ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 08-1358

DATE: 2014/12/10

BETWEEN:

LLOYD BENEDICT

Plaintiff

– and –

OHWISTHA CAPITAL CORPORATION

Defendant

Graeme Hamilton and Donald R. Fiske, for the Plaintiff

Clara McGregor, for the Defendant

HEARD in Cornwall: December 1-2, 2014

REASONS FOR decision

Hackland J.

[1] This is an assessment of damages arising from the defendant’s actions in seizing certain equipment owned by the plaintiff under an invalid purported security interest held on the equipment by the defendant. The wrongful seizure constitutes the tort of conversion. This hearing concerned the valuation of the seized equipment, the income loss suffered by the plaintiff as a result of the seizure and the plaintiff’s claim for punitive damages arising from the circumstances of the seizure.

[2] In 2011 I issued a decision in this proceeding holding that the conditional sales transaction between the parties contravened section 89(1) of the Indian Act, R.S.C. 1985, c. I-15 to the extent that the loan transaction purported to pledge or charge the plaintiff’s equipment as security for a loan of $120,000. These funds were advanced by the defendant to the plaintiff and were never repaid. This earlier decision is reported at Benedict v. Ohwistha Capital Corp., 2011 ONSC 18, [2011] 78 B.L.R. (4th) (Ont.Sup.Ct.) 61 and was upheld on appeal by the Ontario Court of Appeal, see 2014 ONCA 80, [2014] 23 B.L.R. (5th) 1.

[3] The defendant is a not for profit company established in 1991 under federal letters patent. Its head office is located on the Mohawk Territory of Akwesasne and its business is lending to aboriginal owned enterprises by way of small business loans and other financial vehicles. The plaintiff borrowed the funds from the defendant in June 2002 and as noted the loan was not repaid. The plaintiff filed an assignment into bankruptcy in March 2006 and received his absolute discharge from bankruptcy in December 2006. The defendant seized the plaintiff’s equipment which was purported to be pledged as security for the loan. The equipment was seized in July 2008 and never returned.

[4] At this hearing counsel for the defendant did not contest the plaintiff’s contention that he had title to the equipment when it was wrongfully seized, notwithstanding the plaintiff’s intervening bankruptcy. Furthermore, no claim for equitable set off or other relief was advanced by the defendant in relation to plaintiff’s original defaulted loan.

[5] It was common ground that the plaintiff is entitled to be compensated for the value of his equipment wrongfully seized. Prior to the seizure the plaintiff carried on an excavation, snow removal and landscaping business on Cornwall Island where he resides. The defendant seized 4 buckets which were required for the use of the plaintiff’s excavator as well as a flatbed trailer he used to transport his excavator. Also taken were a tiller and a landscape rake which were attachments to the plaintiff’s tractor and allowed him to overturn soil and do landscaping, particularly in the spring and fall. His snow plow was also seized thereby shutting down his winter snow clearing business. Fortunately, the defendant did not seize the plaintiff’s bush hog or branch mower, so that he could at least continue to earn money from these two implements. The plaintiff’s business had both a cash and a ‘documented component’ which he advises earned him about $4,000 a month. After the seizure he was unable to earn more than $1,000 a month from his excavating/landscaping/snow removal business. I accept the plaintiff’s evidence in this regard. In particular, I rely on his monthly income figures that are a total of both his cash and his documented income.

[6] Dealing first with the value of the equipment seized, the plaintiff estimated its value at about $34,000. I gather this was generally reflective of what he originally paid less wear and tear and generally his informed opinion as an experienced equipment operator. The plaintiff did not furnish any documentation or substantiation for his opinion, nor did he call expert evidence pertaining to the equipment valuation.

[7] On the equipment valuation issue the defendant called the evidence of Gary Schroeter who specializes in the appraisal of automobiles for the insurance industry and other clients. While not a licenced mechanic or farm equipment technician he has extensive experience in equipment valuations and has spent his youth and entire adult career working with automobiles and related equipment. I permitted him to testify as an expert on the valuation of this equipment and the related issues of the required maintenance and the equipment life span. I found his evidence to be fair, objective and his appraisal to be carefully prepared and presented. An important aspect of the appraisal process is to assess the mechanical condition of the equipment and then to compare the equipment with on-line sales data where comparable equipment is marketed. He also identified equipment prices from dealers.

[8] Mr. Schroeter candidly acknowledged that his efforts to arrive at a fair valuation of the equipment were hampered by the fact that the equipment was not available for inspection and there was a complete absence of any maintenance or purchase documentation. Instead, he worked from a series of high quality digital close up photographs taken of the equipment at the time of seizure. These photographs (Exhibit 3) show equipment that appears to be heavily rusted. The equipment was stored outdoors, exposed to the elements and appears to be badly in need of maintenance. The hydraulic hoses on the plow appear to be in need of replacement. Mr. Schroeter opined that equipment in this condition and stored outdoors would have a short life span. He said he gave the plaintiff the benefit of the doubt that the equipment was operable but allowed for a slight value reduction to reflect the costs necessary to get the equipment ready for sale.

[9] Mr. Schroeter was of the opinion that the total value of the nine pieces of equipment he assessed was $8,562. I accept this evidence. His report includes internet listings of comparable equipment which support his analysis. It was pointed out in cross-examination that two buckets for the plaintiff’s front end loader were not included in the valuation. The two buckets which he did value were $1,000 for one and $700 for the other. I will increase his valuation by $1,700 for the two non-assessed buckets and add a slight upward adjustment on the basis of the contingency that perhaps the equipment was in somewhat better shape than the photographs depict. I find the seized equipment to have had a total value of $12,000.

[10] The plaintiff is also entitled to an amount for his loss of income from this equipment resulting from the wrongful seizure. He is of course required by law to take reasonable steps to mitigate his loss and the defendant is only liable for such loss up to the point at which the loss should have been mitigated. The plaintiff, currently age 56, in the six and a half years from the seizure to the present, has never replaced this equipment and has never resumed that part of his business that utilized this equipment. He seeks damages for the full loss of this revenue to the date of trial and in future to potential retirement dates at age 70, 75 and 80. He has furnished an expert’s report prepared by an accountant Kas Rehman of Price Waterhouse Coopers. The report is structured as a personal injury type of claim where the victim is permanently disabled and unable to work. I view this approach as being unreasonable and inconsistent with the requirements of mitigation and common sense. Furthermore, I accept Mr. Schroeter’s evidence that the equipment in question was in poor condition and would have required replacement within three years or sooner.

[11] The plaintiff points out that following the bankruptcy and in circumstances where his main creditors were the only two lending institutions in the area, he was and remains effectively unable to borrow money so he cannot afford to replace the equipment in question. He also says the whole lending transaction and subsequent seizure hurt his business reputation and resulted in a permanent loss of his customers. He has no intention of resuming the type of work he formerly performed with the equipment that was seized. I accept the plaintiff’s evidence that he is effectively precluded from borrowing due to his credit history. However, I do not accept that the plaintiff can fail to mitigate his losses and simply look to the defendant for an income indemnity.

[12] In my view the relevant question is what period of income loss shall be considered as reasonably arising from the seizure of these nine items of used equipment valued at approximately $12,000? The plaintiff’s expert conceded that in an insurance claim the maximum period of income loss from property damage would normally be 12 months. For the reasons discussed below I think that would be an appropriate period in this case with a 25% increase to reflect some notional borrowing costs and the challenges arising from restoring the plaintiff’s customer base in a small community.

[13] The winter aspect of the plaintiff’s business was snow plowing. I am not convinced that he would be unable to somehow acquire a used replacement plow and snow blower to use with his truck. Moreover, he could find employment operating heavy equipment. He could make greater use of the equipment he does have. He has an impressive resume which could give rise to many income earning opportunities. Or, he could simply discontinue the business as he has done but in that event he is not lawfully entitled to require the defendant to replace his lost revenue beyond the period of reasonable mitigation.

[14] I accept the plaintiff’s evidence that his total annual income at the time of seizure was $50,546. I would allow that sum plus a gross up of 25% to reflect possible notional borrowing costs and delays and unforeseen costs in re-establishing the good will of his business. I award $63,182 in total for the plaintiff’s income replacement claim.

[15] The plaintiff also seeks punitive damages for the conduct of the defendant’s agent Mr. Oakes in his attempts to have the plaintiff’s equipment seized in satisfaction of the $125,000 debt. Mr. Oakes’ own statements, filed in evidence, show that he embarked on a determined campaign to have the plaintiff charged with theft for refusing to turn over the equipment to the defendant in the months leading to the seizure. He was repeatedly told by the police, the crown attorney and others that this was a civil matter and they would not get involved.

[16] Ultimately however when the defendant’s agents showed up to seize the equipment, the police were actively involved and when the plaintiff protested the seizure the police took him into custody for several hours and ultimately charged him with theft. These charges were later stayed or withdrawn.

[17] This mistreatment of the plaintiff was the direct result of Mr. Oakes’ campaign to label the plaintiff as having stolen the equipment. He wrongfully involved the police in the collection of a civil debt. He did this in the course of his employment as general manager of the defendant and therefore the defendant is vicariously responsible.

[18] As a mitigating factor I recognize that Mr. Oakes likely honestly believed that the defendant had lawful title to the pledged equipment as reflected in the loan documentation. However that does not excuse the high handed and outrageous conduct of calling the plaintiff a thief and involving the authorities in the collection of what he was repeatedly told was a civil debt. This conduct exacerbated the circumstances surrounding the wrongful seizure and conversion of the plaintiff’s equipment. I award $10,000 punitive damages.

[19] In summary I award the plaintiff the following damages:

a) Value of the seized equipment $12,000

b) Loss of business income $63,182

c) Punitive damages $10,000

Total: $85,182

These amounts will carry pre-judgment interest pursuant to the Courts of Justice Act, R.S.O. 1990, c. C-43.

[20] If the costs cannot be agreed to, I direct the plaintiff to provide me with a concise written submission on costs within 30 days of the release of these reasons and the defendant is to respond within 30 days of receiving the plaintiff’s submission.

The Hon. Mr. Justice Charles T. Hackland

Released: December 10, 2014

COURT FILE NO.: 08-1358

DATE: 2014/12/10

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LLOYD BENEDICT

Plaintiff

– and –

OHWISTHA CAPITAL CORPORATION

Defendant

REASONS FOR decision

Hackland J.

Released: December 10, 2014