



COURT OF APPEAL FOR ONTARIO

CITATION: Pita Royale Inc. (Aroma Taste of the Middle East)
    v. Buckingham Properties Inc., 2019 ONCA 439

DATE: 20190527

DOCKET: C64803

Hourigan, Benotto and Huscroft JJ.A.

BETWEEN

Pita Royale Inc. o/a Aroma Taste of the Middle
    East

Plaintiff

(Respondent)

and

Buckingham
    Properties Inc.

and William Mandelbaum

Defendants

(Appellants)

David A. Weisman, for the appellants

Harvey S. Consky and Rana Nosratpanah Gashti, for the
    respondent

Heard: February 21, 2019

On appeal from the judgment of Justice Carole J. Brown of
    the Superior Court of Justice, dated December 18, 2017, with reasons reported
    at 2017 ONSC 5976.

Hourigan J.A.:

Overview

[1]

The appeal arises from an action by the respondent
    against Buckingham Properties Inc. (Buckingham) and its principal, William
    Mandelbaum, for improper termination of a commercial lease of a restaurant and
    illegal distraint or conversion of the restaurant chattels. Buckingham counterclaimed
    for arrears of rent.

[2]

The trial judge found that the lease termination was proper, but that Buckingham
    had illegally distrained the respondents chattels. The first finding is not
    challenged on appeal.
The trial judge awarded the respondent $58,190.74
    in damages for conversion, $10,000 in punitive damages, and costs on a partial
    indemnity basis in the amount of $74,305.15. These amounts were offset by
    damages of $1,294 for unpaid rent awarded on the counterclaim. In addition, the
    trial judge found that Mr. Mandelbaum was jointly and severally liable for
    these damages with Buckingham.

[3]

This appeal raises the following issues:


(i)

Did the trial judge err in finding that the respondents
    goods and chattels were illegally distrained or that they had a value of
    $58,190.74?


(ii)

Did the trial judge err in awarding punitive
    damages in the amount of $10,000?


(iii)

Did the trial judge err in finding Mr.
    Mandelbaum jointly and severally liable with Buckingham?


(iv)

Did the trial judge err in her assessment of
    damages on the counterclaim?


(v)

Did the trial judge err in awarding costs?

[4]

For the following reasons, I would allow the appeal in
    part. I would reduce the damages for conversion to $18,539.71, but not
    interfere with the punitive damages or the damages awarded on the counterclaim.
    In addition, I would set aside the finding that Mr. Mandelbaum is jointly and
    severally liable with Buckingham, and order that the parties make written
    submissions regarding the trial costs if they cannot resolve that issue.

Analysis

Issue 1: Illegal Distraint

[5]

The trial judge did not err in finding that Buckingham
    had to choose between the mutually exclusive remedies of termination and
    distress. Instead of making a choice, it attempted to do both. Thus, the
    distraint was illegal.

[6]


The critical issue on distraint is the trial judges
    calculation of damages. The appellants submit that there were a limited number
    of items left on the premises and that Buckingham paid for those by means of a
    $4,000 cheque that was delivered to the respondent after Buckingham retook
    possession.
The trial judge found that the value of the goods distrained
    was far in excess of $4,000. However, she did not specifically identify which
    chattels had been distrained and did not provide any analysis of the quantum of
    damages. She simply noted, [b]ased on the evidence adduced, I award damages
    for conversion in the amount of $58,190.74.

[7]

At trial, the main evidence regarding the quantum of damages consisted
    of bank statements and cheque images relating to various items purchased for
    the restaurant. The respondent provided additional evidence in his
viva voce
testimony, explaining the purpose for each expense noted in those exhibits. He further
    testified to what he remembered to have paid for certain additional items.

[8]

The respondents counsel also prepared a list entitled Schedule of
    Plaintiffs Capital & Renovation Costs (the C&R List). The C&R
    List was provided to the trial judge just for demonstrative purposes. It
    purported to summarize the relevant expenses documented in the cheque images
    and bank statements. The list had several flaws: it included some items that
    should have been excluded, and it excluded some items that likely should have
    been included. The respondents counsel prepared an amended version of the list
    (the Amended C&R List), which decreased the amount claimed from
    $76,538.26 to $58,190.78.

[9]

The appellants argue that the damages awarded were based on the Amended
    C&R List, and that the list included several items that should have been
    excluded. In particular, the appellants submit that certain items were
    fixtures, and that third party leasing companies owned certain other chattels.
    As a result, the appellants say, the quantum of damages should have been much
    lower.

[10]

Although
    the respondent addresses some of the appellants arguments, it does not
    specifically address every item on the list line-by-line, but generally submits
    that the trial judges factual findings are owed deference. The respondent also
    argues that the trial judge did not rely solely on the Amended C&R List to
    calculate the damages, but on all of the evidence. Its position is that the
    trial judge did not include any listed fixtures in her award of damages, but
    included other items not on the list.

[11]

Trial
    judges assessments of damages are owed considerable deference by an appellate
    court:
Naylor Group Inc. v. Ellis-Don Construction Ltd.
, 2001 SCC 58,
    [2001] 2 S.C.R. 943, at para. 80. The calculation of damages is often more of
    an art than a science, requiring the trial judge to make judgment calls. In
    this case, however, the trial judge has offered no guidance on how she
    calculated the damages..  It therefore falls to this court to review the
    evidence and calculate the damages that should have been awarded.

[12]

I
    start with the Amended C&R List. It includes claims related to leased
    equipment. The respondent filed several equipment lease documents, which generally
    provide that the respondent would have had an option after three years to
    purchase the equipment. In the meantime, however, the respondent would not have
    any title or right to the equipment beyond a right to maintain possession. Therefore,
    the respondent had accumulated no equity interest in the equipment at the time
    of the distraint. The equipment was subsequently returned to its owners. As a
    result, these items were not subject to distraint and should be excluded from
    the calculation of damages. These claims total $21,786.24.

[13]

I
    would also disallow several claims in the Amended C&R List for items
    related to renovation costs. These claims, which consist of money paid to
    contractors and total $6,400.00, cannot be included in a claim for illegal
    distraint. Nor would I permit costs that are clearly related to fixtures (e.g.,
    a fire door, drywall, tiles, and lights). These fixture claims total $7,758.29.

[14]

The
    respondent made a claim for restaurant equipment originally purchased from
    Buckingham for $16,950. It is clear that many of the items purchased were no
    longer on the premises following a renovation of the property undertaken by the
    respondent. The purchase also seems to have included an element attributable to
    goodwill. However, the respondents principal, Jcyk Josefsberg, testified that
    there remained on the premises a walk-in refrigerator and freezer that was part
    of this purchase. He valued that item at $5,000, and I would include that
    amount in the damages awarded under the Amended C&R List.

[15]

In
    addition to the foregoing, I would reduce the amount awarded by $320.59 to
    reflect amounts that were erroneously referred to as debits to the respondents
    bank account but were actually credits.

[16]

In
    total, I would award damages pursuant to the Amended C&R List in the amount
    of $10,375.15

[17]

The
    respondent is correct that it was open to the trial judge to award damages for
    items that were not included in the Amended C&R List. Together with Mr.
    Josefsbergs testimony, the cheque images filed support the inclusion of
    certain other amounts in the damages award. They amount to $7,864.56 and
    include amounts paid for a cash register touch screen, a salad bar, a debit
    machine, dishes, and supplies.

[18]

In
    addition to the C&R List, another list was also provided to the trial judge,
    titled List of Inventory Being Claimed by Mr. Josefsberg (the Inventory
    List). This list summarized the chattels that the respondent claimed in his
viva
    voce
testimony to have been distrained by the defendant. At para. 34 of her
    reasons, the trial judge mentioned many items on this list with implicit
    approval, and it was open to her to find that they were distrained by the
    appellant based on the respondents testimony. Most of the items, such as a
    cutting board, a stereo system, and mirrors, did not appear on any other list
    already mentioned.

[19]

The
    Inventory List filed on appeal does not include any monetary values for the
    chattels. It appears from the transcripts that a version of this list with
    monetary values was presented at trial. It was not, however, made an exhibit;
    it was only meant to assist the court. The respondent did, however, provide
    testimony on what he remembered to have paid for a handful of the listed items.
    Specifically, he testified that he paid $300-$600 for a set of stainless steel
    shelves, $250 for a bistro set, and $750 for tables. Therefore, I would award
    $1,300 for items on the Inventory List.

[20]

In
    a supplementary factum filed on appeal, the respondent includes two more lists,
    which were not provided at trial. Together, items on these lists add up to
    $59,178.30. The first list, the Receipted Chattels List, purports to include
    items paid for by cheque, debit or credit card payment. The second list
    included in the respondents supplementary factum is the Unreceipted Chattels
    List, and it purports to include items paid for by cash or debit. Both lists
    consist almost entirely of items already discussed as part of other lists. The
    only new item from these lists open to the trial judge to add to the quantum of
    damages was $3,000 towards a sign. The appellants conceded in their analysis of
    the Amended C&R List that a partial payment of $1,000 for this sign would
    be properly included in the damages. Therefore, I would add $3,000 to the
    damages calculation for this item.

[21]

Based
    on the foregoing, I would calculate damages to be $22,539.71. There is no
    evidentiary basis for additional damages.

[22]

It
    is uncontroverted that Buckingham paid $4,000 to the respondent pursuant to a
    Bill of Sale for assorted tables & chairs, assorted dishes, pots &
    pans.

In the appellants submission,
    the amounts properly included in the calculation of damages  which the
    appellants argue total $4,629.25  were covered by that $4,000. The
    respondent argues that the appellants should not be allowed to profit from
    their illegal distraint, and that it only accepted the $4,000 in dire
    financial circumstances.

[23]

The
    trial judge did not reduce the amount of damages by $4,000. I find that she
    erred in not setting this payment off from the damages awarded. I would allow this
    set-off because the respondent did not establish that there was no overlap
    between the Bill of Sale and the items for which damages were awarded.

[24]

In
    summary, I would calculate damages for conversion to total $22,539.71, but
    would reduce that amount by $4,000 to reflect the payment made pursuant to the
    Bill of Sale, so that the final figure for such damages is $18,539.71.

Issue 2: Punitive Damages

[25]

The
    trial judge was satisfied that the actions of the appellants in distraining the
    chattels on the premises and converting them for use by a new tenant without
    providing Mr. Josefsberg with an opportunity to remove those items from the
    restaurant warranted an award of punitive damages. She also found that these
    actions caused injury to the respondents credit and reputation.

[26]

The
    appellants submit that if they are found not to have illegally distrained the
    respondents property, there is no basis to award punitive damages. However, as
    noted above, the respondent's property was illegally distrained, albeit at a
    much lower amount than the trial judge found.

[27]

Appellate
    courts will not lightly interfere with a trial judges decision that punitive
    damages are appropriate in the circumstances of a given case, so long as they
    are a rational response to the facts:
Whiten v. Pilot Insurance Co.
, 2002
    SCC 18, [2002] 1 S.C.R. 595, at paras. 76, 100
.
The findings made in
    support of the award were open to the trial judge on the record, and they
    rationally support the imposition of punitive damages in the amount ordered. I
    see no basis for appellate interference.

Issue 3: Personal Liability

[28]

The
    trial judge found Mr. Mandelbaum personally liable. In so finding, she stated,
    [t]he individual defendant cannot hide behind the corporate veil in the
    circumstances of this case. She also found that the relationship of
    landlord-tenant was between Mr. Mandelbaum and Mr. Josefsberg. Further, the
    trial judge relied on a British Columba Supreme Court decision for the
    proposition that [d]irectors may be held responsible for the tortious acts of
    their company where those acts were expressly directed by them:
Beaver
    Steel Inc. v. Skylark Ventures Ltd.
, [1983] B.C.J. No. 54 (S.C.). Those
    statements represent the totality of the trial judges analysis of Mr. Mandelbaums
    personal liability. In my view, the trial judge erred in law in finding Mr.
    Mandelbaum personally liable.

[29]

The
    trial judge erred in her analysis of the parties to the lease. Contrary to her
    statement, the lease was between the respondent and Buckingham, two corporate
    parties. There was no pleading that the corporate principals were the real
    parties to the lease. There was also no evidence to support such a finding. The
    fact is that corporations act through officers and directors. That does not
    change the nature of the contractual relationships they enter into, such as the
    commercial lease in this case.

[30]

The
    trial judge also erred in failing to consider the nature of the allegations
    pleaded against Mr. Mandelbaum. In
McDowell v. Fortress Real Capital Inc.
, 2019 ONCA 71, this court emphasized the need to
    plead the particulars of tortious conduct separate from that of the company
    when suing officers and directors
. In the statement of claim, Mr.
    Mandelbaum was sued on the basis that he was at all material times the
    director, president and controlling mind of Buckingham Properties Inc. There
    were no allegations of separate misconduct levelled against him. It is
    unconscionable to find an officer or director of a company liable in
    circumstances where they do not know the precise nature of the alleged
    malfeasance and how it leads to liability separate from that of the
    corporation.

[31]

In
    addition,
Beaver Steel
was relied on by the trial judge without
    reference to the leading case in Ontario on officers and directors liability,
    being
ScotiaMcLeod Inc. v. Peoples Jewellers Ltd.
(1995), 26 O. R.
    (3d) 481 (C.A.). That case was binding on the trial judge. In it, Justice
    Finlayson said the following about the personal liability of directors and
    officers for torts, at pp. 490-91:

The decided cases in which employees and officers of companies
    have been found personally liable for actions ostensibly carried out under a
    corporate name are fact- specific. In the absence of findings of fraud, deceit,
    dishonesty or want of authority on the part of employees or officers, they are
    also rare. Those cases in which the corporate veil has been pierced usually
    involve transactions where the use of the corporate structure was a sham from
    the outset or was an afterthought to a deal which had gone sour... Additionally
    there have been attempts by injured parties to attach liability to the
    principals of failed businesses through insolvency litigation. In every case,
    however, the facts giving rise to personal liability were specifically pleaded.
    Absent allegations which fit within the categories described above, officers or
    employees of limited companies are protected from personal liability unless it
    can be shown that their actions are themselves tortious or exhibit a separate
    identity or interest from that of the company so as to make the act or conduct
    complained of their own.

[32]

More
    recently, in
642947
Ontario Ltd.
    v. Fleischer

(2001),
56 O.R. (3d) 417 (C.A.)
, at para. 68, Laskin J.A. stated
as follows:

Typically, the corporate veil is pierced when the company is
    incorporated for an illegal, fraudulent or improper purpose. But it can also be
    pierced if when incorporated those in control expressly direct a wrongful
    thing to be done:
Clarkson Co.
v
. Zhelka
at p. 578. Sharpe J. set out a useful
    statement of the guiding principle in
Transamerica
    Life Insurance Co. of Canada
v
. Canada
    Life Assurance Co.

(1996),
1996 CanLII 7979 (ON SC)
,
28 O.R. (3d) 423
at pp. 433-34
(Gen.
    Div.), affd
[1997] O.J. No.
    3754 (C.A.)
: the courts will disregard the separate legal
    personality of a corporate entity where it is completely dominated and
    controlled and being used as a shield for fraudulent or improper conduct.

[33]

In this case there was no evidence that the Buckingham
    was incorporated as a sham or was being used as a shield for fraudulent or
    improper conduct. If the trial judges analysis were accepted, then any time a
    corporation engaged in a tort its officers and directors would be personally
    liable. In summary, this is not one of those exceptional cases where the
    corporate veil should be pierced to impose liability on an officer or director.

Issue 4: Counterclaim

[34]

In
    its counterclaim, Buckingham sought $9,879 for rental arrears in addition to
    $1,000 for work it alleges was done by its workers on the premises.

[35]

The
    key issue in the claim for rental arrears was the date when the respondent was
    locked out. Buckingham took the position that it occurred in September and the
    respondents submitted that it took place in August. The trial judge preferred
    the evidence of the respondent on this point and calculated rental arrears
    accordingly. This was a finding open to her on the evidence.

[36]

The
    trial judge also found that there was no evidence to support the claim for the
    work alleged to have been undertaken. Again this was a finding open to the
    trial judge on the record.

[37]

In
    the circumstances, I would not interfere with the trial judges calculation of
    damages in the counterclaim.

Issue 5: Costs at Trial

[38]

As
    a result of the conclusions herein, the costs award made by the trial judge
    cannot stand. The parties are encouraged to reach an agreement on the issue of
    the trial costs. If they cannot do so, I would require written submissions to
    this court within 14 days of the issuance of these reasons.

Disposition

[39]

I
would allow the appeal in part and reduce the damages for
    conversion to
$18,539.71,
but I would not interfere
    with the punitive damages award. The damages awarded on the counterclaim are
    upheld and those damages should be set off against the conversion damages. In
    addition, I would set aside the finding that Mr. Mandelbaum is liable and order
    that the parties make written submissions regarding the trial costs if they are
    unable to agree on the issue.

[40]

With
    respect to the costs of the appeal, I am of the view that there has been mixed
    success and would award no costs.

Released: C.W.H. May 27, 2019

C.W. Hourigan J.A.

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

I agree. Grant Huscroft J.A.


