



Corrected
    decision: The text of the original judgment was corrected on September 22, 2021
    and the description of the correction is appended.




COURT OF APPEAL FOR ONTARIO

CITATION: 1758704 Ontario Inc. v. Priest,
    2021 ONCA 588

DATE: 20210830

DOCKET: C68390

Benotto, Miller and Trotter
    JJ.A.

BETWEEN

1758704 Ontario Inc. and 1191305
    Ontario Inc.

Plaintiffs
(Respondents/Appellants by way of cross-appeal)

and

Carl Priest

Defendant
(Appellant/Respondent by way of cross-appeal)

AND BETWEEN

Carl Priest and 1737161 Ontario
    Limited

Plaintiffs by Counterclaim
(Appellants/Respondents by way of cross-appeal)

and

1758704 Ontario Inc., 1191305
    Ontario Inc. and Martin Donkers

Defendants by Counterclaim
(Respondents/Appellants by way of cross-appeal)

Maanit Zemel, for the appellants/respondents
    by way of cross-appeal

Krista McKenzie, for the
    respondents/appellants by way of cross-appeal

Heard: April 22, 2021 by video conference

On appeal from the judgment of Justice Annette
    Casullo of the Superior Court of Justice, dated May 22, 2020, with reasons
    reported at 2020 ONSC 3222, and from the costs order, dated August 18, 2020.

Trotter J.A.:

[1]

These appeals arise from the sale of a business.
    Almost two years after the deal closed, things went awry. The purchasers/assignees,
    who are the appellants in this appeal, defaulted on a promissory note, secured
    by certain assets (i.e., heavy construction equipment). Without notice, the respondents/cross-appellants
    (hereafter the respondents) seized these assets from the appellants, putting
    them out of business.

[2]

The respondents sued for the money still owing.
    The appellants filed a counterclaim pleading breach of contract, intentional
    interference with economic relations, and the tort of conversion based on the
    seizure without notice.

[3]

In the main action, the trial judge granted
    judgment in favour of the respondents, based on the unpaid debt. She also
    dismissed the appellants counterclaim, based on her conclusion that the
    respondents were not required to provide notice to the appellants prior to seizing
    the assets.

[4]

The appellants originally appealed from the
    judgment against them in the main action and from the dismissal of the
    counterclaim. However, at the oral hearing, they focused solely on the
    counterclaim. The respondents appeal the trial judges award of damages.

[5]

I would allow the appeal from the dismissal of
    the counterclaim. At common law, and under the terms of the Asset Purchase Agreement
    (APA) entered into by the parties, the appellants were entitled to notice
    before the equipment was seized. This amounted to a breach of contract. I would
    remit the case to the Superior Court for an assessment of damages. As I see no
    error in the trial judges assessment of damages in the main action, I would
    dismiss the cross-appeal.

A.

BACKGROUND FACTS

(1)

Overview

[6]

The appellants are 1737161 Ontario Ltd. (173
    Ltd.) and its principal, Carl Priest. The respondents are 1758704 Ontario Inc.
    (175 Inc.) and 1191305 Ontario Inc. (119 Inc.) and their principal, Martin
    Donkers.

[7]

In May 2010, the numbered companies entered into
    an APA, whereby 173 Ltd. Agreed to purchase the assets of 175 Inc. and 119 Inc.

[8]

The APA covered two key transactions. First, 173
    Ltd. Agreed to purchase all the assets set out in Schedule A of the APA (the
    purchased assets). This purchase was to be satisfied through a promissory note
    in the amount of $558,740.00, plus 7% annual interest, which Mr. Priest
    personally guaranteed. The note was payable by monthly blended installments
    from June 2010 to May 2013.

[9]

Second, 173 Ltd. Agreed to assume a number of third-party
    leases from 175 Inc. for several pieces of equipment (the leased equipment),
    as set out in Schedule B of the APA. 173 Ltd. Was to assume the leases for a
    loader and an excavator and make all subsequent payments directly to the
    lessor, John Deere. 173 Ltd. Was to assume the lease for a truck and trailer
    and make monthly payments to 175 Inc., which would remit the payments to the
    lessor, General Electric.

[10]

The numbered companies executed a General
    Security Agreement (GSA), which secured payment under the promissory note and
    granted the corporate respondents security over the purchased assets and leased
    equipment. The GSA was registered under the
Personal Property Security Act
,
    R.S.O. 1990, c. P.10 (
PPSA
).

(2)

The First Default: The Leased Equipment

[11]

173 Ltd. Properly assumed the lease for the loader and made all required
    payments to John Deere until it was paid off in December 2011. 173 Ltd. Also
    properly assumed the lease for the truck and trailer and made all required
    payments to 175 Inc. until the truck and trailer were seized in December 2012.

[12]

However, 173 Ltd. Never properly assumed the lease for the excavator.
    The circumstances surrounding the failed assumption are immaterial. Suffice it
    to say, 173 Ltd. Took possession of the excavator, but made no payments on the
    lease. This resulted in arrears for which 175 Inc. was ultimately responsible
    to John Deere.

[13]

In April 2012, the respondents gave the appellants notice that there
    was $115,399.12 owing in arrears under the APA and GSA for the unassumed excavator
    lease. The notice advised that the respondents considered the arrears an
    occurrence of an event of default and, as a result, the arrears for the excavator
    lease, the amount outstanding under the truck and trailer lease, and the amount
    outstanding under the promissory note became due and payable in full. The notice
    further advised the appellants that they had 10 days to satisfy the excavator
    arrears in full, failing which the respondents would seize the appellants
    assets and sue for any shortfall.

[14]

The appellants made no payments towards the excavator arrears but
    continued to make monthly payments under the truck and trailer lease, and the promissory
    note until November 2012.

(3)

The Second Default: The Promissory Note

[15]

The appellants made every payment under the promissory
    note from June 2010 to October 2012. However, on November 18, 2012, the
    appellants gave Mr. Donkers a cheque for the truck and trailer lease, but made
    no payment on the promissory note. Instead, Mr. Donkers received an unsigned
    letter advising him that the appellants were in the final stages of obtaining
    funding to satisfy the remaining seven payments on the promissory note. The
    letter asked Mr. Donkers to call Mr. Priest to discuss.

[16]

On November 19, Mr. Donkers emailed Mr. Priest
    about the missing cheque. Mr. Priests response merely referenced the letter
    and asked Mr. Donkers to call him. Mr. Donkers replied by email, telling Mr.
    Priest that putting together financing to pay the balance was up to him. There
    is no evidence of any further discussion on the outstanding payment.

(4)

Seizure and Sale of Assets and Equipment

[17]

On December 8 and 9, 2012, the respondents seized
    173 Ltd.s assets, including some of the purchased assets, the truck and trailer,
    and the loader. The respondents did not give the appellants notice; the appellants
    discovered that their equipment was gone on December 10, 2012 and called the
    police.

[18]

On December 14, 2012, the appellants received a
    Notice to Retain Articles from Lloyds Bailiff Services.
[1]
The Notice advised 173 Ltd. Of
    the following: Lloyds intended to retain the seized articles; 173 Ltd. Owed
    175 Inc. and 119 Inc. $132,634 for late payments; and Lloyds would be
    charging ongoing storage fees at $900 per day, or $27,000 per month. The equipment
    was stored at Call Service Towing/Classic Towing and Storage (Call Service),
    and the storage fees from the date the assets were seized to the date they were
    sold totalled $160,200.

[19]

Shortly after the seizure, Mr. Donkers began running
    another business out of the same address as Call Service and used Call Service
    to store some of his own equipment. Mr. Donkers storage costs were considerably
    less: $1,500 per month for roughly 35% less space than that required to store
    the seized assets.

B.

Procedural History

[20]

This litigation has been lengthy, rancorous, and
    messy. Although there were multiple actions and many steps in the litigation
    prior to trial, two events are relevant to the issues on appeal: (a) an appeal
    to this court (March 17, 2014) from an order granting partial summary judgment
    to 175 Inc. and 119 Inc.; and (b) a default judgment granted on February 28,
    2017 (which was later set aside).

(1)

Partial Summary Judgment

[21]

In June of 2013, in an action brought by 175 Inc.
    and 119 Inc. against Mr. Priest, the companies moved for summary judgment on
    the promissory note. McDermot J. granted partial summary judgment in which he
    found Priest had defaulted on the promissory note but ordered a trial on the
    issue of damages. He also struck Mr. Priests Statement of Defence:
1758704
    Ontario Inc. v. Priest
, 2013 ONSC 5395, 1 P.P.S.A.C. (4
th
) 279.

[22]

On appeal, this court agreed with McDermot J.s
    finding that Mr. Priest defaulted on the promissory note, holding there can be
    no dispute about that fact:
1758704 Ontario Inc. v. Priest
, 2014 ONCA
    202, at para. 4. However, the court set aside the part of McDermot J.s order
    that struck Mr. Priests Statement of Defence. The court further held that,
    the appellant is not precluded from arguing, on the return of the injunction
    application and the trial of the issue, that the seizure and sale of the assets
    was unlawful and should prevent the respondents recovery of any deficiency
    from the appellant (at para. 8). This decision is referenced in the trial
    judges reasons, discussed below.

(2)

The Default Judgment

[23]

The underlying actions were consolidated in
    April 2014 and the respondents issued and served a consolidated Statement of
    Claim on July 15, 2016. After failing to file a Statement of Defence, the
    appellants were noted in default on August 30, 2016, and the respondents
    appeared before Mulligan J. on February 28, 2017, on a default judgment motion.
    The appellants did not attend the hearing and Mulligan J. awarded the
    respondents $368,339.79 in damages, calculated as follows:

·

$161,943.65 in damages for the outstanding
    principal and interest owing under the Promissory Note, calculated from the
    date of default until the date of the default judgment hearing, plus 7% annual
    interest from the date of judgment; plus

·

$189,804.49 in damages for the outstanding
    principal and interest owing under the excavator lease, after deducting credits
    from John Deeres sale of the equipment, plus 7% post-judgment interest; plus

·

$50,814.84 in damages for the outstanding
    principal and interest owing under the truck and trailer lease, plus 7%
    post-judgment interest; and minus

·

$34,223.19 in credit to the appellants,
    representing the difference between the respondents expenses ($236,082.65) and
    amount the respondents recovered after selling the seized equipment ($
270,305.84)
.

[24]

The default judgment was set aside on an unopposed
    motion. At a subsequent appearance before Di Tomaso J. on June 14, 2019, he
    made an order, on consent, issuing a Writ of Seizure and Sale against the
    appellants for $383,409.79, being roughly the amount awarded under the default
    judgment.

C.

the trial judges reasons

[25]

After reviewing the evidence, the trial judge
    referred to this courts earlier decision in this litigation and framed the
    issues before her as follows (at para. 86):

Mr. Priests failure to make the November
    payment on the Promissory Note has already been judicially determined to be a
    default, of which I am in full agreement. Pursuant to the GSA, any default
    permitted Mr. Donkers to pursue the remedies contained in the GSA, including
    seizure and sale. Thus, the issues before me are:

1.
Was notice required prior to the 2012 seizure?

2.
If not, what damages flow from the default?

(1)

Notice

[26]

The trial judge found that, by operation of the
PPSA
,
    the respondents were not required to give the appellants notice of their
    intention to seize the equipment as a result of the default on the promissory note.

[27]

The trial judge rejected the appellants argument that the duty
    of good faith in the performance of contracts obliged Mr. Donkers to tell Mr.
    Priest that he considered the missed November 2012 payment a default on the promissory
    note and that he intended to seize the equipment: see
Bhasin
    v. Hrynew
, 2014 SCC 71, [2014] 3 S.C.R. 494;
C.M.
    Callow Inc. v. Zollinger
, 2020 SCC 45, 452 D.L.R. (4
th
) 44.

[28]

Consequently, the trial judge dismissed the
    counterclaim.

(2)

Damages

[29]

The trial judge re-calculated the quantum of
    damages. She resisted the respondents invitation to simply endorse the
    accounting of Mulligan J. on the default judgment. The trial judge said (at
    para. 99): I concur to a certain degree, but adjustments are required. Recall
    that Mulligan J. was presented only with Mr. Donkers version of events; I have
    had the benefit of a full trial, with submissions from all parties. While
    Mulligan J. had calculated damages in the amount of $368,339.79, the trial
    judge awarded $200,865.48.

[30]

Additionally, the trial judge found the
    appellant Priest to be jointly and severally liable with 173 Ltd. For the failure
    to assume the excavator lease.

(3)

Writ of Seizure and Sale

[31]

As for the Writ in the amount of $383,409.79, the
    trial judge waived the requirements under r. 60.07(18) of the
Rules of Civil
    Procedure
, R.R.O. 1990, O. Reg. 194, which provides that no sale of real
    property may proceed until six months after the writ has been filed with the
    sheriff.

(4)

Costs

[32]

The trial judge ordered $137,812.65 in costs
    against the appellants on a joint and several basis.

D.

ISSUES ON APPEAL

[33]

The appellants appeal the dismissal of the
    counterclaim on the notice issue. In the alternative, they submit that the
    trial judge erred in finding Mr. Priest personally liable for failing to assume
    the excavator lease. Finally, they appeal the decision to waive the six-month
    waiting period under the Writ of Seizure and Sale.

[34]

The respondents appeal the trial judges
    calculation of damages, urging this court to substitute the order of Mulligan
    J.

E.

ANALYSIS

(1)

Notice Was Required

[35]

In my view, the appellants were entitled to
    notice prior to the seizure of the collateral, at common law and pursuant to
    the APA.

[36]

The APA, promissory note, and GSA all include
    provisions relevant to an event of default.

[37]

The APA provides that, if 173 Ltd. Defaults on
    any payments under the Agreement, the respondents must give 173 Ltd. 15 days
    notice before seizing the purchased assets. The leased equipment is excluded
    from this provision.

[38]

The promissory note includes an acceleration
    clause in the event of default, such that the entire unpaid balance and accrued
    interest becomes payable immediately. It contains no notice requirement.

[39]

Similarly, the GSA makes any outstanding
    obligations  including those under the promissory note and equipment leases 
    immediately payable in full upon default. It also specifies the remedies
    available to the respondents, including the right to enter any premises where
    the purchased assets or leased equipment are located, and to repossess and sell
    those items. Like the promissory note, the GSA stipulates no notice
    requirement.

(a)

The
PPSA

[40]

In my respectful view, the trial judge erred in
    finding that the
PPSA
relieved the respondents of the obligation to give
    the appellants notice of its intention to seize the secured assets.

[41]

Part V of the
PPSA
provides rights and
    remedies to a creditor upon default of a debtor. More specifically, s. 62 gives
    the creditor the right to take possession of the secured goods, unless
    otherwise agreed, or if the secured goods are equipment, the right to render
    the equipment unusable, but without removing it from the debtors premises.
    Section 63 then grants the creditor the right to dispose of the secured goods,
    provided the creditor gives the debtor at least 15 days advance notice, in
    writing: s. 63(4). However, pursuant to s. 63(7)I, no notice is required under
    s. 63(4) where the goods are of a type customarily sold on a recognized market.

[42]

Relying on
Lloyds Bank Canada v. Transfirst
    Inc.
, 71 O.R. (2d) 481 (Ont. H.C.) and
AJM Leasing v. Brown
(2002), 6
    P.P.S.A.C. (3d) 58 (Ont. S.C.), the trial judge was satisfied the seized assets
    fell within the exception under s. 63(7) of the
PPSA
; therefore Mr.
    Donkers had no obligation to give Mr. Priest notice.

[43]

In my view, s. 63(7)I of the
PPSA
had no
    application in the circumstances; it could not relieve the respondents of its
    common law obligation to provide notice to the appellants, and its contractual
    obligation under the APA.

[44]

Looking at the scheme of the
PPSA
as a
    whole, s. 62 (Possession Upon Default) addresses the rights of creditors in
    terms of seizing secured assets, whereas s. 63 (Disposal of Collateral)
    speaks to disposition. In Jacob S. Ziegel, David L. Denomme & Anthony
    Duggan,
The Ontario Personal Property Security Act  Commentary and Analysis
,
    3
rd
ed. (Toronto: LexisNexis, 2020), the authors describe the
    operation of s. 63, at p. 486: Once the secured party has repossessed the
    collateral it will typically proceed with its disposition either directly or
    through a receiver. Section 63 is concerned with all aspects of the disposal
    process.

[45]

Although the trial judge may have been correct
    in finding that the seized equipment was fungible for the purposes of s. 63(7)I,
    the provision has no application at the pre-seizure stage. The respondents were
    required to give notice at common law, and according to the terms of the APA.

(b)

Common Law Duty

The Principle in
Lister
    v. Dunlop

[46]

The trial judge did not consider the position
    advanced by the appellants on the common law obligation to give notice to a
    debtor before seizing secured assets. This principle was adopted in Canada in
R.E.
    Lister Ltd. V. Dunlop Canada Ltd.
, [1982] 1 S.C.R. 726. Writing for the
    Court, Estey J. said, at p. 746:

The rule has long been that enunciated
    in
Massey v. Sladen
(1868), L.R. 4 Ex. 13 at 19, 38 L.J.
    Ex. 34: the debtor must be given some notice on which he might reasonably
    expect to be able to act. The application of this simple proposition will
    depend upon all the facts and circumstances in each case. Failure to give such
    reasonable notice places the debtor under economic, but nonetheless real
    duress, often as real as physical duress to the person, and no doubt explains
    the eagerness of the courts to construe debt-evidencing or creating documents
    as including in all cases the requirement of reasonable notice for payment.

[47]

See also
Royal Bank of Canada v. W. Got &
    Associates Electric Ltd.
, [1999] 3 S.C.R. 408, at p. 417, where it is
    applied in a debt collection action that shares some similarities with this
    case.

[48]

In
Kavcar Investments Ltd. V. Aetna Financial
    Services Ltd.
(1989), 70 O.R. (2d) 225 (C.A.), this court applied and
    clarified the
Lister
principle. McKinlay J.A. wrote that it applies,
    regardless of the wording of the security document (at p. 228) and that [r]easonable
    time must be given by the creditor, whether or not asked for by the debtor (at
    p. 235). See also
Waldron v. Royal Bank
(1991), 53 B.C.L.R. (2d) 294 (B.C.C.A.),
    at p. 7,
per
Lambert J.A.

[49]

In
Kavcar
and
Got Electric
, both
    courts considered what constitutes reasonable notice in the circumstances. However,
    it is not necessary to address that issue in this case because, as discussed
    below, no notice was given at all.

[50]

The
Lister
principle has been embedded in
    Canadian debtor-creditor law for decades. This reality is important when
    considering the reach and effect of the
PPSA
. The respondents submit
    that it has been ousted by the
PPSA
. Even if I were to accept the respondents
    interpretation of s. 63(7) of that Act, there is no basis to conclude that the
    Legislature intended to extinguish the
Lister v. Dunlop
line of
    authority:
Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp
.,
    2020 SCC 29, 41 B.C.L.R. (6
th
) 1, at para. 39;
Parry Sound (District)
    Social Services Administration Board v. O.P.S.E.U., Local 324
,
2003 SCC 42
, [2003] 2
    S.C.R. 157, at para.
39
. In
Goodyear
    Tire & Rubber Co. of Canada Ltd. V. T. Eaton Co. Ltd.
, [1956] S.C.R.
    610, at p. 614, Fauteux J. (as he then was) wrote, a Legislature is not
    presumed to depart from the general system of the law without expressing its
    intentions to do so with irresistible clearness, failing which the law remains
    undisturbed.

[51]

In my view, the
Lister v. Dunlop
line of
    cases remains undisturbed by the
PPSA
.

Application to
    his Case

[52]

Despite their assertion that they were under no
    duty to give the appellants notice, the respondents submit that they did give
    reasonable notice to the appellants. In their Factum, they assert, The Trial
    Judge found as a fact that there was a demand for payment and notice of default
    given by the Respondents to the Appellants on April 20, 2012.

[53]

This is a distortion of the trial judges
    reasons. She found that the seizure of the equipment was
not
based on
    the April 2012 Notice. The trial judge found that the respondents did not take
    any steps on that notice and, [m]atters continued on much as they had for the
    previous two years (at para. 33).

[54]

The trial judge rejected Mr. Donkers evidence
    that he had always intended to seize the equipment on the strength of the earlier
    notice. He testified that he waited until after the summer because he did not
    want to harm the appellants business. The trial judge rejected this evidence,
    holding that it did not ring true, especially since the respondents were
    forced to pay more than $100,000 in relation to the excavator lease.

[55]

The trial judge concluded her analysis of this
    aspect of the facts in the following way: Given the deficiencies contained in
    the 2012 Notice,
had Mr. Donkers relied upon it to seize equipment
, he
    would have been on tenuous ground. Fortunately for Mr. Donkers, and
    unfortunately for Mr. Priest, however, a second breach intervened (at para. 55).
    In relation to the second default, the trial judge made the following finding,
    at para. 63:

Mr. Donkers seized the defendants assets over
    the weekend of December 8, 2012.
Priest was not given notice of the seizure,
    nor was he given an opportunity to cure the default or redeem the equipment
    before seizure.
[Emphasis added.]

[56]

Consequently, the question of reasonable notice
    was tethered to the November 2012 default on the promissory note, not the April
    2012 default concerning the excavator lease. Indeed, the trial judge found that
    Mr. Donkers acted out of spite when he did not tell Mr. Priest he was treating
    the missed payment as a default (at para. 96).

[57]

The trial judge erred in dismissing the
    counterclaim. As the Supreme Court held in
Got Electric
at paras. 20-21,
    the seizure of assets without notice amounts to a breach of contract. The same
    set of circumstances may also support an action for the tort of conversion. In
    that case, the Court decided that it was unnecessary to consider whether
    conversion was made out because the quantum of damages would not differ,
    whether liability sounded in contract or in tort (at pp. 418-419). Here too,
    having found that the respondents conduct amounted to a breach of  contract,
    it is not necessary to address the tort claim.

(c)

Notice Requirement in the APA

[58]

In addition to the common law doctrine discussed
    above, the appellants rely upon the APA, which also provides a duty to give
    notice in the event of default. Para. 3.03 of the APA provides:

3.03   That
upon default of any payment
owing hereunder
the
    Vendor shall forthwith provide notice of such default to the Purchaser
or
    its solicitor by fax or by electronic communication at fax numbers or email
    addresses to be designated by the Purchaser.
Upon such default existing for
    a period of fifteen (15) days following receipt notification of such default
,
    the Vendor shall thereafter be entitled to forthwith have all licences and
    certificates howsoever related to the assets included hereunder reverted back
    to name of the Vendor or as it might direct which to such reversion of said
    licences and certifications the Purchaser does hereby consent and agree.
    Further in the event of such default, the Vendor shall have the right to seize
    all chattels and assets included hereunder pursuant to its security
    documentation however to mitigate its losses and without interference from the
    Purchaser. [Emphasis added.]

[59]

The trial judge did not address this provision
    in her reasons. The appellants submit that the trial judge erred in failing to
    give effect to this provision in relation to the default on the promissory
    note. The respondents submit that the notice provision in Article 3.03 is
    inapplicable because it merged on closing.

[60]

I would reject the respondents submissions. The
    notice provision in Article 3.03 remained operative. It did not merge upon
    closing.

[61]

Although the doctrine of merger has some
    application to real property transactions (see
Fraser-Reid v. Droumtsekas
,
    [1980] 1 S.C.R. 720, at pp. 734-738), [t]he doctrine has never applied to
    transactions involving personal property, such as goods: G.H.L. Fridman,
The
    Law of Contract in Canada
, 6
th
ed. (Toronto: Thomson Reuters
    Canada Limited, 2011), at p. 566. Moreover, even when applicable, merger is not
    automatic; it is the intentions of the parties that must prevail:
Fraser-Reid
,
    at p. 738. This is a fact-specific inquiry.

[62]

In this case, the inclusion of Article 3.03 would
    make no sense if it were to merge upon closing. The entire transaction, for
    both purchased and leased equipment, was structured on installment payments to
    satisfy outstanding debt. It provided that, in the event of default of any
    payment owing hereunder, the respondents would have certain remedies, and the
    appellants would be entitled to  notice.

[63]

The respondents breached this term of the APA.

(d)

Conclusion

[64]

For the foregoing reasons, the trial judge erred
    in finding that the respondents had no duty to give the appellants notice upon
    the default on the promissory note.

[65]

The failure to provide notice was not an
    academic exercise or a mere formality in this case. The record before the trial
    judge established that, in October 2012, the appellants applied to their bank
    for financing to retire the balance on the promissory note, which was roughly
    $120,645 at the time. Just days after the illegal seizure, on December 12,
    2012, the bank approved the advance of $122,000.

[66]

Given my conclusion that the appellants were
    entitled to notice at common law and according to the terms of the APA, it is
    not necessary to address the appellants alternative argument that the duty of
    good faith in the performance of contracts required the respondents to give
    notice of its intention to seize the appellants assets. The application of
    this duty would be especially difficult in this case given the trial judges apt
    finding, at para. 95: To be frank, both parties acted dishonourably.

[67]

I would set aside the trial judges order
    dismissing the counterclaim, allow the counterclaim, and remit the matter to
    the Superior Court for an assessment of damages. During her submissions at the
    hearing, appellants counsel advised us that the matter could be addressed in
    writing because the trial judge heard all of the evidence relevant to this
    issue. While that may well be the case, the matter of how to proceed is best
    determined by that court.

(2)

Personal Liability and the Excavator Lease

[68]

The trial judge found that both 173 Ltd. And Mr.
    Priest were liable for failing to properly assume the excavator lease. At para.
    48 of her reasons, the trial judge found, [b]ased on the evidence before me, I
    am satisfied that Mr. Priest failed to assume the Excavator lease pursuant to
    the Agreement. She awarded damages against both 173 Ltd. And Priest. This
    finding may well have been inadvertent, a simple result of failing to
    distinguish between Priest and his company.

[69]

Nonetheless, I agree with the appellants that
    the trial judge erred in awarding damages against Mr. Priest personally. Mr.
    Priest was not a party to the APA. Although he was personally liable on the
    promissory note, the note only applied to purchased assets, not leased
    equipment. In the absence of findings that would support a decision to pierce
    the corporate veil, and there were none, this part of the trial judges order
    cannot stand.

(3)

Damages

[70]

The respondents appeal the trial judges
    calculation of damages. As noted above, at para. 29, the trial judge made
    adjustments to Mulligan J.s calculations. She did so because she had the
    benefit of a more robust record, including input from both sides. The trial
    judges assessment of damages must be accorded significant deference unless
    tainted by an error in principle, or is unreasonably high or low:
Awan v.
    Levant
, 2016 ONCA 970, 133 O.R. (3d) 401, at paras. 100-101 and
Whitefish
    Lake Band of Indians v. Canada (Attorney General)
, 2007 ONCA 744, 87 O.R.
    (3d) 321, at para. 28. The respondents have failed to identify any such error.

Promissory Note
    and Excavator

[71]

The trial judge accepted Mulligan J.s
    calculations and only adjusted the amount to reflect interest to date.

Loader

[72]

Although Mulligan J. did not address the loader
    in his endorsement, the trial judge determined the loader was sold for $15,000
    less than it was worth. Mr. Donkers commissioned three appraisals for the loader,
    which averaged out at $49,000. However, the loader was only sold for $34,000.
    The trial judge also noted the fact the loader was sold to the owner of Call
    Service rendered the sale questionable. She granted Mr. Priest a $15,000
    credit for the sale of the loader.

[73]

In my view, it was in the trial judges purview
    to make this finding.

Truck and
    Trailer

[74]

Mulligan J. awarded $50,814.84 in damages for
    the outstanding payments on the truck and trailer lease, plus interest. The
    trial judge rejected this award and removed the amount from her consideration
    of damages. She noted that there was $33,661.33 outstanding on the lease
    between the seizure and sale of the truck and trailer. General Electric
    repossessed the truck and trailer from Mr. Donkers and consigned them to a
    third party, which sold the equipment at auction for $101,500. The third party
    paid General Electric the outstanding $33,661.33 and remitted the remaining
    $65,538.67 to Mr. Donkers. That amount was then properly credited to Mr.
    Priest. Since Mr. Donkers was never required to make any payments to General
    Electric for the truck and trailer, there was no basis upon which to award him
    $50,814.84 in damages.

[75]

I agree with the trial judges assessment of
    this issue.

Storage Costs

[76]

Mulligan
    J. approved the respondents expenses at $236,082.65, which included $160,200
    for the 178 days the seized assets were stored at Call Service. However, the
    trial judge found the $900 per day storage fee was excessive. Mr. Donkers had
    eight months (from April 2012, when the appellants received the 2012 Notice, to
    December 2012, when the respondents seized 173 Ltd.s assets) to find a
    suitable facility at a reasonable rate, yet there was no evidence he made any
    effort to look elsewhere than Call Service. Considering the rate Mr. Donkers
    was paying to store his own equipment with Call Service, the trial judge
    concluded $10,000 was a reasonable monthly fee, for a total of $60,000 for the
    roughly six months the seized assets spent in storage. Accordingly, she gave
    Mr. Priest a $100,200 credit, representing the excessive storage fees.

[77]

It
    was unclear whether interest applied to the Call Service storage costs that Mr.
    Donkers personally guaranteed. Accordingly, the trial judge held that if Mr.
    Donkers satisfied Mr. Priests counsel that interest applied, it would be
    calculated at the rate set out in s. 127 of the
Courts of Justice Act
,
    R.S.O. 1990, c. C-43.

[78]

Again,
    I see no error in the trial judges approach.

(4)

The Writ of Seizure and Sale

[79]

Given that this case must be returned to the
    Superior Court for an assessment of damages on the counterclaim, the writ is
    set aside altogether. It is not necessary to consider the issue of waiver.

F.

conclusion

[80]

I would allow the appellants appeal against the
    dismissal of its counterclaim and remit the case to the Superior Court for an
    assessment of the appellants damages. I would dismiss the cross-appeal against
    the trial judges award of damages in the main action.

[81]

Both parties agreed that the successful party is
    entitled to costs of the appeal in the amount of $20,000, plus disbursements
    and HST. Costs are awarded to the appellants in this amount.

[82]

As for the costs awarded at trial, the parties
    are content that they be addressed in the Superior Court in conjunction with
    the assessment of damages on the counterclaim.

Released: MLB August 30, 2021

Gary Trotter J.A.
I agree. M.L. Benotto J.A.

I agree. B.W. Miller J.A.





Erratum

Correction made September 22, 2021: The
    phrase inclusive of disbursements and HST in paragraph 81 was replaced with
    plus disbursements and HST.





[1]
Note that the bailiff in this case used the wrong form. This notice
    was under the
Repair and Storage Liens Act
, R.S.O. 1990, c. R.25. Where
    creditors seek to secure payment of a debt by taking a security interest in
    property of the debtor, they must issue a Notice of Intent to Enforce
    Security pursuant to the
PPSA
.


