Nature of the Proceeding:

[1] In my Endorsement of August 5, 2016, I granted summary judgement for the Plaintiff/Defendant by Counterclaim (MAS) against the Defendant/Plaintiff by Counterclaim (TNS) and declared that MAS’ chattel purchase from TNS was at an end. What remained to be determined was TNS’s Counterclaim against MAS for damages arising from MAS’ continued use of the Defendant’s chattels.

[2] Under the special powers under R. 20, I ordered that there would be a two-day hearing on liability and quantum of damages in the Counterclaim. I limited the hearing to two days in part because the evidence should be limited and because this is proportional given the assets in issue.

[3] These are my reasons for judgement on the Counterclaim.

Facts:

[4] MAS and TNS originally entered into an Agreement of Purchase and Sale whereby MAS was to purchase TNS’ assets in a tire retail and service business. The assets included TNS’ chattels, soft assets, and real estate. The Agreement of Purchase and Sale, dated October 8, 2013, set the price at $515,000.

[5] The Defendant was unable to provide certain documents with respect to the operation of the business before the closing date. Accordingly, the parties agreed to sever the Agreement into two parts: one for real property and one for chattels. The price of the land was $430,000. The price of the chattels was $85,000.

[6] The purchase of the land closed uneventfully, the chattel sale did not.

[7] Before the chattel transfer could be completed, TNS’s corporate charter was dissolved. By agreement dated December 12, 2013, the parties agreed that for $1 consideration, the $85,000 MAS paid to purchase the chattels was to be held in Trust by TNS’s lawyer until certain conditions were satisfied. These conditions were contained in paragraph 1 of the Agreement and were:

a) The corporate status of the Defendant was to be reinstated;

b) The Defendant was to provide an HST Clearance Certificate;

c) The Defendant was to provide appropriate corporate documentation to give effect to the APS and all necessary resolutions, consents and directions;

d) The Defendant was to provide a Clearance Certificate under the WSIB (Purchase Certificate); and

e) The Defendant had to comply with the terms of the APS.

[8] These conditions were to be satisfied by June 12, 2014, failing which TNS was required to return the $85,000, the chattel APS was to be considered void, and TNS was entitled to retrieve its physical assets. MAS, however, was entitled to keep the phone number, e-mail and website.

[9] Other than the reinstatement of TNS’ corporate status, the conditions were not all satisfied by June 12, 2014.

[10] On April 20, 2014, TNS advised MAS that TNS’ registration was reinstated, and the corporation was now active. On April 24, MAS advised that items b) to d) of paragraph 1 of the Agreement were still outstanding.

[11] By June 12, 2014, items b) to d) of paragraph 1 of the Agreement were still outstanding. On June 23, MAS demanded return of its $85,000. TNS responded on June 24 saying that it had filed documents with the WSIB and CRA that were necessary to fulfill the conditions but was still waiting for a response. It asked for a 30-day extension to satisfy the conditions. Nothing was attached to the letter.

[12] On June 27, MAS advised that since TNS had not attached any proof of the documents TNS mentioned that it had filed with CRA and WSIB, there would be no extension. MAS followed up on July 2 for a reply to its June 27 letter. In response, TNS said that it was resending the CRA and Corporate documentation. On July 4, MAS advised that the WSIB clearance and the HST clearance were still outstanding, and the CRA letter was late.

[13] Negotiations continued based on TNS’ promises to deliver the missing documents. By August 1, 2014, TNS had still not provided ownerships for certain vehicles that were to be transferred. Without the ownerships, MAS could not re-plate the vehicles, which were towed for not being plated. MAS again demanded return of $85,000 failing which it would sue. It was clear that by August 1, MAS considered the transaction null and void.

Procedural History:

[14] In my reasons of August 5, 2016, I ordered that TNS was entitled to return of its assets as contemplated by the Agreement, and that MAS was entitled to the return of the $85,000. I ordered that assets listed in Schedule A to the order be returned by MAS to TNS and that TNS would pay to MAS the $85,000 deposit.

[15] By Endorsement dated October 24, 2017, following a case conference, I clarified my earlier Endorsement by saying that the return of the chattels and return the money need not be simultaneous but should be contemporaneous. I noted that in the 14 months since the release of my August 5, 2016 Endorsement, nothing had occurred. Accordingly, I ordered that the $85,000 deposit should be paid to MAS immediately and held in Trust by MAS’ solicitor until further order was made. I did not make interest earned thereon payable to the credit of the action. I also ordered that the MAS should pay to place the chattels (which had not yet been delivered to TNS) in storage, at its own expense, subject to any reapportionment of storage costs by the trial judge. MAS was to provide an itemized list of those items in storage to TNS along with a photo record of the chattels or equipment that MAS placed in storage. These items were to be released to TNS on consent or by court order. Any disputes as to what was returned or ought to have been returned and its value should form part of the Counterclaim.

[16] On October 15, 2018, MAS moved to dismiss the Counterclaim for delay. I ordered it returned on October 29 as it was short served.

[17] By Endorsement dated October 29, 2018, I heard MAS’ motion to dismiss the Counterclaim for delay and TNS’ cross motion seeking an order that the Plaintiff was in contempt for not returning the chattels. I dismissed both motions. I noted that MAS had not done as ordered on 24 October 2017. It had not placed into storage the chattels that were to be returned to TNS.

[18] It appears that TNS paid the $85,000 to MAS, which remains in its counsel’s Trust account. The chattels were finally delivered by MAS to a storage unit on or about November 1, 2018.

The Counterclaim:

[19] At this trial of the Counterclaim, I am to determine the damages payable by MAS to TNS arising from MAS retaining and using the chattels and returning some but not all of them. I use as the basis for my decision, the List of 40 items attached to this decision as Schedule A, which were attached as Schedule A to my Order of August 5, 2016.

[20] This Counterclaim gives rise to the following questions:

a. Is MAS liable to TNS for not returning the chattels?

b. What items should be removed from Schedule A?

c. How should valuation of the chattels be approached?

d. What are the Disputed Items?

e. The Quantum of the Loss

f. From when does pre-judgment interest run?

[21] At the trial of the action, I heard from representatives of both of the parties. I received exhibit books from both parties which were admitted for the truth of their contents. I also received the October 2018 Fair Market Value Appraisal from Danbury Global Ltd., a certified appraisal firm, prepared for MAS. That report was accepted as if its contents had been delivered orally under oath. While TNS had the right and opportunity to cross-examine the appraiser, it did not exercise that right. Finally, I received written summaries from each party (TNS’ as Exhibit B and MAS’ as Exhibit C) which I could use as outlines of their positions, and in making my decision. I thank counsel for their helpful summaries which I have used.

Position of TNS:

[22] TNS has returned the $85,000. It says that it is entitled to judgment for the whole of the $85,000, less the fair market value of the assets that were eventually returned, subject to some minor adjustments. At minimum, it is entitled to $79,440.01 out of the $85,000 ($85,000 - $5559.99 as fair market value of items returned).

Position of MAS:

[23] MAS did not contest liability seriously. It accepts that it must pay fair market value for those chattels that were not returned as of August 2016, when they were ordered returned. MAS calculates the Plaintiff’s loss between $8,855 and $9,355. MAS agrees it owes TNS these amounts but is entitled to receive the balance of the $85,000.

Disposition:

a. Liability

[24] MAS did not contest liability seriously. It is liable to TNS for failing to return certain chattels and failure to return the balance when ordered.

b. What items should be removed from Schedule A?

[25] TNS concedes that items number 1, 5, and 6 should be removed from the List, or assigned $0 in value.

c. How should valuation of the chattels be approached?

[26] In August 2016, TNS was ordered to return to MAS its $85,000 deposit. It did so, and the money remains in MAS’ counsel’s Trust account pending the release of these reasons. At the same time, MAS was ordered to return the chattels to TNS, which it did not do until approximately November 1, 2018.

[27] There is no great dispute between the parties as to how damages should be calculated for property losses. TNS is entitled to damages, so far as money can do so, in an amount that will place TNS in the same position it would have been in if the damage had not occurred.[^1]

[28] In this case, TNS’ damages take two forms. First, there is the chattels that were returned, but only in November 2018, not in August 2016 when ordered. For those chattels, TNS’ loss could be quantified by a) the income the chattels would have generated, b) the cost to rent those chattels, and/or c) their diminished value. With respect to chattels that were never returned, the Plaintiff is entitled to their fair market as of the date they ought to have been returned.[^2]

[29] With respect to the late-returned chattels, there is no evidence to support any quantification of damages based on loss of income that the chattels would have generated or the cost to rent them. The only basis upon which I have to quantify TNS’ damages is the diminished fair market value of those assets between August 2016 and November 2018.

[30] TNS says that damages sustained in this case with respect to those items not returned or those not returned when ordered, should be those calculated based on the tort of conversion since MAS converted TNS’s chattels to its use. This argument does not assist TNS. Damages in conversion are calculated based on the fair market value of the goods when the conversion came to the attention of the rightful owner.[^3]

[31] When did the conversion come to TNS’ attention? TNS did not articulate a clear position. The earliest date would be August 2014 when the chattel purchase fell through. MAS argued that there was never any conversion or unrightful detention of the goods since the obligation to return the chattels, or TNS’ right to recover them, did not arise until TNS returned the $85,000. Until that time, MAS had the right to operate its tire business using those chattels. Further, once the $85,000 was returned, TNS was entitled to recover the chattels. MAS had no obligation to return them. TNS never arranged to recover the chattels.

[32] Generally, the fair market value of an asset is proved by opinion evidence from a certified appraiser. Another approach is to arrive at a depreciated value of the asset as of the appropriate date. This, too, requires the opinion of an expert.

[33] TNS did not provide any expert opinion. Instead, in Exhibit 5, Mr. Sidhu, the principal of TNS, produced all the documents TNS relied upon in quantifying the value it ascribes to each of the chattels as listed at tab 2 of Exhibit 5 (taken from Schedule A). In some cases, Mr. Sidhu provided the results of computer searches for used, similar items. In all other cases, he provided catalogue listings or Internet searches showing the price of new, replacement items of the same or similar kind as listed. TNS left it to me to apply such depreciation as I thought appropriate.

[34] TNS lists the total fair market value at the time of the sale for all chattels as $122,393.66 (Exhibit 5, tab 2). In addition, TNS estimates the cost of use or depreciation of the chattels that MAS continued to use after August 2016 at approximately $10,161.82. These sums exceed the $85,000 figure. Hence, it says that it is entitled to keep the $85,000.

[35] Mr. Sidhu did not provide evidence such as the original cost of the item (along with the invoice), inventory lists, or documents supporting depreciation of assets individually, or collectively.

[36] MAS employed the services of Danbury Global Limited, which prepared a report dated October 23, 2018 assessing the fair market value of all assets as of two dates: July 2014 and October 2018. The fair market value of all chattels as of July 2014 is $19,845, whereas it is $11,555 as of October 2018.

[37] I accept the Danbury Report as evidence of the fair market value of the Schedule A assets as of July 2014 and October 2018. TNS accepted that the Danbury Report could be admitted for the truth of its contents. It did not cross-examine the appraiser to challenge his credibility or expertise, or to test the accuracy or reliability of the opinion.

[38] I accept that there is some logic in the TNS’ approach to calculating damages, but that logic is only superficial and does not make TNS’ approach acceptable. It assists neither in determining the original cost of the chattel, nor the depreciation applicable. To arrive at the proper fair market value of the chattels, one still needs evidence with respect to those adjustments that need to be made from the replacement cost to obtain the fair market value of older, used equipment. TNS has not addressed this step in quantifying the loss.

[39] What is the valuation date? Paragraph 2 of the December 13, 2013 Agreement with respect to the chattels (Exhibit 3, tab 1) says:

“The vendor shall complete the following matters within six (6) months, failing which the lawyer for the vendor shall return the aforesaid $85,000 to the purchaser and the transaction of the purchase and sale shall be null and void and terminated and of no further force and effect. Upon that occurrence taking place, the vendor shall be entitled to retrieve all of its physical assets, save and except the telephone number, email and website, which shall have been taken over by the purchaser pursuant to the terms of the agreement of purchase and sale.” [Emphasis added]

[40] In other words, by using the words “upon that occurrence taking place,” the parties intended that MAS’ obligation to release the chattels to TNS was contingent upon TNS returning to MAS the $85,000. TNS was obliged to collect the chattels.

[41] It appears that the $85,000 was not returned until October 2017, notwithstanding my order of August 5, 2016. Both parties breached that order. I consider August 5, 2016 as the date that the $85,000 was to have been returned and on which TNS was entitled to retrieve its chattels.

[42] Therefore, with respect to those items not returned after August 2016, they should to be valued as of August 2016. For those items returned in October 2018, the damages are the total diminished fair market value between August 2016 and October 2018.

[43] There is no evidence as to the precise fair market value of any chattel on August 5, 2016. It can be approximated, however. The Danbury Report provides appraisals for the fair market value of each chattel or group of chattels as of July 2014 and as of October 2018. Since the Danbury Report contains the only admissible evidence on this point and is the best evidence of the fair market value of the chattels, a reasonable estimate of the August 2016 fair market value of any specific item that was not returned is the midpoint between the two Danbury estimates.

[44] Using the Danbury Report, a reasonable estimate of the depreciated value of the items returned in October 2018 that were ordered returned in August 2016 is the difference between the midpoint of the Danbury 2014 and 2018 fair market value estimates, less the 2018 estimates. This can be expressed as the following formula:

(July 2014 FMV – October 2018 FMV) – October 2018 FMV

d. The Quantum of the Loss

[45] The Disputed Items: In the table below, I have listed a) those items from Schedule A over which there is a dispute as to their existence or whether TNS is entitled to damages for the items, b) the positions of the parties, and c) my finding in respect of each:

Schedule A Item	Description	TNS Position	MAS Position	Disposition
#3	Heating System	Hard to value as was part of the building, but was contracted to be returned, “…and has some value	TNS has provided no evidence re the value.	While the contract provides for its sale, no admissible evidence was provided with respect to the heading system’s value. It is assigned a value of $0.
#15	3D Laser Hunter Alignment Machine	Leased, but TNS made 6 to 8 payments and is entitled to the value of its acquired “equity”.	The equipment was leased, and MAS took over the lease.	No evidence was provided with respect to any equity TNS may have acquired. It is assigned a value of $0
#16	4-wheel, 4-post alignment lift	Ditto	Ditto	Ditto
#17	Two Centre jacks	Ditto	Ditto	Ditto
#8	Air tank	Not listed in the Danbury Report. Assign a value of $44 representing 75% of replacement cost of $59.99.	There is no admissible evidence as to the fair market value of the air tank at any given date.	Since there is no dispute that the item is present, I arbitrarily ascribe a value of $30.
#20 & 40	Display counter and ram rack	Not listed in the Danbury Report. Assign a value of $2100, representing 75% of the replacement cost value of $2800.	Ditto	Since there is no dispute that the item is present, I arbitrarily ascribe a value of $1500.

[46] Accordingly, I ascribe a total value of $1,530.00 for these items.

[47] Items not returned: The following chart includes the items that the Plaintiff claims were not returned, and my findings with respect to the value. Since these items were not returned, their value is fixed at fair market value for August 2016, using the formula discussed above, unless stated otherwise:

Item in Schedule A	Description	Comments	Finding
#2	Light Fixtures	TNS claims $899.80. The light fixtures were installed and, technically, became fixtures. They were listed as a chattel in the Agreement. The evidence is that they were fairly new. I have arbitrarily assigned a value of $500.	$500.00
#7	Dodge Van	TNS claims $5,750 based on comparisons of listings from AutoTrader.com listings.	$625.00
#36	Ford E350	TNS claims $8000 comprising an estimated truck value of $5000 and tires stored therein of $3000. MAS takes the position of the truck was towed away during its operation of the business, by people unknown, likely because of outstanding parking tickets.	$625.00
#11	Dynamic Wheel Balancer	TNS claims $2315.	$1,300.00
#9	Dynamic tire change or	TNS claims $4325	$2,475.00
#39	Television	TNS claims $35	$10
	Tire racks (wood)	TNS claims $993.90 representing the cost of the lumber and other materials used to construct the tire racks. Danbury assigned a value of zero dollars as it was merely loosely piled, use lumber. I arbitrarily assign a value of $100.	$100.00
#27	New tires	TNS says that it sold MAS an inventory of 1000 new and used tires but only 588 were returned. The Danbury Report, items seven and eight, indicates that there were of 1700 new and used automotive tires transferred. Most of these were used, and the 588 that were returned were beyond their expiry date. The Danbury Report, Exhibit “A”, item 7 provides a 2014 value four 1000 new and used tires of $5000 and a 2018 value of zero dollars.	$2,500

[48] Accordingly, I ascribe a total value of $8,135.00 for these items.

[49] Remaining Items: The remaining items on Schedule A, were returned in October 2018, although they were ordered returned in August 2016. As indicated above, since there was an approximately two-year delay in returning these chattels to TNS, TNS has suffered a loss measured in the diminished fair market value of the chattels between August 2014 and October 2018.

[50] Using Exhibit “A” to the Danbury Report (Exhibit 1) I have applied the loss calculation formula, above, to the chattels returned as listed on Exhibit “A,” items 1 – 3, 5, 6, 10 – 20, and 22 – 24. With respect to item 8 on Exhibit “A” to the Danbury Report (700 new & used automotive tires), since 588 tires were returned, I have allowed for the 122 tires not returned, or 16% of item 8 on Exhibit A to the Danbury Report. I quantify the total loss for the depreciation in items returned late plus item 8 as adjusted above, at $2,305.

e. From when does pre-judgment interest run?

[51] MAS’ obligation to return the chattels began in August 2016 when I ordered TNS to return the $85,000 and ordered MAS to store the chattels. Pre-judgement interest runs from that date.

[52] Under section 127 and 128 of the Courts of Justice Act, TNS is entitled to pre-judgment interest at the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced. A Counterclaim is proceeding. TNS commenced its Counterclaim on December 16, 2014. The pre-judgment rate is 3% p.a. x 3 and 1/3 years, or 10% in total.

f. TNS’ Total Damages Including, Pre-Judgment Interest.

[53] TNS’ total damages based on the foregoing, are as follows:

Disputed Items $ 1,530 Items Not Returned $ 8,135 Remaining Items $ 2,305 Subtotal $11,970 PJI $ 1,197 Total $13,167

[54] For the foregoing reasons, TNS shall have judgment against MAS for $13,167, to be paid out of the $85,000 MAS’ solicitor holds in Trust. The balance of the $85,000 shall be returned to MAS.

Costs:

[55] In my August 5, 2019 Endorsement, I reserved costs to be determined after this hearing. Unless the parties can agree on cost, I shall determine who pays whom costs and in what amount, in writing. Submissions are limited to 4 double-spaced, typed pages (excluding Bills of Costs, offers, and cases). TNS’ submissions are to be served and filed by 4 p.m., December 1, 2019, and MAS’ by 4 p.m., January 6, 2020.

Trimble J.

Released: October 25, 2019

COURT FILE NO.: CV-14-5029-00

DATE: 2019 10 25

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

MAS AUTOWORKS INC.

Applicant

– and –

TIRES “N” SUCH INC.

Defendant

ENDORSEMENT

Trimble J.

Released: October 25, 2019

[^1]: Buchanan v. Cook, (1958), 1958 CanLII 190 (SK CA), 11 D.L.R. (2d) 638 (Sask. C.A.), at para 6.

[^2]: Roynat Ltd. v. Northern Meat Packers Ltd. et al., (1986), 1986 CanLII 135 (NB CA), 29 D.L.R. (4th) 139 (NBCA), at para. 12.

[^3]: Steiman v. Steiman (1982), 1982 CanLII 2973 (MB CA), 143 D.L.R. (3d) 396 (Man. C.A.), at para. 18; Tridont Leasing (Canada) Limited v. Saskatoon Market Mall Ltd. (1995), 1995 CanLII 3973 (SK CA), 131 Sask. R. 169, [1995] 6 W.W.R. 641 (Sask. C.A.), at para. 40

MAS AUTOWORKS INC. v. TIRES “N” SUCH INC., 2019 ONSC 6227

Case Summary

Nature of the Proceeding:

Facts:

Procedural History:

The Counterclaim:

Position of TNS:

Position of MAS:

Disposition:

Costs:

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Expert Witnesses

Financial Outcomes

Issues

Statutory Provisions 2