of all of the items, less the applicable TIWG fees, at 33%, pursuant to the written contract. There is no evidence that Ms. Lauzon recovered anything from any insurer for the loss of the inventory, and accordingly, there is to be no offset for insurance recovery under para. 2.5 of the written contract. The determination of the aggregate “minimum bid price” is discussed below. In making this determination, I specifically find that Ms. Lauzon did not abandon the inventory items. The statement made by her in the March 24, 2008 telephone message that “if it’s [i.e. the inventory] online, we’re gonna have to make alternate arrangements to have everything picked up” and the fact that she did not subsequently attend to do so is far from an unequivocal declaration of abandonment of the inventory which would relieve Mr. Drummond from his obligation to safeguard the inventory pursuant to the written agreement.

(b) Tort of Conversion

[59] Ms. Lauzon also relies upon the tort of conversion. In the case of Transit Trailer Leasing Ltd. v Robinson (2004) C.C.L.T. (3d) 227 (Ont SCJ) Cusinato J. quoted Iacabucci, J. in Boma Manufacturing Ltd. v Canadian Imperial Bank of Commerce, [1996] 2 S.C.R. 727 at p. 746 in authoritatively defining the tort of conversion as follows:

The tort of conversion involves a wrongful interference with the goods of another, such as taking, using or destroying these goods in a manner inconsistent with the owner’s right of possession. The tort is one of strict liability, and accordingly, it is no defence that the wrongful act was committed in all innocence.

[60] I find that Ms. Lauzon delivered possession of her inventory to Messrs. Ellis and Drummond for a specific limited purpose under the written contract, namely, to list each item for sale on eBay and for no other purpose. In disposing of the goods, or permitting the disposal of the goods, in a manner which was inconsistent with the purpose enumerated in the written contract, and therefore in a manner which was inconsistent with Ms. Lauzon’s right of possession, Mr. Drummond committed the tort of conversion.

[61] Even if it may be argued that the inventory was in the possession of the corporate entity “There it Was Gone Inc.” Mr. Drummond has direct personal liability for conversion, on the authority of Shibamoto & Co. v Western Fish Producers Inc. (Trustee of) 1991 CarswellNat 133 (Fed Ct) at para. 49, where it was stated that “when an individual chooses to convert property belonging to a third party and that property is in possession of a company which he controls, the individual as well as the company is liable in tort.”

(c) Negligent Misrepresentation

[62] Ms. Lauzon also submits that Mr. Drummond is liable for negligent misrepresentation. The alleged false representations relied upon are set forth in the Statement of Claim as follows:

(a) Each item would be sold at no less than the wholesale price;

(b) Most items would actually sell for more than the retail price;

(c) The total value of the goods sold would amount to more than the retail price; and

(d) The entire process from start to sale of all the items would take six weeks.

[63] Hembruff v. Ontario (Municipal Employees Retirement Board), 2005 CanLII 39859 (ON CA), [2005] O.J. No. 4667 (Ont. C.A.), sets out the following principle with respect to actionable misrepresentations, at paragraph 76:

A representation which amounts merely to a statement of opinion, judgment, probability or expectation, or is vague and indefinite in its nature and terms, or is merely a loose, conjectural or exaggerated statement, goes for nothing, though it may not be true, for a man is not justified in placing reliance on it.

[64] As stated by Hollingsworth, J. in Datile Financial Corp. v Royal Trust Corp. of Canada (1991) 1991 CanLII 7310 (ON SC), 5 O.R. (3d) 358 (Ont Ct Gen Div) at para. 54:

It is clear that no action will lie for misrepresentation unless it is a statement of an existing fact. Put another way, only representations of fact can give rise to actionable negligence. On the other hand, representations as to future occurrences do not form a ground for legal relief as negligent misrepresentation unless they import by implication a misstatement of an existing fact.

[65] Mr. Drummond disputes having made the representations complained of, and Ms. Lauzon was not perfectly clear in her testimony that the representations were made to her by Mr. Drummond in the manner alleged in the Statement of Claim. However, it is not necessary for me to make a finding as to whether the representations were made, since, as they relate to future occurrences and actions of third parties, they would not be actionable in any event, on the basis of the authorities referred to above.

[66] Moreover, in order to be actionable, Ms. Lauzon must have reasonably relied upon the alleged representations to her detriment. Ms. Lauzon testified that she carried out her own investigation of what similar items to hers were selling for on eBay, and it is therefore difficult to see how she relied upon any representations made by Mr. Drummond in that respect. Furthermore, any reliance on a representation that all of the inventory would sell for full retail value or that each item would sell for no less than the wholesale price on an online auction site would not be considered reasonable, since the sale values obtained, or even if there would be bidders for each item, would be known to be entirely dependent on the existence of third party bidders and what they were prepared to bid, if at all, for the various items at the time they were listed.

d) Counterclaim for Malicious Prosecution

[67] Mr. Drummond counterclaims against Ms. Lauzon for malicious prosecution, relying on her commencement of a private information prosecution against him. It was not clear from the evidence what offence Mr. Drummond was charged with under the private information. Mr. Drummond testified that he, along with Mr. Ellis, was served with a summons relating to the charge but ultimately the charge was withdrawn. He stated that he was required to attend at criminal court with a lawyer and was subjected to the worry of having a criminal charge being made against him. He characterized the legal fees he incurred as “minimal,” being $500.00 or less. However, he did not present an account or proof of payment of any legal expenses. There was no evidence that Mr. Drummond suffered any emotional distress that required treatment or lost any time from his work or occupation.

[68] On the authority of the case of Nelles v. Ontario 1989 CanLII 77 (SCC), [1989] 2 S.C.R. 170 at p. 26 there are four necessary elements which must be proved for a plaintiff to succeed in an action for malicious prosecution, as follows:

a) the proceedings must have been initiated by the defendant;

b) the proceedings must have terminated in favour of the plaintiff;

c) the absence of reasonable and probable cause;

d) malice, or a primary purpose other than that of carrying the law into effect.

[69] It was acknowledged by Mr. Brogden in argument that the first two elements were established. In Nelles, at p. 26, it was observed by the Supreme Court of Canada that the third element contains both a subjective and objective element. There must be both actual belief in the guilt of the accused on the part of the prosecutor and that belief must be reasonable in the circumstances. In this case, I find on the evidence that Ms. Lauzon genuinely believed that her inventory had been disposed of improperly and illegally by Messrs. Drummond and Ellis and that that belief was reasonable in the circumstances, given their virtually complete lack of response to her repeated and persistent attempts to contact them to determine what was happening with the inventory which they promised to list on eBay.

[70] Furthermore I find that Mr. Drummond has failed to prove the existence of malice in Ms. Lauzon which motivated the laying of the charge. The Court in Nelles, at p.27, quoting J.G. Fleming in The Law of Torts (5th ed.) at p.609, stated malice has “a wider meaning than spite, ill-will or a spirit of vengeance, and includes any other improper purpose, such as to gain a private collateral advantage.” At its highest, Ms. Lauzon was frustrated and angry, but in my view, that falls short of the kind of malice encompassed in the test for malicious prosecution. I therefore find that the required elements to establish a claim for malicious prosecution have not been made out.

e) Damages

[71] On the question of damages, Mr. Brogden argues that the proper measure of damages for conversion is the “market value” of the goods at the time and place of their loss being “the price as would be fixed by negotiation and mutual agreement between a willing buyer and a vendor who is willing but not compelled to sell” (see Canada Trustco Mortgage Co. v Cerilli Group Inc. 2005 CarswellOnt27 (SCJ) at para. 16. Mr. Brogden suggests that this amount is equivalent to the retail price of the inventory as established by Ms. Lauzon (being twice the cost price) pursuant to the price stickers placed on each item. Based upon the inventory prepared by Ms. Lauzon in early 2007, he submits that this amount was $ 177,640.00.

[72] The difficulty with the foregoing analysis is that the evidence does not establish that there was a market value for the goods in the store equivalent to, or approaching, the retail prices established by Ms. Lauzon. Ms. Zurbrigg testified that the total sales in the store for the first five months of 2007 were less than $100.00 in the aggregate. There is little evidence that there were, or would be, “willing buyers” for the inventory items at the retail prices within any reasonable period of time. This is borne out by the relatively low sales and turnover of inventory as disclosed by Ms. Lauzon’s income tax returns. The gross sales for 2003 were reported as $27,465, $27,002 for 2004, with no income tax return produced for 2005 and $ 54,280.00 reported for 2006 (suggesting the possibility that 2005 and 2006 may have been combined).

[73] Moreover, in May 2007, Ms. Lauzon made the decision to liquidate the inventory. She stated in evidence that she told Messrs. Drummond and Ellis that she would not accept anything less than the wholesale cost of the inventory if sold on eBay. However, there was no assurance that even that level would be achieved. If items did not sell for at least the cost price, pursuant to a set minimum bid, she would be left with them and would ultimately be forced to dispose of them at a lesser value. Accordingly, having made the decision to liquidate the inventory, Ms. Lauzon’s reasonable expectation of its value would not exceed the liquidation value.

[74] In Waddams, The Law of Damages at para. 1.560-1.570 it is stated, with reference to the proper measure of damages where goods are lost or destroyed through a defendant’s wrong, “the question is not answered by saying that the plaintiff recovers the value of the goods, without a consideration of how value is to be determined.” Waddams goes on to say that the basic principle of damage assessment is that “the plaintiff should be put in as good a position as would have been occupied if the wrong had not been done.” At para. 1.590 Waddams observed “measuring damages by the selling price of the goods is justified, it is suggested, only where the plaintiff can show that in the absence of the wrong there would have been a sale at the selling price.”

[75] In this case the assessment of damages is severely hampered by the absence of annual balance sheets of Ms. Lauzon’s business which would show the cost of inventory on a periodic basis, and by the fact that no regular annual or periodic physical inventories were taken, as might be expected in a retail operation. Moreover the reliability of the inventory list which was prepared by Ms. Lauzon, along with her employee Ms. Zurbrigg, is hampered by the facts that 1) it was prepared for a different purpose, namely a proposed sale of the business, 2) it was not subject to any third party verification, 3) the source documents, being the post-it notes on which the inventory counts were noted, are no longer available, and 4) the general lack of formality and professionalism under which it was completed.

[76] Ms. Drummond, in argument, submitted that the accuracy of the inventory count is not borne out by the reported sales on Ms. Lauzon’s income tax returns. He points to the only tax document which disclosed a closing inventory, being the 2004 Statement of Business Activities showing a year-end inventory of $42,466.00, at cost. Unfortunately any potential reliance which the Court may place on the income tax documents in determining the cost value of the inventory is hampered by the absence of any expert opinion evidence analyzing the tax documents and putting them in context. However, the documents, and in particular, the reporting of the 2004 closing inventory, do serve to cast some doubt on the accuracy of the inventory count conducted by Ms. Lauzon in early 2007.

[77] On the authority of Wood v. Grand Valley Railway Company 51.S.C.R. 283 at p. 289, even when the court is unable to assess damages with any degree of mathematical accuracy, this impossibility does not relieve the wrongdoer of the necessity of paying damages, and the court is required to “do the best it can” to estimate the damages, even if it is a matter of guess work.

[78] As indicated above, para. 2.5 of the written contract provided that in the event of the goods being lost, stolen or damaged “reimbursement will be as if sold to TIWGONE at minimum list price, with applicable TIWGONE fees applied.” Although the written contract did not specify the “minimum list price” I am satisfied that Ms. Lauzon would not have delivered up possession of the inventory to Messrs. Drummond and Ellis unless they had agreed that the list price would be the wholesale cost value, being 50% of the retail prices.

[79] The reimbursement pursuant to para. 2.5 of the written contract would therefore be the wholesale cost value, less 33% being the contractual fee to TIWG. From the aggregate retail price of $ 177,640.00 submitted by Mr. Brogden I would apply a contingency discount of 25% to account for concerns with respect to the accuracy of the inventory count, resulting in an aggregate retail value of $ 133,230.00. The wholesale cost value at 50% would be $ 66,615.00. Applying the 33% fee, totaling $21,982.95, would result in a contractual reimbursement claim of $44,632.05.

[80] As indicated above, the damages for conversion would be calculated differently, being the liquidation value of the inventory, without any deduction of the 33% TIWG fee. There was no expert evidence led with respect to an appropriate method for determination of liquidation value. In doing “the best that the Court can” as mandated by Wood v. Grand Valley, I would apply a contingency discount of 40% to the wholesale cost value determined above to arrive at a liquidation value of $ 39,969.00.

[81] In the absence of expert or other evidence on what would have been generated on eBay had Mr. Drummond performed his contractual obligation to list all of the inventory on eBay for 7 days, I find that not more than the liquidation value of $ 39,969.00 would have been obtained. In assessing damages for breach of this contractual obligation Ms. Lauzon is entitled to be put into the same position she would be in had it been performed, which would have been the liquidation value of $ 39,969.00 less the contractual fee of 33% or $ 26,779.23.

[82] In assessing damages I would opt for the higher of the methodologies set forth above, being the reimbursement amount under para. 2.5 of the written contract being the sum of $44,632.05.

[83] Ms. Lauzon claimed aggravated and punitive damages. Although not pressed vigorously in argument, I do find Mr. Drummond did act in a callous and high-handed manner towards Ms. Lauzon by dealing with the inventory entrusted to him for listing on eBay without any regard to Ms. Lauzon’s legitimate interest in it and through his persistent failure to respond to her repeated requests to ascertain the status and whereabouts of her inventory. This conduct is worthy of condemnation by the Court and I therefore assess aggravated or punitive damages against Mr. Drummond in the sum of $10,000.00.

[84] On the basis of the foregoing there shall be judgment in favour of the Plaintiff against the Defendant Robert Drummond as follows:

(a) Compensatory damages in the sum of $44,632.05;

(b) Aggravated or punitive damages in the sum of $10,000.00;

(c) Prejudgment interest on the compensatory damages of $44,632.05 at the rate of 2.5% pursuant to the Courts of Justice Act R.S.O. 1990 c. C.43, as amended, calculated from January 1, 2008 to the date hereof.

[85] The parties may make brief written submissions with respect to costs, the plaintiff within 21 days of the release of these reasons and the Defendant Robert Drummond within 35 days hereof.

D. A. Broad J.

Released: June 19, 2012