COURT FILE NO.: CV-11-1830-SR
DATE: 2015-07-03
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Sofia Oliveira and Frederick Kurz
Robert Kostyniuk, for the Plaintiffs
Plaintiffs
- and -
Akbar Zareh and Maxcom Realty Inc. o/a Kingsway Real Estate Brokerage
Alex Valova, for the Defendants
Defendants
HEARD: February 9-13, 17, 2015
REASONS FOR JUDGMENT
M. J. Donohue, J.
Contents
OVERVIEW.. 4
Background of the Listing. 5
Background of the Purchase. 8
Credibility of Mr. Zareh. 13
What right did the Defendants have to any Chattels?. 16
Analysis of Legal Rights. 17
Claim for Chattels. 17
Claim for Property Damage. 21
DAMAGES. 24
What was Taken?. 24
Piano, Armoire, Exercise Bicycle, Jump Rope, Dumb Bells. 24
Paintings/Pictures. 26
Two Foyer Tables. 28
Living Room Armchair, Table & Lamp, Book Shelf 29
Office Desk, Chair, Credenza and Paper Shredder 29
Family Room Flat Screen TV. 29
Kitchenette fridge. 30
Upper Corridor Table and Wall Mirror 30
Master Bedroom Armchair 31
Master Bedroom TV. 31
Guest Bedroom Chair and Ottoman. 31
Two Bathroom Mirrors. 32
Basement TV and Sound System.. 32
Gym Equipment 32
Barbeque. 33
What was the value of the Chattels taken?. 33
Piano. 35
Armoire. 35
Exercise Bicycle. 37
Paintings. 37
Two Foyer Tables and Matching Upper Corridor Table. 38
Living Room Armchair Table & Lamp, Bookshelf 38
Office Desk, Chair, Credenza, and Paper Shredder 38
Sound System and Three TVs - Family Room, Basement, Master Bedroom.. 39
Two Wall Mirrors. 39
Master Bedroom Armchair 39
Barbecue. 39
Summary of Value. 40
What Property Damage was done?. 40
Should Punitive Damages be awarded and if so, how much?. 42
Conclusion. 42
COSTS. 43
OVERVIEW
[1] The plaintiffs are husband and wife who were looking for a new home in the fall of 2009. Their real estate agent was Mr. Sousa. He showed them a property at 1387 Pineway Court in Oakville. The mortgagee, Royal Bank, had the property for power of sale, following the default and suicide of the mortgagor owner. The law firm of Gowlings was handling the power of sale for the bank. Gowlings retained a property management company, Veranova to clean and secure the property. Gowlings also retained a real estate coordinator, Linda Sway. Ms. Sway retained the defendant, Akbar Zareh, of Kingsway Real Estate Brokerage to handle the listing of the property.
[2] There were chattels on the property unclaimed by the estate of the owner/mortgagor, which included a number of framed pictures/paintings, a piano, gym equipment, pieces of furniture and televisions and a large wine cooler.
[3] The plaintiffs purchased the property. On the day before closing, they found that most of the chattels had been removed from the property only days before. They found damage to their flooring from the removal. A large wine cooler in the basement was partially moved out of position and the handles were damaged.
[4] The plaintiffs suspected that they were removed, not by the bank mortgagee, nor by the estate, but by the defendant real estate agent, Akbar Zareh. Mr. Zareh denied taking chattels but some years later admitted to removing some of the items.
[5] The plaintiffs brought this claim for damages against Mr. Zareh for the property taken and the cost of repairs. They also claim punitive damages.
Background of the Listing
[6] Brian McCluskey, solicitor, from Gowlings testified that he had carriage of the file for the bank’s power of sale proceedings. His office arranged a property manager, Veranova, to take possession and change the locks. He retained Linda Sway, real estate coordinator to list the property through the defendant and negotiate the agreement of purchase and sale.
[7] Ms. Jansen testified on behalf of Veranova that she had a bin arranged for the property in which to deposit garbage. She had the house cleaned. It was completed August 27, 2009, and noted that items of value were left on site as per “client request”. (Mr. McCluskey on behalf of RBC).
[8] The defendant, Mr. Zareh, attended the property on September 28, 2009, and took photographs of some of the rooms of the home and prepared the listing for approval by Linda Sway. The MLS listing was put up on October 6, 2009.
[9] In Mr. McCluskey’s review of the file there were items of value that were left, including a number of pieces of art and a piano. His instructions were to leave them and see if someone makes a claim for them. He got a call October 9, 2009, from the Veranova property manager that the mortgagor’s widow, Ms. Wagner, had asked to pick up certain items. He authorized this but asked that the inspector (Ms. Jansen) check identification. He understood that 20 paintings were removed.
[10] Ms. Jansen of Veranova met with Ms. Wagner on October 19, 2009, and assisted her to take down 30 paintings/pictures and place them in the garage. The suicide had occurred in the garage and Ms. Wagner expressed a wish not to go in there.
Ms. Wagner ultimately took only some of the paintings, and left the rest in the garage. Ms. Wagner signed an acknowledgement that “all remaining contents can be disposed of at the mortgagee’s discretion.” There is no evidence that she requested Veranova to allow her access to the house again.
[11] Ms. Jansen testified that there was other valuable furniture and paintings left in the house.
[12] Mr. McCluskey had a record that Veranova inquired on October 28, 2009, about whether they were to remove the piano, or leave it in the home. His instructions were to leave it in the house. When he was advised the house had sold and the closing was to be November 19, he again instructed Veranova to leave the remaining contents on site.
[13] Mr. McCluskey confirmed that under no circumstances was the bank’s listing agent (Mr. Zareh) authorized to remove contents from the home. If he had been asked, Mr. McCluskey stated he would have denied such permission. He confirmed that he received no other requests from Veranova or any other party for permission to remove contents.
[14] He noted that although the plaintiffs had requested certain chattels, as listed on the agreement of purchase and sale, they were crossed out by his agent, Linda Sway, as the bank did not claim title to the chattels. The section on chattels referred to “Schedule B” which is standard for all power of sale contracts, Schedule B, para 8 states,
“The Vendor is selling only such interest, if any, as it may have in the fixtures and chattels referred to in the Agreement and/or located on the property and does not warrant title thereto. The Vendor will not be liable for the removal by any third party of any fixtures and chattels from the property prior to, on or after closing. On closing the Purchaser shall have possession of the fixtures and chattels then on or about the property “as is”. The Vendor will not provide a bill of sale, warranty, security interest discharge or other title documentation and there will be no adjustment or abatement of any kind to the purchase price with respect to fixtures and chattels.”
[15] Mr. McCluskey stated that purchasers would, therefore, have the expectation that if there are chattels about the property when they make their offer that they can reasonably expect that they will be there, unless somebody else has removed them.
[16] The defendant, Mr. Zareh, admitted at trial that until closing, the estate was the owner of the chattels. He said he understood that the estate could redeem the property right up to the closing date.
[17] A neighbour of the new property, Ms. Stead, testified that she spoke with Mr. Zareh when the house went up for sale. She asked him what would happen to the contents of the house and he advised her that they would be sold with the home.
Background of the Purchase
[18] Sofia Oliveira, the plaintiff, was first shown the property by her agent, Mr. Sousa, on October 21, 2009. She and Mr. Sousa returned on October 25, 2009. On November 2, 2009, she made an offer to purchase the property including a number of listed chattels, conditional on an inspection.
[19] Ms. Oliveira was told that the previous owner had committed suicide in the home and that was the reason it was under power of sale.
[20] Ms. Shay, on behalf of the Royal Bank of Canada, signed the offer back on November 4, 2009. She attached the standard power of sale schedules, as noted above which omitted the chattels. The closing date was to be November 19, 2009.
[21] This was acceptable to Ms. Oliveira who initialled the changes such that the counter-offer was accepted. The purchase was subject to a home inspection, which was conducted in the presence of Ms. Oliveira and Mr. Sousa on November 7, 2009.
[22] Mr. Sousa said he phoned Mr. Zareh and inquired about the chattels, expressing his client’s interest in them. He said Mr. Zareh advised that he had no idea whether the contents would be left or not. Mr. Sousa testified that he believed Mr. Zareh understood that the plaintiffs were interested in the chattels.
[23] Mr. Sousa testified that, because of this uncertainty they could not expect anything other than what they were told. He said the bank would not want to sell contents in power of sale proceedings as it could face liability. Mr. Sousa said that in most power of sale listings the contents are removed before a house is listed for sale.
[24] The inspection was satisfactory and so all conditions were waived on November 11, 2009. Ms. Oliveira and Mr. Sousa attended with more family members. On all these visits Ms. Oliveira and Mr. Sousa noted a great number of chattels in the home without any modification or change until the night before closing.
[25] On November 18, 2009, Mr. Sousa and Ms. Oliveira attended for the final visit before closing the next day. They found many chattels missing. Mr. Sousa phoned Mr. Zareh and asked where they had gone. Mr. Zareh admitted at trial that when Mr. Sousa asked him, he answered, “I have no idea.”
[26] On closing day, Mr. Sousa and Mr. Zareh had a telephone discussion about the contents. Mr. Sousa had noted the call in his file. He stated that Mr. Zareh advised him the management company needed to return the remainder of the contents, specifically a large wine cooler in the basement. Mr. Sousa stated that he, therefore, contacted the plaintiffs and their counsel to inquire of their rights. Mr. Sousa did not believe the management company would leave items they were supposed to remove, until the day of closing. In his experience such companies would inventory what they were to remove and do so before the house was shown. Mr. Sousa, after consulting with counsel, advised Mr. Zareh that they would deny further access.
[27] Mr. Zareh had no notes and was not sure about the conversation, but testified that the management company, Veranova, had said the widow was coming back for the rest of the contents after closing date. Mr. Zareh’s testimony, about Veranova, is not supported by any other witness or document and contrasts with the written document by the widow releasing all contents. Mr. Zareh did not summons the administrator of Veranova or her file.
[28] Ms. Jansen, the inspector at Veranova, had a lockbox on the door. From August 2009, until closing she did bi-weekly inspections. She confirmed that none of the chattels were removed after the visit of Ms. Wagner on October 19, 2009. The day following closing she attended the property to remove the lock box and expressed her shock at observing that the contents were gone. She knew that her instructions had been for the contents to be left on the property.
[29] The plaintiff, Ms. Oliveira, phoned Mr. Zareh about the contents after closing. He did not admit to taking anything. Ms. Oliveira testified that she said she had no issue if it was the estate that removed the things. She said Mr. Zareh told her he did not have to tell her who took the things and recommended she speak to her lawyer. Mr. Zareh gave no evidence to dispute this testimony.
[30] The plaintiffs, with their real estate agent, compiled a list from memory of the items that had gone missing. They wrote a letter of complaint to the Real Estate Council of Ontario (“RECO”).
[31] RECO responded on February 10, 2010, that it had no jurisdiction to “involve itself in contractual issues/disputes” and recommended they contact a lawyer. They stated further that, “if any legal proceedings determine a registrant gave unauthorized access” they may file a complaint on that issue.
[32] RECO’s correspondence states its’ core purpose is to “foster confidence and uphold integrity in real estate transactions.”
[33] The plaintiffs retained counsel who sent a demand letter to the defendants on November 2, 2010. The demand was for return of the chattels removed and for a listing of property taken, in compliance with s. 15, Ontario Regulation 579/05 of the Real Estate and Business Brokers Act, 2002.
[34] Mr. Zareh responded by letter dated November 17, 2010. He did not list items taken. He did not admit to removing any items. He stated, “Ms. Oliveira’s claim is solely based on the assumption that the chattels and items in question were abandoned by the seller, when in fact this is not the case.”
[35] In March 2013, at his examination for discovery, Mr. Zareh finally admitted to attending at the property a day or two before closing, with others, to remove some chattels from the property.
[36] Mr. Zareh’s friend, Roy, testified at trial that he and “Daniel” drove a cube van to Mr. Zareh’s storage unit in Mississauga and deposited an armoire and dumbbells there. Roy then drove the van with the piano to his ex-wife’s home in St. Catharines where it remains today.
[37] Mr. Zareh said he had authority to take the piano from the management company. He had no notes of this conversation. He was not sure of the name of the person he spoke with (Marisa or Jennifer). This is in contrast with Mr. McCluskey’s direction to the management company that the piano was to remain in the home.
Credibility of Mr. Zareh
[38] I found Mr. Zareh’s evidence not to be credible. I found him to be deceitful and to state a number of untruths. My reasons are as follows.
[39] In his evidence at discovery, Mr. Zareh said he had an employee, as well as his friend Roy with him, removing the chattels. He described this employee as a part time worker whose name he did not remember. He undertook to provide the man’s last known information. In his undertakings letter he stated that, on reflection, there was no one other than himself and his friend Roy. Roy testified for the defence at trial and disclosed, however, that when he arrived at the property, Mr. Zareh was there with his son, Daniel. Daniel is a real estate agent who works with his father. Although Daniel was involved in removing chattels from the property, his identity was hidden by Mr. Zareh. Daniel, a critical witness, was not called as a witness at trial.
[40] Despite inquiries from Mr. Sousa, Ms. Oliveira, and plaintiff’s counsel, Mr. Zareh did not admit to removing any chattels from the property until 2013. Rather, he suggested the estate had not abandoned the chattels and suggested the management company removed items. At trial, the defence had no evidence to support these suggestions.
[41] When he admitted at his discovery to taking some chattels he stated he took only three things; the piano, the armoire, and eight - ten weights (dumb bells). He insisted that he only took those three things. Later, however, he admitted he took some gym equipment. His answer was not completely audible but he then said he took an “exercise bike”. At trial, under cross-examination, he admitted he may also have taken a skipping rope used for exercise.
[42] Initially, Mr. Zareh stated that he did not take the items for himself. Later, his evidence changed when he testified that the armoire was in his garage. He again changed his evidence to say that the armoire was in a storage locker.
[43] Similarly, at discovery he said the gym equipment was in his basement. At trial, he changed his answer to say his son had it.
[44] In discovery, Mr. Zareh misspelt Roy’s last name. The undertakings letter, which was copied to him, provided a further incorrect spelling of Roy’s last name. I find this to be further evidence of his attempting to hide this potential witness.
[45] In discovery, Mr. Zareh stated that Roy had taken the armoire from the house. In his undertakings letter, he confirmed he asked Roy to photograph it. At trial, Roy testified that he only took the piano from the house. Mr. Zareh then testified at trial that he had the armoire in his garage. Later, Mr. Zareh stated he did not realize that Roy had taken it to Mr. Zareh’s storage unit. Under cross-examination he stated that Roy must have had the dresser at one point. There is no supporting evidence for this.
[46] At discovery in March 2013, Mr. Zareh undertook to ask Roy about certain information and to advise plaintiff’s counsel. In the undertakings letter dated June 2013, Mr. Zareh gave some answers to these undertakings of discussions he had with Roy. Both Mr. Zareh and Roy later testified at trial that they had no contact with one another between March 2012 and June 2014. Roy said he had been avoiding creditors and was out of contact with all his acquaintances. If this is correct, then parts of Mr. Zareh’s undertakings letter containing the information he discussed with Roy in June 2013, was a fabrication.
[47] In his undertakings letter, Mr. Zareh confirmed that he requested Roy to photograph the piano. At trial, Roy testified that he was first asked to photograph the piano only about two weeks before the trial started. He promptly emailed the photo to Mr. Zareh. The photograph was not produced to the plaintiffs until the defence evidence was going in.
[48] Despite requests by the plaintiffs’ counsel, information regarding the manufacturer of any of the items which was available to Mr. Zareh was not provided. Roy produced the photograph of a Hardman piano, but no other information or serial number was produced.
What right did the Defendants have to any Chattels?
[49] Mr. Zareh did not testify that he requested permission to take anything other than the piano. There was no other evidence to support that he received such permission. The law firm’s file confirms that the instructions were for the piano and other items to be left in the home. The January 9, 2010, notes from Veranova summarizing the dealings with the chattels make no mention of permitting an agent to remove anything.
[50] Mr. Zareh did not summons the administrator from Veranova or obtain a copy of their file. Ms. Jansen’s evidence from Veranova was that she clearly understood all items were to remain in the home and she was shocked to see them removed.
[51] I find that he had no authority from the owner of the chattels, the estate, nor the possessory owner, the bank, to remove these chattels. He used his access as a real estate agent to take contents from the home. In the absence of any explanation or justification, such as colour of right, it appears on the evidence to be simply a theft.
Analysis of Legal Rights
Claim for Chattels
[52] There is no argument that the chattels were intended to be left in the home. The estate made no further claim and the bank’s counsel instructed the chattels to be left. On closing, it is understood that the purchasers would become the owners of the chattels. The contract confirmed they would take the property “as is”.
[53] The agreement of purchase and sale confirmed that the bank was not responsible for the chattels or liable for same. However, the agreement of purchase and sale is not relevant to these parties, as there was no contract between the bank’s real estate agent and these purchasers. The agreement of purchase and sale confirms, however, that the plaintiffs had not purchased an entitlement to certain chattels as they were specifically omitted from the agreement.
[54] The plaintiffs pled unlawful conversion.
[55] The tort of conversion requires 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: Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, [1996] 3 S.C.R. 727 at para. 3, 1996 149. The wrongful aspect of the tort of conversion consists of acting in a manner that is inconsistent with the owner’s right of possession. Blameworthy conduct going beyond that is not essential: Westboro Flooring and Décor Inc. v. Bank of Nova Scotia, 2004 59980 (ON CA), 71 O.R. (3d) 723 at para. 14, 241 D.L.R. (4th) 257 (C.A.).
[56] In order to sue for conversion, the Plaintiff must either have (1) ownership of the goods; (2) the right to immediate possession of the goods; or (3) actual possession of the goods: GHL Fridman, The Law of Torts in Canada 3rd ed. (Toronto: Carswell, 2010) at p. 127.
[57] The defendants correctly state that there is no action for conversion as the plaintiffs did not have ownership, a possessory right or actual possession of the goods. In this situation, although the plaintiffs had every expectation that they would obtain ownership of these chattels, and the bank intended for the chattels to pass into their hands, title did not pass until November 19, 2009, on the day of closing at which time the chattels had already been removed.
[58] The Plaintiffs only held a spes successionis or an expectancy in the property. They could only hope that the chattels they had seen in the house would be theirs at closing and that they then could take possession of those goods. The Court of Appeal in Mandeville v. The Manufacturers Life Insurance Company, 2014 ONCA 417, 120 O.R. (3d) 81 at para. 140 explained that having an expectancy is not an interest in property. The Court of Appeal stated that:
A hope or mere expectancy is not a legally enforceable right or interest, however. In this regard, the nature of the class members’ “interest” can be seen to be akin to the concept of a spes successionis in estate law. A spes is a mere expectancy or hope of becoming a member of a class that has been designated to receive property; it is not a vested or even a contingent interest in property. See Re Midleton’s Will Trusts, [1969] 1 Ch. 600, at pp. 607-8; Kidd v. The Canada Life Assurance Co., 2010 ONSC 1097, 54 E.T.R. (3d) 225, at paras. 34-35.
[59] The plaintiffs here, had no right in the property for which they could enforce against the defendant. The plaintiffs cannot prove either possession or ownership in the property.
[60] If I am incorrect on my analysis and there was a contingent interest in the chattels that was interfered with, it would be an error in law for me to consider this as a way of finding liability and damage. This theory was never included in the pleadings of the plaintiffs nor did they seek to amend their pleadings at trial. In Rodaro et al v RBC, 2002 41834 (ON CA), 59 O.R. (3d) 74 at para. 61-63 (ONCA) the Court of Appeal stated:
[61] By stepping outside of the pleadings and the case as developed by the parties to find liability, Spence J. denied RBC and Barbican the right to know the case they had to meet and the right to a fair opportunity to meet that case. The injection of a novel theory of liability into the case via the reasons for judgment was fundamentally unfair to RBC and Barbican.
[62] In addition to fairness concerns which standing alone would warrant appellate intervention, the introduction of a new theory of liability in the reasons for judgment also raises concerns about the reliability of that theory. We rely on the adversarial process to get at the truth. That process assumes that the truth best emerges after a full and vigorous competition amongst the various opposing parties. A theory of liability that emerges for the first time in the reasons for judgment is never tested in the crucible of the adversarial process. We simply do not know how Spence J.'s lost opportunity theory would have held up had it been subject to the rigours of the adversarial process. We do know, however, that all arguments that were in fact advanced by Mr. Rodaro and were therefore subject to the adversarial process were found wanting by Spence J.
Spence J. erred in finding liability on a theory never pleaded and with respect to which battle was never joined at trial. This error alone requires reversal.
[61] This Court can only address the claim for conversion as it was the claim that was pleaded. There was no claim for a constructive trust or other equitable relief.
[62] If I am found to have erred in concluding that a claim for conversion is not made out, I address the issue of damages below.
Claim for Property Damage
[63] On the claim for damages to the property I find the plaintiffs had a beneficial interest before closing in the home that they had purchased. However, they are not entitled to claim against the defendants until they have first sought recourse against the bank as trustee.
[64] In Simcoe Vacant Land Condominium Corporation No. 272 v. Blue Shores Developments Ltd., 2015 ONCA 378, the Court of Appeal explained the trust relationship between vender and purchaser after an agreement of purchase and sale has been entered into, but before closing.
The common law has long recognized that a valid contract for the purchase and sale of land gives rise to a trust relationship, with the purchaser acquiring a beneficial interest in the property: Jessel M.R. summarized this principle in Lysaght v. Edwards (1876), 2 Ch. D. 499 at p. 506:
[I]t appears to me that the effect of a contract for sale has been settled for more than two centuries … [T]he moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser…
See also Anne Warner La Forest, Anger and Honsberger Law of Real Property, 3d ed., loose-leaf (Toronto: Canada Law Book, 2014), ch. 11 at p. 52; Anthony Duggan, "Constructive Trusts from a Law and Economics Perspective" (2005) 55 U.T.L.J. 217, at p. 218.
The trust relationship, known as “equitable conversion”, has been described as “[p]ossibly the oldest, and certainly the most frequent, use of the constructive trust”: Robert Chambers, "Constructive Trusts in Canada" (1999) 37 Alta. L. Rev. 173, at p. 186.
This court described the qualified nature of the trust that arises from an agreement of purchase and sale in Buchanan v. Oliver Plumbing & Heating Ltd., 1959 141 (ON CA), [1959] O.R. 238 at pp. 242 and 244 (C.A.):
The relationship created by such a contract does not entail all the obligations of an ordinary trusteeship. The vendor is not a mere dormant trustee; he is a trustee having a personal and substantial interest in the property, a right to protect, and an active right to assert that interest if anything is done in derogation of it …
[T]he trusteeship is not from the beginning an absolute one, for it is recognized that the vendor has a personal and substantial interest in the property which he is bound to protect.
[65] In the case at bar, the bank acted as trustee when it sold the property to the plaintiff purchasers. The Bank’s third party agent, Mr. Zareh, damaged the trust real property when he nefariously removed the chattels from the home. A beneficiary of a trust has the right to compel its due administration as against the trustee: Burke v. Hudsons Bay Co., 2010 SCC 34 at para. 87, [2010]¸ 2 SCR 273. However, the remedies of the beneficiary are personal as against the trustee to compel him to discharge his duties.
[66] Only after the beneficiary has exhausted every reasonable avenue of relief to force the trustee to act, may the beneficiary assume the position of an incapacitated trustee and sue to recover trust property: see Testa v. Testa, 2015 ONSC 2381, at para. 31, Mayer v. Osborne Contracting Ltd., 2012 BCCA 77, at para. 241 and Norfolk v. Roberts, 1913 533 (ON CA), 28 O.L.R. 593, [1913] O.J. No. 86 affirmed 1914 13, 50 S.C.R. 283 (SCC).
[67] As stated in Nelson House Indian Band v. Young (1999), 1999 5079 (MB CA), 169 D.L.R. (4th) 606, [1999] 6 W.W.R. 405 (Man. C.A.),
[13] Beneficiaries of a trust have no status to commence an action for the protection or recovery of trust property if the trustee is willing and able to commence such an action: see Sharpe v. San Paulo Rlwy. Co. (1873), 8 Ch. App. 597 (C.A.) and Norfolk v. Roberts, (1912), 1913 533 (ON CA), 28 O.L.R. 593 (App. Div.), affirmed (1914), 1914 13 (SCC), 50 S.C.R. 283.
[68] Donovan Waters in his text Waters Law of Trusts: D. W. M. Waters, M. R. Gillen and L. D. Smith, eds., Waters' Law of Trusts in Canada (4th ed. 2012), at p. 1265, states:
Assume, for example, that a third party has carelessly damaged trust property. The right of action is in the trustee. This right of action is itself trust property and the duty of the trustee is to use it as such, for the benefit of the beneficiaries. A recalcitrant trustee who has rights against a third party but will not enforce them can simply be joined as a defendant to the beneficiary’s action which also names the third party as a defendant. Notionally the beneficiary is seeking an injunction against the trustee requiring him to sue the third party, but the two proceedings are joined in one.
[69] In this case, there is no evidence before me as to whether the beneficiary plaintiff took any steps to legally compel the trustee bank to act against the real estate agent on its behalf. Unfortunately, the plaintiffs did not bring their action against the bank or at least attempt to compel the trustee to act. As such the plaintiffs cannot bring a derivative claim against the third party agent. The trust relationship is inpersonam.
[70] Their claim for property damage must be dismissed. In the event I am wrong, I have still included an analysis of damages below.
DAMAGES
What was Taken?
Piano, Armoire, Exercise Bicycle, Jump Rope, Dumb Bells
[71] Ultimately Mr. Zareh admitted to taking the piano, an armoire, an exercise bicycle, an exercise jump rope and a set of dumb bells from the home.
[72] Mr. Zareh suggested that other agents may have used the access granted by his lockbox code in the following week. He conceded that a log was kept of what agents were given the code, and he never checked those records. He advised the records are now destroyed.
[73] The MLS listing showed the property as “sold” as of November 11, 2009, at which time Mr. Sousa and Ms. Oliveira observed that the chattels were still in the home. On the balance of probabilities I find that it is unlikely another agent who had previously accessed the house would go in after it was marked sold and remove contents.
[74] The evidence of “Roy” who testified for the defendants stated that when he arrived Mr. Zareh and his son were already at the house and he did not observe the items noted missing by the plaintiffs.
[75] In light of my concerns about Mr. Zareh’s credibility noted above, I consider that he removed more items than he has admitted to. As he did not address what was taken when first asked to make a list, I find that his memory cannot be trusted either. In addition, he hid the witness Daniel who was present when things were removed.
[76] I find it more probable than not that Mr. Zareh removed additional chattels than those that he has admitted to.
[77] The evidence of what specific chattels were missing between November 11, 2009, and November 17, 2009, is largely from the lists made by the plaintiffs and their agent, Mr. Sousa. Their notes were made within months of the closing. Other family members corroborated some of the evidence of the items in question, as they had toured the house before the offer was finalized.
[78] After the cleaning, Ms. Jansen of Veranova had been instructed to leave contents of value at the property. She said she recalled there was a lot of value in the contents left. She remembered there was; furniture, a piano, wingback chairs, TV’s, “stuff” in the basement, a workout centre, two antique tables. Similarly, Ms. Jansen testified that the owner’s widow had only taken some of the paintings from the home. She remembered there was furniture, fridges, electronics, speakers and other paintings left after the widow left the property.
Paintings/Pictures
[79] Ms. Jansen said the widow selected 30 pictures from the paintings hanging in the house. They were placed in the garage. Ms. Wagner backed her car up to the garage and Ms. Jansen assisted with loading the paintings/pictures into Ms. Wagner’s car. Ms. Jansen testified that Ms. Wagner decided that some pictures were bad memories and put ten pictures back. Ms. Jansen said she left the ten pictures neatly stacked against the side wall of the garage.
[80] Ms. Jansen was cross-examined on her notes as to the number 28 that was circled on her records but was not asked whether that was the number of paintings removed or not. Her evidence was that a number of paintings were left stacked in the garage. Evidence was given by other persons, who attended the home that month, of a number of paintings stacked in the garage as well as still hanging on the walls of the house.
[81] Louis Oliveira, the plaintiff’s brother, recalled a large collection of art in the garage, that were well-framed. From the paintings he observed in the home he thought the owner must have had an art gallery.
[82] Natasha Goletz, the plaintiff Oliveira’s daughter, recalled observing artwork all through the house. Josephina Oliveira recalls “paintings all over the place” and four or five large paintings stacked in the garage. The real estate agent, Mr. Sousa, recalled seeing four or five framed paintings stacked in the garage as well as a dozen or so throughout the house. Ms. Stead, a next door neighbour, recalls paintings everywhere in the house and that the former owner had been “in to art collecting”. The plaintiff, Mr. Kurz, testified that he recalled eight to ten framed prints in the garage. He wrote a list to RECO and set out that they recalled about a further 20 paintings in the house.
[83] Mr. and Mrs. Boyd, the plaintiffs’ daughter and son-in-law, testified that paintings were throughout the house when they toured it. The plaintiff’s daughter Ashley recalls paintings all around the house. The plaintiffs’ son Andrew also recalled seeing paintings.
[84] The file notes of the Veranova administrator, Marisa, states that five pictures were left on site. It was Ms. Jansen however who attended and gave evidence that there remained paintings in the house as well as those left in the garage. As a number of witnesses observed about five paintings in the garage I am satisfied that those were the paintings referred to in the file notes.
[85] Mr. Kurz’s notes which were made within months of the closing suggest there were closer to 30 paintings. He based some of his memory on the listing photos that were taken in September 2009, before the owner’s widow removed her selection of paintings. I am concerned, therefore, that he overstated the paintings that he recalled in the home.
[86] The plaintiffs claim that 20 paintings were taken. I am satisfied on the totality of the evidence that the correct number is 20.
Two Foyer Tables
[87] A number of witnesses recall two half-moon shaped matching tables on either side of the front door in the entry hall. The witnesses include the plaintiffs, Mr. Sousa, Ms. Jansen, Ashley Goletz and Josephina Oliveira.
[88] I am satisfied that these two tables were taken.
Living Room Armchair, Table & Lamp, Book Shelf
[89] Mr. Sousa noted these three items in his list shortly after the events. Mr. Kurz also noted these things in his listing to RECO shortly afterward. A number of witnesses recall these items in the living room including Josephina Oliveira, Ms. Jansen and the plaintiff Sofia Oliveira.
[90] I am satisfied that these items were taken.
Office Desk, Chair, Credenza and Paper Shredder
[91] These items were noted in both Mr. Sousa’s list and Mr. Kurz’s letter to RECO compiled within months after the closing. Ms. Oliveira testified that these things were missing. Louis Oliveira recalls seeing the desk and credenza. Natasha and Ashley Goletz specifically remember the desk, as did Mr. and Mrs. Boyd. Mr. Zareh, in his evidence, also admitted there had been a large desk in the office.
[92] I am satisfied that these items were taken.
Family Room Flat Screen TV
[93] Mr. Sousa and Mr. Kurz both listed this television. A number of witnesses remembered it. It can also be seen in the listing photographs.
[94] I am satisfied this was taken.
Kitchenette fridge
[95] This item was not mentioned in either Mr. Sousa’s list or Mr. Kurz’s list. The plaintiff, Ms. Oliveira, noted this missing in the kitchen. There was no evidence that this small kitchenette fridge in the kitchen had been there when the house was shown.
[96] I am not satisfied this was taken between the time of the offer and the closing.
Upper Corridor Table and Wall Mirror
[97] These items were not mentioned in Mr. Sousa’s list but both were noted in Mr. Kurz’ letter to RECO. The table was described as a match to the two in the foyer. Josephina and Sofia Oliveira noted the table upstairs as did Natasha Goletz and Kyle Boyd.
[98] I am satisfied that these items were taken.
Master Bedroom Armchair
[99] This item was noted in both Mr. Sousa’s list and Mr. Kurz’s letter to RECO. There was also testimony by Josephina and Sofia Oliveira as well as Louis Oliveira confirming this item had been there.
[100] I am satisfied that it was taken.
Master Bedroom TV
[101] Neither Mr. Sousa’s list nor Mr. Kurz’ letter to RECO mention this item. Mr. and Mrs. Boyd recall a TV in the bedroom armoire. Sofia Oliveira testified that the armoire had a TV in it.
[102] I am satisfied that this item had been there, but was taken.
Guest Bedroom Chair and Ottoman
[103] This item was not mentioned in either Mr. Sousa’s list or Mr. Kurz’s letter to RECO. No witness remembered these items apart from the plaintiff, Sofia Oliveira.
[104] Considering the length of time that has passed and the concern that memories have faded, I am not satisfied that the evidence is sufficient on this item.
[105] I am not satisfied that it was taken.
Two Bathroom Mirrors
[106] Mr. Sousa’s list omits these items but it is noted in Mr. Kurz’s letter to RECO. Sofia Oliveira testified that these items had been there.
[107] I am satisfied they were taken.
Basement TV and Sound System
[108] The TV was noted in Mr. Sousa’s list. Both the TV and sound system were noted in Mr. Kurz’s letter to RECO. A number of witnesses noticed these items on closing. Josephina Oliveira recalls the TV. Natasha Goletz recalls seeing both items. Ms. Jansen of Veranova recalled a sound system left in the house after the widow left. Sofia Oliveira remembered both items.
[109] I am satisfied these items were taken.
Gym Equipment
[110] Mr. Sousa’s list stated “exercise equipment by window at rear of home. Also a second piece of equipment, bike or treadmill.” Mr. Kurz’s letter to RECO noted “one set of high end fitness equipment (three - four pieces)”. Natasha Goletz recalled a “rack of weights, a treadmill and a bike machine”. Kyle Boyd recalled weights and a gym set. Ashley Goletz testified that there was, “gym set, weight rack, an all-purpose lifting machine, a treadmill and stationary bicycle.” Louis Oliveira and Andrew Kurz both recall seeing fitness/gym equipment.
[111] I am satisfied that there was equipment taken in addition to the admitted removal of the exercise bike, jump rope and weight set.
Barbeque
[112] Mr. Sousa’s list does not mention items from outside the house. Mr. Kurz’s letter to RECO notes a missing “large natural gas bar-b-cue”. Louis Oliveira testified that there had been a very nice one that looked as if it had been made for the backyard.
[113] I am satisfied that this was taken.
[114] I note that there was evidence of some other items missing, such as the pool cover, but were not pursued in this claim.
What was the value of the Chattels taken?
[115] The plaintiffs were in the unenviable position of listing items by memory and valuing items by their best estimate. Some internet searches gave some suggestions of the value. They received no assistance from the defence before the trial to provide manufacturer’s names of those items which Mr. Zareh admitted to taking. Photographs were not produced before the plaintiffs completed their case.
[116] There was strong evidence that the general quality of the chattels was very high quality.
[117] The real estate agent, Mr. Sousa, described it as “quality stuff” and not the “run of the mill” furniture that he finds in thousands of homes he has been in.
[118] Neighbour Karen Stead lived next door and had attended parties in the home of the prior owner. She described paintings everywhere and the furnishings to be top rate. “He did not do anything cheap; he was into art collecting; the Ethan Allen truck would deliver furniture; he had the best of everything.”
[119] Sofia Oliveira described the “high end” name brands of appliances such as a Miele dishwasher and U-line sub-zero refrigerator that she could not normally afford.
[120] Mr. Kurz recognized the high quality wood of the furniture pieces due to his experience in woodworking.
[121] This fits with the description of the house which the defendant described in the MLS listing as follows, “**Exquisite Home, Nothing Has Been Spared! Fully Upgraded Home in Prime Upscale Oakville. Marble, Hardwood, Crown Mouldings, A Dream Kitchen-Granite, Swimming Pool, Backs Into Ravine, Close to Schools And Parks.”
[122] Mr. Zareh gave no evidence of the values of the items in the home including the armoire, piano and bench, and dumbbells. His witness Roy advised that in his research the Hardman piano had a value of $4,000.
Piano
[123] When the photograph of the piano was finally produced at trial, during the defendant’s case, it showed the name “Hardman” on it. The plaintiffs searched the internet for prices of upright Hardman Peck pianos and found the suggested retail price was $5,495. They claim $5,000 as the value of this piano. As the piano is used I prefer the evidence of Roy that the piano he had was valued at $4,000.
Armoire
[124] It was the evidence on discovery of Mr. Zareh that he gave the armoire to Roy. In his undertakings letter Mr. Zareh confirmed that he had asked Roy to photograph the armoire. Roy then testified that he assisted removing the armoire to a storage unit for Mr. Zareh and never had it in his possession. Mr. Zareh then testified at trial that the armoire had been in his garage. Later he testified that he photographed the armoire in his storage unit. A photograph of the armoire was finally produced in the course of his evidence. The armoire photographed was a light coloured, inexpensive looking, unit with four feet such that it could be lifted simply by putting one’s hands into the open area at the bottom.
[125] The plaintiff, Mr. Kurz, gave reply evidence. He testified that the armoire depicted in the photograph is not the one that had been in house and is now missing. He said it was nothing like the calibre of furniture that had been in the home. He confirmed that the armoire that had been in the master bedroom was solid wood to the floor and in fact left indentations in the carpet for several years afterward.
[126] I find that the photographed armoire is not consistent with the quality of all the other chattels in the home. The bottom edge is not consistent with indenting the carpet as described by Mr. Kurz. The inconsistencies of Mr. Zareh’s testimony that he had given the armoire to Roy, later stated it was in his garage and then later testified it was in storage, undermine his credibility. The production of this photograph near the end of the trial, after the plaintiffs’ case was in, was most improper. I conclude it is further evidence that Mr. Zareh’s testimony cannot be relied upon.
[127] Sofia Oliveira claimed $3,000 for the armoire. The descriptions of the quality wood product support this valuation.
Exercise Bicycle
[128] Mr. Zareh testified that he thought his son now has this. He was not sure. He made no efforts to obtain a name brand of the item or value it.
[129] The plaintiffs claimed $2,000 for all the fitness equipment, which includes the exercise bicycle, the treadmill, the weight machine, the eight dumb bells and jump rope. Their internet searches support that value even if it was discounted as being used. I am satisfied that is a reasonable value for the gym equipment taken.
Paintings
[130] Further support that the chattels were high quality was provided by a Mississauga gallery owner who had sold a sculpture and several paintings to the late owner of this property in 2004. Each painting was sold for $800. The plaintiffs claim $800 for each of the 20 missing paintings.
[131] I must consider that before the plaintiffs saw the property, however, the widow went through the house and chose at least 20 paintings to take with her. It is reasonable to expect that she would have taken the most valuable ones. For that reason I discount the value by 1/3. I find that 20 paintings valued at $533 each were taken for a total of $10,660.
Two Foyer Tables and Matching Upper Corridor Table
[132] The plaintiffs valued the three tables, looking at similar style tables on the internet. They claimed $1,200 for each table for a total of $3,600. The tables impressed all the witnesses who testified and thought the tables were antique. I find this to be a reasonable value.
Living Room Armchair Table & Lamp, Bookshelf
[133] The plaintiffs claimed $1,000 for the armchair based on research of Ethan Allan chairs. They claim $500 for the table and lamp. They claim $1,000 for the bookshelf.
[134] I discount this total of $2,500 by 1/3 in consideration that these items were used. I allow $1,667 for these items taken.
Office Desk, Chair, Credenza, and Paper Shredder
[135] The plaintiffs claim $2,500 for this office desk. Ms. Oliveira valued the office chair at $200 and the paper shredder at $100. She valued the matching credenza at $1,000. These items total $3,800.
[136] As these items were used I discount them by 1/3 for a net amount of $2,533.
Sound System and Three TVs - Family Room, Basement, Master Bedroom
[137] The plaintiffs claim $1,500 for all these items missing. I find that to be a conservative and reasonable number, taking into account that the items were used but that at least two of the TVs were flat-screen.
Two Wall Mirrors
[138] The plaintiffs estimated $200 for each of the mirrors that were missing. Considering that the items were used I discount that $400 claim by 1/3 for a value of $267.
Master Bedroom Armchair
[139] The plaintiffs claim $1,000 based on Ethan Allan chairs of similar quality. As above I discount this 1/3 as the item was used. I find the value to be $667.
Barbecue
[140] The gas barbecue was described as a very nice unit and not one to be purchased at a Walmart. The plaintiffs valued it at $500. I consider that to be a conservative estimate and take into account that it was used.
Summary of Value
Summary of Value
Piano
$4,000
Armoire
$3,000
Gym
$2,000
Paintings
$10,660
3 Tables
$3,600
Armchair/table/lamp/bookshelf
$1,667
Office furniture
$2,533
Sound system and 3 TVs
$1,500
Mirrors
$267
Bedroom Chair
$667
Barbecue
$500
Total
$30,394.00
What Property Damage was done?
[141] The plaintiffs testified that there were scratches or gouges in the hardwood flooring which appeared to be from the removal of the heavy armoire from the master bedroom. The location of the scratches was at the top landing of the stairs.
[142] Roy testified that he helped lift the armoire with Mr. Zareh and Mr. Zareh’s son. Roy confirmed that they did not use any equipment (no dolly or straps) to move the armoire. Roy’s evidence was that they did not damage the floor while moving the armoire.
[143] Mr. Zareh was allowed to attend at the property a year before trial with his counsel and a contractor of their choice to photograph the damage and provide a repair estimate. Neither the photographs nor the repair estimates were served on the plaintiff before trial. The contractor was not called and so the photographs were not allowed into evidence.
[144] Mr. Zareh described the damage as looking like “dog scratches”.
[145] Mr. Kurz, in his letter to RECO, described the damage as “new scratches on the stairs”.
[146] The plaintiffs did not provide any photographs of the damage in the flooring. They submitted two contractors’ quotes to re-sand and finish all the main floor hardwood as evidence. The costs range from $5,495 to $16,214, plus removal to a hotel for three days. The contractors did not testify to explain a potentially less costly alternative. The quotes do not refer to the specific damage claimed in the flooring.
[147] The plaintiffs have not fixed the flooring in five years. They have not provided any photographs. I am not persuaded that the damage is significant. I allow $1,000 to provide for some spot sanding and repair work only.
[148] The plaintiffs testified that the large wine cooler/fridge in the basement had been dragged out from the wall and the lock broken on the unit. Louis Oliveira recalls that it was dragged to the bottom of the stairs leaving grooves in the floor. No photographs of the flooring nor the actual unit were entered into evidence, nor was a repair estimate provided. I am unable to assess a damage claim for this.
Should Punitive Damages be awarded and if so, how much?
[149] Had the plaintiffs’ action been properly constituted I would have found the conduct of Mr. Zareh to have warranted an award of punitive damages. His actions deserve denunciation, and other agents should be deterred from acting in such a manner which abuses the trust they are given when allowed access to properties.
[150] If occupiers move out and leave items for the next occupier it is wrong to suggest that real estate agents can help themselves.
[151] However, in light of the result I dismiss the claim for punitive damages.
Conclusion
[152] The plaintiffs’ claim for conversion of chattels taken by the defendants is dismissed.
[153] The plaintiffs’ claim for damage to the flooring of the house, which I find was caused by the defendants, is dismissed.
[154] The plaintiffs’ claim for punitive damages is dismissed.
[155] In light of my findings and the request from RECO that they be contacted after a legal decision, I order counsel for both parties to forward a copy of this decision to the RECO council.
COSTS
[156] It is unclear as to which party should get costs, having regard to my findings.
[157] If the parties cannot agree on costs, both parties may serve written submissions as to costs within 14 days of the release of these reasons for decision. Each has 14 days thereafter to serve responding submissions. All such written submissions are to be forwarded to me at my chambers at 7755 Hurontario Street, Brampton. Submissions are to be confined to three pages plus any offers, bills of costs and case law. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.
M. J. Donohue, J.
Released: July 3, 2015
COURT FILE NO.: CV-11-1830-SR
DATE: 2015-07-03
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Sofia Oliveira and Frederick Kurz
Plaintiffs
- and –
Akbar Zareh and Maxcom Realty Inc. o/a Kingsway Real Estate Brokerage
Defendants
REASONS FOR JUDGMENT
M. J. Donohue, J.
Released: July 3, 2015