CITATION: Landry v. Peter Ayling, 2013 ONSC 3069
COURT FILE NO.: 77126/12
DATE: 2013-05-27
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
SUZANNE LANDRY & HARVEY THERIAULT
Applicants
– and –
PETER AYLING AND ASSOCIATES LIMITED
Respondent
J. Montgomery, for the Applicants
C. Craig, for the Respondent
HEARD: May 17, 2013
Justice B.A. Glass
Application Pursuant to the Repair and Storage Liens Act, R.S.O. 1990 c. R. 25 as Amended
Introduction
[1] The Applicants seek a declaration that the seizure and sale of their vessel and its contents was conducted contrary to the Repair and Storage Liens Act (hereinafter called "the RSLA").
[2] Failing to follow the requirements of the RSLA, Suzanne Landry and Harvey Theriault claim that Peter Ayling and Associates Limited did not have any right to sell or interfere with their property.
[3] The Applicants seek compensation for losses arising from the wrongful sale of their property.
[4] The Applicants also seek damages, prejudgment and post-judgment interest pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43.
[5] Finally, the Applicants seek costs on a substantial indemnity scale.
[6] The Respondent claims that it followed the RSLA and provided notice to the only address it had for the Applicants. After no response was received from the Applicants, the sale of the vessel was completed to cover the outstanding charges. The value of the vessel is disputed by the Respondent as well. The Respondent challenges the value of the vessel submitting that the Applicants have grossly over-stated the value.
Issues
[7] What are the requirements for the Respondent pursuant to the RSLA with respect to the sale of this vessel?
[8] Was the notice given to the Applicants proper?
[9] If the Respondent did not follow proper procedures, what relief is available to the Applicants?
[10] What is the value of the vessel?
[11] Was the vessel undersold?
[12] Was the vessel sold to a person who is a bona fide purchaser for value with the protection of the RSLA?
Position of the Applicants
[13] The Applicants dispute that there was proper notice provided. Suzanne Landry had provided clarification that she was a co-owner and she never got notice. Harvey Theriault never received notice. Suzanne Landry spoke with Linda Flewitt from the Respondent about the address to which she and Harvey Theriault were moving. She did so when paying storage charges by credit card.
[14] At the commencement of the storage arrangement, the Respondent had noted the owner as Harvey Theriault only, but Suzanne Landry says that she corrected the ownership to include her name. Documentation in the materials show her first name in brackets after Harvey Theriault and also her first and last names.
[15] The history of paying the storage account shows lump sum payments. The Applicants submit that they actually had a credit of about $390.00 at the time of the alleged arrears and subsequent sale of their vessel.
[16] The Respondent had an obligation to follow the procedures of the RSLA before selling the vessel in question. Section 28 of the Act provides that property cannot be sold for outstanding interest on an account unless the claimant advanced money to the owners. Section 15 of the RSLA provides that notice of sale must be given to the owners. The notice for sale must show how the account will continue to accumulate on a daily basis until the proposed sale date, and no such process was shown to the Applicants.
[17] The Respondent has an obligation to sell for a commercially reasonable quantum. In this case, the vessel was sold for just over $2,000. The vessel was appraised at $90,000 in 2005 and then subsequent appraisals show a value of $46,750 and between $34,000 and $39,000. They submit that damages of $46,750 should be awarded for the vessel itself. It was not the derelict boat promoted by the Respondent.
[18] Further, the Applicants claim that they had personal property on the vessel worth about $15,000. Allowing for depreciation, damages of $10,000 should be awarded.
[19] The Applicants had additional disbursements of $1113.05 for the extra appraisal they engaged when they were not aware of any other appraisal by Mr. Gray having been done. And the Applicants had purchased $3,000 for flooring for the vessel. Now, they cannot use that material because the vessel has been sold.
[20] Those damages total $60,863.05.
Position of the Respondent
[21] Peter Ayling and Associates Limited takes the position that there was an outstanding storage account, the vessel was in poor condition, notice of outstanding storage fees was given to the Applicants and that the vessel would be sold, and the sale price was not unreasonable considering the condition of the vessel.
[22] The records of the Respondent showed that Harvey Theriault was the sole owner. He was the person to whom the notice was directed. They sent the notice of the account and sale to that address. There is no written notice from the Applicants to the Respondent for a change of address. Peter Ayling and Associates Limited does not agree that the Applicants had a credit, but rather submits that there were outstanding arrears.
[23] The Respondent states that the vessel was not in good shape. The appraisal that was engaged by Mr. Gray, the purchaser, demonstrates that the vessel was in poor condition. This vessel was not worth over $46,000. The engines were in need of replacement or repair.
[24] The bottom line for the Respondent is that the vessel was not undersold when sold to Mr. Gray for $2,000. Therefore, the sale price met the commercially reasonable sale test.
[25] The amount of interest on the account was negligible so that one should not eliminate the notice because of an interest claim. It was about $7 per month.
[26] The personal property was not sold but rather was removed from the boat and left at the marina of the Respondent. There is no claim for those items.
Analysis
[27] Section 27 of the RSLA provides a method for property to be sold. A person with a storage account cannot be careless and sell a customer's property for a very undervalued sum of money. That is called a commercially unreasonable sale. It is a more stringent test that courts have been requiring of persons selling property upon which there is a lien. The reasoning found in Melrose v. Halloway Holdings Ltd, 2005 CarswellOnt 104 at paragraph 37 where Clark J. dealt with the RSLA and referred to Copp v. Medi-Dent Service (1991), 1991 7147 (ON SC), 3 O.R. (3d) 570 which was a decision dealing with a sale pursuant to the Personal Property Security Act. The same considerations apply to both statutes.
[28] In Toronto Dominion Bank v. 1737929 Ontario Inc., 2011 CarswellOnt 9730 at paragraph 33, Annis J. took note that the question of what amounts to a commercially reasonable sale of security is a question of fact. Such a test is an objective one. The creditor must take reasonable care that the proper value is obtained.
[29] With the sale of the Applicants' vessel, selling for the amount owing on the storage account of $2000 is much lower consideration than what appears to be the value of the vessel.
[30] The evidence in the materials before me demonstrates that this was not a derelict vessel worth $2000, but rather was worth several thousand dollars. I am satisfied that a value of $46,750 is the value of the vessel.
[31] Therefore, the Respondent did not sell for a commercially reasonable sum of money. Basically, the Respondent disposed of the property for an unreasonable sum. The buyer was not a stranger to the Respondent but rather a person whom the principals of the Respondent knew. He got the vessel for a tremendous bargain.
[32] That alone is sufficient to find that the sale was improper pursuant to the RSLA.
[33] Section 15 of the RSLA provides that notice is to be sent to the owners. Notice was not given to both owners of the vessel. The documents demonstrate that both Suzanne Landry and Harvey Theriault were the two owners. Suzanne Landry appears to have been the owner who made the contact for paying lump sums by credit card for the storage of the vessel. I accept that Suzanne Landry provided verbal notice of a change of address and that Linda Flewitt failed to record that address.
[34] If a notice was sent, it was sent to the wrong address as a result of negligence by the Respondent. Linda Flewitt from the Respondent in her affidavit states that she cannot recall being told by Suzanne Landry on the telephone that the owners were moving. On the other hand, Ms. Landry is definite that she provided verbal notice about moving. I accept Ms. Landry's evidence on this point because it is consistent with her making payments each year by calling and clearing credit card payments.
[35] The notice has the deficiencies of not being given to both owners and of including interest claims along with failing to provide a method for the customer to calculate an accrual of the account to the time of sale. Therefore, the notice is insufficient for the RSLA.
[36] The RSLA provides in Section 28(3) that interest in not a claim for lien unless money has been advanced to the party by the lien claimant. That was not the case here; therefore, no interest should have been claimed in the sale proceeding.
[37] With respect to the personal effects of the Applicants, notice of its location appears to have been done in a manner that it would not have been noticeable. And now it has been left for a considerable time without any explanation of its care. I am satisfied that the personal property is lost.
[38] The Applicants had an appraisal of the vessel and might very well have been able to avoid that expense if they had known of another appraisal prepared for Mr. Gray. That is an expense for which they ought to be compensated.
[39] The $3000 for more flooring for the vessel is virtually an expense thrown away because it cannot be used since the vessel has been sold.
[40] The Respondent has provided answers for how the vessel was sold, how it was valued, what was owing on the storage account; however, I have not accepted those explanations. This appears to have been a sale brought on by carelessness by the Respondent in its accounting, its noting of the names of the owners of the vessel and its recording of the address change of the Applicants. The explanation from Mr. Gray about work done on the vessel does not state when the work was done.
[41] The bottom line is that notice was deficient pursuant to the RSLA. Notice was not given to the owners. And the vessel was sold for a very reduced price that was well below the value of the vessel.
Summary of the Answers to the Issues
[42] What are the requirements for the Respondent pursuant to the RSLA with respect to the sale of this vessel? The Act requires the person claiming the lien to provide notice to the owners of the amount of the claim, the date by which payment must be made and when the property will be sold. The Respondent has an obligation to provide the owners with a method of calculating any accrual of the account through to the date of sale. Interest is not a valid claim in this procedure; however, a separate claim for interest might be made aside from the sale procedures of the RSLA. The Respondent was deficient for these requirements.
[43] Was the notice given to the Applicants proper? No.
[44] If the Respondent did not follow proper procedures, what relief is available to the Applicants? The Applicants are entitled to be compensated for the loss incurred with the improper sale of the vessel and contents. The purchaser is protected from having the sale reversed as an alleged buyer in good faith.
[45] What is the value of the vessel? The value of the vessel is $46,750.
[46] Was the vessel undersold? Yes.
[47] Was the vessel sold to a person who is a bona fide purchaser for value with the protection of the RSLA? The Applicants do not have evidence to say that the purchaser did not buy in good faith; therefore, the buyer keeps the vessel.
Conclusion
[48] The Applicants have made out their claims successfully.
[49] Damages are awarded to the Applicants in the sums of :
[i] $46,750 for the vessel;
[ii] $10,000 for the personal property of the Applicants;
[iii] $1,113.05 for the appraisal of the vessel;
[iv] $3,000 for the flooring for the vessel.
[50] Costs to the Applicants ought to be awarded. The Applicants may file costs submissions by June 7th. The Respondent may file costs submissions by June 14th. The costs submissions are to be no more than 5 pages. If a party files more than 5 pages, I shall read the first 5 pages.
Justice B.A. Glass
Released: May 27, 2013
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