101003246 Saskatchewan Ltd. - v. -, 2010 SKPC 174

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2010 SKPC 174 Date: December 15, 2010 File: 2/10 Location: Wynyard _____________________________________________________________________________ Between: 101003246 Saskatchewan Ltd. - and - Ray Healey and Shannon Lalach Gordon Horvath For the Plaintiff Russell Weber For the Defendant JUDGMENT J.

PLEMEL, J [ 1 ] The plaintiff and defendants entered into a lease agreement, filed as Exhibit P-1 in these proceedings, on October 31, 2007, for a one year lease by the plaintiff to the defendants of an existing business known as the Bargain Bin located in the Town of Wynyard, Saskatchewan. The Bargain Bin was a retail store. The lease was for the store premises, fixtures and equipment and was for $1,500.00 per month plus $90.00 per month GST. The rent was payable on the first day of each month.

The lease also contained an option for the defendant tenants to purchase “the said leased land” providing the tenants were not in default under any conditions of the lease agreement.

[ 2 ] At trial, Gordon Horvath, the plaintiff company’s president and sole director testified for the plaintiff. When I discuss the plaintiff’s testimony, it is Mr. Horvath I am referring to. Both defendants testified and several exhibits were filed by the parties. [ 3 ] The defendants began operating the Bargain Bin on November 1, 2007, pursuant to the lease agreement. Clause 4 of the agreement states that the defendants were also buying the stock-on-hand.

The wording of the clause is relevant in this case and reads as follows: “The parties hereto acknowledge and agree that the rental does not include stock-in-trade or receivables and the parties agree to take stock on November 1, 2007. The Tenants shall pay the Landlord for stock-on-hand at cost on terms mutually agreed upon between the parties hereto.” The plaintiff states that it was agreed that the defendants were to pay for the stock-in-trade and inventory over time as they sold it.

This was not disputed by the defendants at trial. [ 4 ] An inventory list filed by the plaintiff as Exhibit P-2 shows the inventory valued at $17,631.62 on November 1. This was accepted by the defendants at trial as the correct value of the inventory on that date. PLAINTIFF’S CLAIM [ 5 ] The plaintiff’s statement of claim is for unpaid rent and unpaid inventory. Together, he states, this totals $29,589.92.

In his statement of claim he abandons any claim over the sum of $20,000.00 to place the claim within the jurisdiction of this Court. [ 6 ] Furthermore, at the outset of the trial the plaintiff indicated he was abandoning any claim for unpaid rent and was seeking judgment only for stock-in-trade and inventory which the defendants sold but had not paid for. He testified that he was doing this only because he felt the defendants might have difficulty paying the full amount of the lease and the unpaid inventory if he was successful in his claim.

As the plaintiff’s claim for loss of rent is abandoned, I will deal only with his claim for judgment in the amount of cost of loss of inventory. [ 7 ] In the statement of claim the plaintiff states that on or about February 25, 2008, the defendants informed him that they no longer wished to carry on with the lease and vacated the convenience store business and premises on that date. In his testimony, Mr. Horvath said this conversation took place on about March 1, 2008, between Mr. Healey and him.

Considering all of the evidence before me, I am satisfied that this conversation occurred in the last days of February 2008, although the evidence of exactly what was said in this conversation is in dispute. [ 8 ] The plaintiff testified that Mr. Healey called him and told him he was walking out on the lease. He told him there was no more money to keep going. He said they were “broke.” Mr. Horvath offered assistance to them to carry on business but Mr. Healey refused this offer. During the conversation, Mr. Healey offered him his van for non-payment of the lease. Mr.

Horvath refused the van, saying he would rather have money so he could make payments. [ 9 ] Mr. Healey, however, denied that he told the plaintiff that they intended to abandon the lease. He did not recall mentioning anything about the van to Mr. Horvath. He testified that he told Mr. Horvath that the rent for March 2008, would be late. He testified that the plaintiff was not happy with it but said they could “work it out.” [ 10 ] I am satisfied on a balance of probabilities that the plaintiff’s recollection of this conversation is correct. The defendants told him they intended to cease operations at the store.

In reaching this conclusion, I am considering all of the evidence but in particular the details of the discussion as related by both Mr. Horvath and Mr. Healey. Furthermore, the defendants testified that they did not go into the store on March 2, 2008, when they saw the plaintiff and his wife in the store counting inventory. Nor did the defendants ever again return to the store or discuss taking over operations of the store with Mr. Horvath. Mr. Healey testified that a day or two later, Mr. Horvath called him to discuss a couple of items which were not found in the inventory. Even then Mr.

Healey did not question Mr. Horvath about why the Horvaths were suddenly managing the store. Ms. Lalach testified that sometime after March 1, 2008, Mr. Horvath phoned her and asked about movies which she had rented from the business. I consider it significant that she also did not take this opportunity to question Mr. Horvath about why he was now operating the store. The defendants’ actions were inconsistent with parties who intended to continue operations of the business or who were led to believe by the plaintiff that they could do so and that they would “work it out.”

[ 11 ] In the statement of claim, it is alleged that the defendants had only paid three months rent. However, when he was shown a copy of a cheque in cross-examination dated February 1, 2008, the plaintiff agreed that it would have been the cheque for February rent. I therefore conclude the plaintiff received rent for four months and not three as alleged in the statement of claim. I do not take this as having been a deliberate attempt to inflate the claim or deceive the Court or defendants.

I am satisfied that this was an oversight by the plaintiff. [ 12 ] By the time their conversation took place in late February 2008, the defendants had sold a considerable amount of inventory, but had only paid the plaintiff $1,300.00 for it. That amount is not in dispute. However, the value of the inventory still remaining in the store at that time is in dispute.

I will discuss this in more detail, but before doing so, I will refer to the defendants’ counterclaim. [ 13 ] The defendants have counterclaimed against the plaintiff alleging that the plaintiff wrongfully terminated the agreement by taking physical possession of the premises on March 2, 2008 and taking possession of the defendants’ inventory. By doing so, the defendants allege that they were no longer able to carry on the business. The counterclaim filed is for loss of income in an amount to be proved at trial.

At the commencement of trial, the defendants also applied to amend their counterclaim to include a claim for punitive or exemplary damages. I advised that my decision on whether or not to grant that amendment would be addressed in this judgment. I am allowing the amendment so all aspects of the defendants’ counterclaim may be addressed by me. [ 14 ] The plaintiff testified that he and his wife took stock on March 2, 2008, when they took over the running of the store from the defendants.

On that date he valued the inventory at $3,111.10 (Exhibit P-2). [ 15 ] However, the defendants both testified that they took stock the day before, on March 1, and they valued the inventory at $6,270.04 (Exhibit D-1). I am satisfied that there was no inventory sold between the time the defendants left the store on March 1 and the time the plaintiff entered on March 2. [ 16 ] Although the plaintiff claims the financial loss of his inventory is $17,631. 62, even using his own calculations at trial, I am satisfied that the loss would be less. Using his figures, it would be $13,220.52.

This amount is arrived at as follows: Total value of inventory as of November 1, 2007 $17,631.62 Less total paid by defendants for inventory between November 1, 2007 and date of trial 1,300.00 Less total inventory remaining on March 2, 2008 according to plaintiff’s calculations 3,111.10 Amount owing on stock according to plaintiff $13,220.52 [ 17 ] Substituting the value the defendants place on the inventory on March 1, the figure changes as follows: Total value of inventory as of November 2, 2007 $17,631.62 Less total paid by defendants for inventory 1,300.00 Less total inventory remaining on March 1, 2008 according to defendants’ calculations plus 5% GST 6,270.04 Amount owing on stock according to defendants $10,051.58 [ 18 ] I am not satisfied, on a balance of probabilities, that there was only $3,111.10 worth of inventory remaining in the store on March 2, 2008.

The defendants’ inventory list filed as Exhibit D-1 contains some items not contained in the plaintiff’s Exhibit P-2. There appear to be different quantities and values for other items. In the absence of other evidence, such as a record made by an

impartial third party, I accept the defendants’ evidence that the value was $6,270.04. Therefore using that figure, I am satisfied that the amount owing to the plaintiffs by the defendants is $10,051.58 unless the defendants are successful in their counterclaim.

DEFENDANTS’ COUNTERCLAIM [ 19 ] The defendants’ counterclaim states: - that the plaintiff wrongfully terminated the agreement by taking possession of the premises on March 2, 2008; - that the defendants owned the inventory in the premises when the plaintiffs took possession on March 2, 2008; - that as a consequence of the wrongful termination of the lease by the plaintiff and the wrongful seizure of the defendants’ inventory, the defendants were no longer able to carry on the business they had operated at the premises. [ 20 ] Clause 2(

c) of the lease provides that if the rent is unpaid for thirty (30) days after becoming payable or “if any covenant, proviso, stipulation or condition on the part of the Tenants herein contained shall not be performed or observed, then and in any of the said cases it shall be lawful for the Landlord by notice in writing under its hand to cancel these presents and terminate the unexpired term hereby demised...” [ 21 ] The defendants point out that s. 9(1) of The Landlord and Tenant Act R.S.S. 1978, c. L-6 provides that unless otherwise agreed, a landlord may re-enter after the rent is in arrears for two months.

In the lease it was “otherwise agreed” that the landlord could re-enter after the lease was in arrears for one month. [ 22 ] The evidence indicates that the defendants were not in arrears for one month when the plaintiff resumed operation of the store on March 2, 2008. Therefore the landlord, Mr. Horvath, would not have been entitled to terminate the lease. I am satisfied, however, for reasons which I stated in paragraph ten, that in this case it was the defendant tenants, and not the plaintiff landlord, who terminated the lease. This occurred when Mr. Healey told Mr.

Horvath in the last days of February 2008, that he was “walking out” of the lease agreement. Mr. Horvath, in an attempt to mitigate his losses, assumed operation of the store as quickly as possible in March. [ 23 ] There is no clause in the lease agreement which provided a mechanism by which the defendants could terminate the lease prior to the expiration of one year, which would have been October 31, 2008. The plaintiff’s conduct in assuming operations of the store was not surprising and certainly not heavy-handed, given the fact that Mr.

Healey told him they were walking out on the lease. [ 24 ] The defendants argue that the stock-in-trade became their property by virtue of clause 4 of the agreement entered into on October 31,

Section 19 of The Sale of Goods Act R.S.S. 1978, c. S-1 states as follows: 19(1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at the time the parties to the contract intend it to be transferred.

(2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.

Rules for ascertaining intention 20 Unless a different intention appears the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer: Rule I. — Where there is an unconditional contract for the sale of specific goods in a deliverable state the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment or the time of delivery or both be postponed. [ 25 ] When giving his testimony, the plaintiff adopted the allegation in his statement of claim stating that the defendants purchased the stock-in-trade on November 1, 2007.

That evidence, when read with s. 19 of The Sale of Goods Act satisfies me that when he resumed operation of the store on March 2, 2008, Mr. Horvath took control of the inventory which was no longer his. It was the defendants’ property, even though they had not yet paid the plaintiff for it.

[26] The next question then is what damage, if any, did the defendants incur as a result of Mr. Horvath assuming operation of thestore and taking possession of their stock-in-trade. [27] I find that the defendants suffered no loss of income as a result of Mr. Horvath’s actions. Mr. Healey told him they weregoing broke operating the store. Therefore, by taking control of the store, Mr. Horvath saved them from further financial loss. They hadnot yet paid the plaintiff for the inventory remaining in the store.

Therefore by re-taking possession of it from the defendants theysuffered no financial loss. [28] I therefore reject the defendants’ counterclaim against the plaintiff for loss of income. [29] I also reject the defendants’ claim for punitive or exemplary damages. According to the Supreme Court of Canada in Whiten v. Pilot Insurance Co. (2002), 2002 SCC 18 , 209 D.L.R. (4th) 257, punitive or exemplary damages are awarded only wherethere has been “malicious, oppressive and high-handed misconduct that ‘offends the court’s sense of decency’” (para. 36).

I find therewas no such conduct on the part of the plaintiff in this case. CONCLUSION [30] There will be judgment in favour of the plaintiff in the amount of $10,051.58 together with prejudgment interest on thisamount from March 1, 2008 to the date of this judgment as well as costs of issuing the summons in this matter in the amount of $100.00. Dated at the Town of Wynyard, Saskatchewan this 15th day of December 2010. ____________________________ J.A. Plemel, J