


COURT OF APPEAL FOR ONTARIO



CITATION: Dean v. Kotsopoulos, 2012
      ONCA 143



DATE:
          20120307



DOCKET:
          C52563



Rosenberg and
          Feldman JJ.A. and Swinton J. (
ad hoc
)



BETWEEN



RONALD
          JAMES DEAN and 1083994 ONTARIO INC.



Appellants
          (Plaintiffs)



and



STEVE
          KOTSOPOULOS and TEDS RESTAURANT EAST YORK LIMITED



Respondents
          (Defendants)



Eric Freedman,
          for the appellants



Alfred S.
          Schorr, for the respondents



Heard: January
          20, 2012



On appeal from
          the judgment of Justice Romain W. Pitt of the Superior Court of Justice,
          dated July 30, 2010



Swinton J. (
ad
          hoc
):



[1]

The appellants
    Ronald James Dean and 1083994 Ontario Inc. (108) appeal from a judgment of
    Pitt J. in which he found that they had abandoned restaurant equipment and so
    dismissed their action for damages for conversion of the equipment with costs
    of $9,300.00. In my view, he erred in finding abandonment, and therefore, the
    appeal should be allowed.

Background
    Facts

[2]

The respondent
    Steve Kotsopoulos was the sole owner of the corporate defendant, Teds
    Restaurant East York Limited.  For many years, he had operated a restaurant in
    a building he owned on OConnor Drive in Toronto.

[3]

On January 25,
    2006, 108 signed a document called Offer to Lease and Offer to Purchase
    Equipment with Mr. Kotsopoulos and Teds Restaurant.   According to that
    document, Mr. Dean, the sole shareholder of 108, agreed to purchase the
    equipment set out in Schedule A for $40,000.00 paid to Teds Restaurant, while
    108 agreed to lease the premises for five years.  The lease was to commence
    February 1, 2006.

[4]

The equipment
    listed in Schedule A consisted of used restaurant equipment and included two
    stoves with burners, two grills, a charcoal broiler, two freezers, chairs and
    tables, among many other items.  The purchase price was paid in full by January
    26, 2006.   Although the parties contemplated the execution of a standard form
    offer to lease, none was ever provided to the appellants by the respondents.

[5]

Mr. Dean also
    purchased some new equipment, including televisions, satellite dishes, cash
    registers and draught lines for beer, which he valued at $16,730.75.  He
    testified that he opened a sports bar for business in April 2006, with the
    delay in opening caused by the need for maintenance work.

[6]

Rent was paid to
    the end of June 2006.  However, during the month of June, 2006, Mr.
    Kotsopoulos lawyer notified Mr. Dean that he was in breach of his obligation
    to provide insurance, and the lease would be terminated if the breach was not
    cured by June 30, 2006.  Mr. Dean asked Mr. Kotsopoulos to use the last months
    rent he had paid for July rent so that he could pay for insurance.  After Mr.
    Kotsopoulos refused, Mr. Dean began to move equipment and supplies out of the
    restaurant over the July 1 long weekend.   He had also contacted an auction
    company with the intention that he would sell the equipment at an auction, but
    the company had no truck available that weekend.

[7]

Mr. Dean testified
    that he made about four trips over the weekend.  Sometime on July 2, when he
    returned to the premises for more of equipment, he found the lock had been
    changed.  Mr. Kotsopoulos denied changing the lock. The trial judge made no
    finding as to whether the lock was changed.

[8]

Mr. Dean and Mr.
    Kotsopoulos had no contact in the following days.  Mr. Dean testified that he
    left a voicemail message for Mr. Kotsopoulos, which was denied.  Mr.
    Kotsopoulous testified that he made numerous attempts to contact Mr. Dean
    without success.

[9]

On July 6, 2006,
    Mr. Dean saw a for rent sign in the window of the premises.  He also saw an
    advertisement for the sale of the premises in the
Toronto Star
that day,
    which said restaurant and equipment for sale. Mr. Kotsopoulos admitted that
    he never told Mr. Dean that he was going to lease or sell the equipment.

[10]

On July 13, 2006,
    Mr. Notzl, a lawyer, wrote a letter on Mr. Deans behalf asking for the
    opportunity to remove the equipment.  Mr. Kotsopoulos testified that he never
    received the letter.  The trial judge accepted, albeit reluctantly, that the
    letter was sent.

[11]

On August 2, 2006,
    Mr. Kotsopoulos listed the property for sale.  The listing made reference to
    the equipment and furnishings.

[12]

On August 30,
    2006, Mr. Kotsopoulos entered into a new lease for the premises, along with the
    equipment listed in Schedule A of the new lease.  The equipment in Schedule A
    was almost identical to the equipment that had been purchased by Mr. Dean.

[13]

On November 10,
    2006, Mr. Notzl sent another letter to Mr. Kotsopoulos on behalf of Mr. Dean,
    again claiming access to the equipment.  Mr. Kotsopoulos lawyer responded on
    November 15, 2006, claiming that the appellants had left the premises vacant
    without contacting the landlord, and they had abandoned the equipment.   There
    was no reply to this letter from the appellants.

[14]

The landlord sold
    the property in 2007 or 2008.  Some of the equipment purchased by the
    appellants remained on the premises at the time of sale.  Mr. Dean, with
    the assistance of Law Help Ontario, issued a Statement of Claim in June 2008.

The
    Decision of the Trial Judge

[15]

The respondents
    defended the appellants claim for conversion or unjust enrichment on the basis
    that the appellants had abandoned the personal property.

[16]

The trial judge
    correctly stated that conversion is a strict liability tort.  It is no defence
    that the wrongful interference with the goods of another was done innocently (
Northstar
    Leasing Corp. v. Two Ten Spruce Corp
.
, [2007] O.J. No. 1068 (S.C.J.) at
    paras. 13-14).

[17]

Abandonment is a
    defence to an allegation of conversion.  The Ontario Court of Appeal adopted
    the following definition of abandonment in
Simpson v. Gowers
(1981), 121 D.L.R. (3d) 709 at para.
    6:

Abandonment has been succinctly defined in R.A. Brown, in The
    Law of Personal Property, 2nd ed. (1955), at p. 9:

·

Abandonment occurs when there is a giving up, a total desertion,
    and absolute relinquishment of private goods by the former owner. It may arise
    when the owner with the specific intent of desertion and relinquishment casts
    away or leaves behind his property ...

[18]

A party who
    alleges abandonment bears the onus to prove, on a balance of probabilities, that
    the owner intended to abandon the chattels in issue (
Simpson
at para.
    9).   Abandonment is a question of fact, turning on factors such as the passage
    of time, the nature of the property, the conduct of the owner and the nature of
    transaction (
Stewart v. Gustafson
, [1998] 4 W.W.R. 695 (Sask. Q.B.) at
    para. 17).

[19]

The trial judge
    considered each of these factors, starting with the passage of time.  He
    observed that the appellants had made minimal efforts to recover the goods
    before commencing litigation, consisting of the letters of July 13, 2006 and
    November 10, 2006.  They made no reply to the respondents letter alleging
    abandonment.

[20]

Second, the trial
    judge described the transaction as, in substance, one in which the chattels and
    equipment were part of a business from which Mr. Dean withdrew.  Third, he
    described the appellants avoidance of the landlord.  Finally, he stated that
    there was no evidence nor reason to believe that the chattels and equipment in
    a free standing situation had real market value.  Therefore, he concluded that
    the goods had been abandoned.

Analysis

[21]

The appellants argue that the trial
    judge erred in finding that Mr. Dean had abandoned the property, as he failed
    to consider evidence showing Mr. Deans ongoing intention to claim possession
    of the property.  As well, he improperly found the goods had no real market
    value in the absence of evidence.

[22]

On an appeal, an
    appellate court will not interfere with the trial judges findings of fact
    absent palpable and overriding error (
Housen v. Nikolaisen
, [2002] 2 S.C.R. 235 at para. 10).

[23]

Mr. Kotsopoulos
    offered to sell the restaurant premises, along with the equipment, as early as
    July 6, 2006.  By late August of 2006, he had entered into a new lease for the
    premises in which he leased much of the equipment which Mr. Dean had
    purchased.   The initial question for the trial judge, then, was to determine
    whether the appellants intended to abandon the equipment before that date - a
    period of about two months.  If not, the respondents are liable for damages for
    conversion.

[24]

The trial judge
    did not address the fact that Mr. Kotsopoulos had leased the equipment by late
    August 2006.  When discussing the passage of time, he focussed on the two
    letters sent on behalf of the appellants on July13 and November 10, 2006, the
    lack of response to the respondents letter in mid-November, and then the further
    delay in bringing the action.  In my view, he erred in failing to determine
    whether the appellants intended to abandon the property in the period up to the
    end of August 2006.

[25]

Moreover, the
    trial judge failed to consider other evidence that showed Mr. Deans ongoing
    intention to protect his property interest:

·

He had an
    auctioneer inspect the equipment with a view to having it moved and sold at an
    auction.

·

Although he moved
    some of the new equipment out of the premises over the July 1st weekend, according
    to Mr. Deans evidence, he could not continue moving the property because he
    was locked out.  The trial judge made no finding as to whether this occurred,
    but he did not reject Mr. Deans evidence.

·

Mr. Dean caused
    his lawyer to write the July 13 letter.

·

Mr. Dean testified
    that he became aware that someone else was operating a restaurant in the
    premises and using the equipment, so he subsequently contacted Mr. Notzl and
    had the November letter sent.

[26]

All of this
    evidence shows that Mr. Dean did assert an ongoing interest in the property.

[27]

Moreover, the
    trial judge assumed that the equipment and property were of little value, and
    this, too, was a factor on which he relied to find abandonment.  However, there
    was evidence going to the value of the property. Mr. Dean had paid $40,000.00
    for the used property only five months before and made inquiries about an
    auction.  As well, the lease to the new tenants included the listed property,
    which they used for a restaurant operation.  Even though the rent they paid was
    less than the rent Mr. Dean and 108 had negotiated, one can infer that there
    was some value to the equipment leased.

[28]

In other cases
    where abandonment has been found, the trial judge has taken note of the efforts
    of the defendant to contact the property owner before the property was disposed
    of and the owners lack of response (see, for example,
Nash v. Chan
(1989), 93 A.R. 228 (Q.B.) at para.
    37).  In the present case, Mr. Kotsopoulos gave no notice to the
    appellants.  Indeed, he began advertising the sale of the premises and
    equipment within a few days after Mr. Dean vacated the premises.

[29]

The trial judge
    also failed to consider whether it made commercial sense for the appellants to
    abandon the equipment, for which Mr. Deans had paid $40,000.00 only five months
    earlier.  The landlord could not have reasonably believed that the appellants
    had abandoned the equipment within a few days after the termination of their
    relationship.  Moreover, the equipment left included large items such as
    refrigerators and freezers which Mr. Dean had been unable to move without a
    truck.

[30]

When all the
    evidence is considered and with a focus on the relatively short period prior to
    the disposition of the property, the trial judge erred in finding abandonment
    prior to the lease of the premises in August 2006.  Therefore, given that the
    appellants did not abandon the equipment, the respondents are liable for
    damages for conversion because they leased and later sold the premises along
    with the equipment.

[31]

The difficult
    issue remaining is the quantum of damages.  The evidence on the value of the equipment
    is minimal.  The appellants submit that the amount should be $40,000.00 for the
    used equipment and some $16,000.00 for the new equipment, less depreciation of
    5%.

[32]

With respect to
    the new equipment, receipts were filed at trial totalling approximately $4,000.00. 
    However, Mr. Dean testified that he removed some of this equipment, including
    the television sets and cash registers, so it is unclear what the value of the
    remaining new equipment was.

[33]

The used equipment
    purchased from Mr. Kotsopoulos that remained on the property consisted, in
    part, of larger items, such as stoves and refrigerators, that were not easily
    moved.  While this equipment would likely have had some
value at
    auction, one can reasonably infer that the recovery would be less than the
    purchase price.

[34]

In the
    circumstances, given the unsatisfactory evidence on valuation, I would award a
    nominal sum in damages, fixed at $10,000.00.

[35]

The appellants
    also argued that the trial judge erred in failing to order the repayment of the
    last months rent.  I would not give effect to this ground of appeal.  The
    landlord reasonably kept this payment after the appellants ceased to carry on
    their business in the premises.

Conclusion

[36]

Accordingly, I would allow the
    appeal, set aside the judgment of the trial judge and grant judgment in favour
    of the appellants in the amount of $10,000.00 plus costs of the trial and of
    the appeal in the agreed amount of $6,700.00, inclusive of disbursements and H.S.T.

Signed:
    K. Swinton J. (ad hoc)

I
    agree M. Rosenberg J.A.

I
    agree K. Feldman J.A.

RELEASED:  MR March 7, 2012


