Court File and Parties
COURT FILE NO.: CV-19-0178-000 DATE: 2020-01-13
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
2133048 Ontario Limited o/a as Rockhouse, Plaintiff Ms. R. Carlino, for the Plaintiff
- and -
1188640 Ontario Ltd., Defendant Mr. M. Cupello, for the Defendant
HEARD: January 6, 2020, at Thunder Bay, Ontario Madam Justice H. M Pierce
Reasons on Motion for an Order for Recovery of Personal Property
Introduction
[1] The corporations named above, through their principals, entered into an oral agreement by which the plaintiff leased part of the defendant’s premises on terms that included payment of property taxes and utilities for the building and responsibility for maintenance. The property was used as a nightclub. In the course of its occupation, the plaintiff effected certain renovations and equipped the space with chattels and fixtures so that it could better operate as a nightclub.
[2] Several years after the lease was entered into, the City of Thunder Bay served notice that if a back-flow prevention system was not installed in the premises by January 30, 2018, the city would not renew licenses necessary for the plaintiff to operate the nightclub. The plaintiff claims that it brought this notice to the attention of the defendant which failed to take any steps to bring the premises into compliance.
[3] The defendant claims that the responsibility for the plumbing work lay with the plaintiff. The genesis of this dispute involves who is responsible for maintenance and to what extent. At trial, the court must determine the terms of the lease and whether the plaintiff or the defendant breached it and when, calculating any damages flowing from the breach.
[4] The plaintiff was unable to continue to operate the nightclub after February 12, 2018, because of the license cancellations. Thereafter, it refused to pay the property taxes and utility charges.
[5] About July 17, 2018, a representative of the plaintiff attended at the premises and discovered that the locks had been changed. The plaintiff claims that by locking it out, the defendant terminated the lease. It is not clear from the evidence before me when the locks were changed. However, the defendant is using the plaintiff’s chattels in order to operate the property as an event centre.
[6] The defendant submits that by failing to pay rent, the plaintiff abandoned the premises. It claims that it is entitled to use the plaintiff’s chattels and fixtures as security for its losses under the lease.
[7] The plaintiff commenced an application in March of 2019 claiming that the defendant had wrongfully or excessively distrained assets and wrongfully terminated its lease. The defendant opposed the application. The matter came on before Mr. Justice D.C. Shaw on April 25, 2019. He ordered the application be converted to an action with a timetable for delivery of pleadings. In addition, Shaw J. made the following order:
The applicant shall bring a motion returnable May 2, 2019, dealing with the disposition/forfeiture of chattels and fixtures at 201 Syndicate Avenue, Thunder Bay. Pending the return of the motion, the respondent [defendant] shall not dispose, sell or transfer any chattels or fixtures that were in the premises of 201 Syndicate Avenue as of June 30, 2018. This order is strictly without prejudice to the position of the respondent.
[8] It is not clear why the motion was not immediately argued.
[9] The statement of claim contains no claim for the recovery of possession of personal property. Instead, it claims damages for negligence, breach of contract, unjust enrichment and other relief. Alternatively, the claim seeks an injunction prohibiting the defendant from depleting, dissipating or disposing of the plaintiff’s assets.
[10] The plaintiff argues that the defendant is engaging in illegal distraint under the Commercial Tenancies Act, R.S.O. 1990, c. L.7.
[11] The defendant submits that Rule 44.01 of the Rules of Civil Procedure, together with s. 104 of the Courts of Justice Act, R.S.O. 1990, c. C.43 apply, and that the plaintiff is not entitled to relief.
[12] Trial in this case has been set for the list commencing April 6, 2020.
Discussion
[13] Rule 44.01 (1) of the Rules of Civil Procedure states:
44.01 (1) An interim order under section 104 of the Courts of Justice Act for recovery of possession of personal property may be obtained on motion by the plaintiff, supported by an affidavit setting out,
(a) a description of the property sufficient to make it readily identifiable;
(b) the value of the property;
(c) that the plaintiff is the owner or lawfully entitled to possession of the property;
(d) that the property was unlawfully taken from the possession of the plaintiff or is unlawfully detained by the defendant; and
(e) the facts and circumstances giving rise to the unlawful taking or detention.
[14] Section 104 (1) of the Courts of Justice Act provides:
104 (1) In an action in which the recovery of personal property is claimed and it is alleged that the property,
(a) was unlawfully taken from the possession of the plaintiff; or
(b) is unlawfully detained by the defendant, the court, on motion, may make an interim order for recovery or possession of the property.
[15] The defendant submits that because the plaintiff did not specifically plead a claim for recovery of personal property in its statement of claim, it is not entitled to claim relief pursuant to s. 104 (1) of the Courts of Justice Act.
[16] I do not agree. The endorsement of Shaw J. specifically directs the plaintiff to bring a motion dealing with the “disposition/forfeiture of chattels and fixtures” at the premises. Further, the plaintiff’s statement of claim seeks an injunction against the defendant for illegal distraint. While the pleading in the statement of claim should have claimed recovery of personal property, the defendant was on notice that the plaintiff would seek the very relief claimed in this motion. There is no suggestion that the defendant is taken by surprise.
[17] The common law with respect to distraint and forfeiture is discussed at some length in Pita Royale Inc. v Buckingham Properties Inc., 2017 ONSC 5976. At para. 128, the court sets out the principles that apply to the remedy of distraint as follows:
The right of distraint (also known as distress) is a common law right available to landlords for recovery of arrears of rent under a lease. It allows landlords to seize goods and chattels on the leased land in question and owned by the tenant. The remedies of forfeiture and distress are mutually exclusive at law and, therefore, the landlord must choose between the right of forfeiture or the right of distraint. Where the landlord elects forfeiture, a simultaneous distraint is illegal and will result in the landlord being liable to the tenant for the full extent of the tenant’s damages. [Citations omitted.]
[18] In para. 130 of Pita Royale, the court cited with approval the conclusion of Campbell J. in Malka v. Vasiliadis, 2011 ONSC 5884, [2011] O.J. No. 4523 to this effect:
The law is clear that when a tenant defaults on the obligation to pay rent, the landlord has two mutually exclusive legal remedies, and must elect which remedy to pursue. The landlord can elect to re-enter the premises and distrain the goods owned by the tenant for purposes of satisfying the debt owed by way of rent, but with a view of continuing the lease. Alternatively, the landlord can elect to retake possession of the premises and terminate the lease, and potentially pursue other additional remedies.
[19] At para. 127 of Pita Royale, the court emphasized that distraint is a remedy available when there are arrears of rent, but only while the lease continues.
[20] At para. 19 of Tosomba v. Base General Contracting Ltd., 2012 ONSC 1839, the court explained that distress is a landlord’s remedy, but once the relationship of landlord and tenant is terminated, the remedy is no longer available. At para. 20, the court noted, “By changing the locks on a rented premises a landlord will effect forfeiture of the lease.”
[21] In this case, the defendant counterclaims against the plaintiff for breach of contract and negligence in relation to the lease. It also claims a declaration that the plaintiff has abandoned the premises. These are issues for trial. The defendant argues that the legality of the distraint should also be considered at trial.
[22] I do not agree. The plaintiff, through circumstances relating to the conduct of the litigation, has been deprived of its goods for nearly two years.
[23] I am satisfied that the conversion of the plaintiff’s chattels to the defendant’s own use while locking the plaintiff out of the premises constitutes an illegal distraint. Once the defendant locked the plaintiff out, there was no subsisting relationship between the landlord and tenant to ground the remedy of distraint.
[24] I am also satisfied that the plaintiff has sufficiently described the property it seeks to recover; proved the value of the property by filing invoices; proved that it is the owner of such property; and established the property is being unlawfully detained, all as required by Rule 44.01 (1) and s. 104 (1) of the Courts of Justice Act.
[25] Accordingly, an interlocutory order will issue for the recovery of the plaintiff’s personal property itemized in the affidavit of Anthony Di Paulo sworn May 1, 2019, provided the personal property has not been installed as a fixture to the premises. The plaintiff shall recover its chattels within thirty days from the release of these reasons at a date and time to be agreed upon by the parties. If there are issues arising involving the execution of this order, I may be spoken to.
[26] As counsel agreed during argument, costs of this motion are fixed at $4,000.00, payable by the defendant to the plaintiff within thirty days.
“original signed by”
The Hon. Madam Justice H.M. Pierce