PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - TRIAL DIVISION

Transcription

1 PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - TRIAL DIVISION Citation: Pitre v. Island Meat Packers Date: PESCTD 30 Docket: S1-GS Registry: Charlottetown BETWEEN: AND: RANDY PITRE (carrying on business as PENOBSCOT POULTRY) and PITRE DEVELOPMENTS INC. ISLAND MEAT PACKERS (1996) LTD., TROY YEO and DALE YEO APPLICANTS RESPONDENTS Before: The Honourable Justice David H. Jenkins (In Chambers) Appearances: Applicants appear on their own behalf Paul Michael representing the Respondents Place and date of Hearing - Charlottetown, Prince Edward Island February 4, 2005 Place and date of Decision - Charlottetown, Prince Edward Island April 29, 2005

2 Citation: Pitre v. Island Mat Packers Date: PESCTD 30 Docket: S-1-GS Registry: Charlottetown BETWEEN: AND: RANDY PITRE (carrying on business as PENOBSCOT POULTRY) and PITRE DEVELOPMENTS INC. ISLAND MEAT PACKERS (1996) LTD., TROY YEO and DALE YEO APPLICANTS RESPONDENTS Prince Edward Island Supreme Court - Trial Division In Chambers Before: Jenkins J. Date Heard: February 4, 2005 Date of Decision: April 29, 2005 (12 pages) Landlord and Tenant: Distress for Rent STATUTES CONSIDERED: Landlord and Tenant Act, R.S.P.E.I. 1988, Cap. L-4 TEXT CONSIDERED: Bentley, McNair and Butkus, Williams & Rhodes Canadian Law of Landlord and Tenant, Sixth Edition, Thompson Carswell

3 Jenkins J.: [1] The Applicants seek relief against distress for rent proceedings brought by the Respondent Island Meat Packers (1996) Ltd. ( IMP ). [2] On May 4, 2004, IMP leased its dormant meat plant building and premises to Penobscot Poultry and or Randy Pitre. The lease was evidenced by a document entitled Rental Agreement. The Rental Agreement was a transitional measure made in conjunction with a sale and purchase transaction pending closing, during which time Mr. Pitre was to carry out his due diligence and arrange for approvals. The term of the Rental Agreement was from May 1, 2004, until the final closing of the said properties has occurred. Monthly rent was $3,500 for May, and then $4,000 per month from June onward, due on the first day of each month. In addition, the tenant was to pay for all utilities and/or services needed by the tenant, including among other things electrical. [3] IMP commenced the impugned distress proceeding on December 1, The Applicants asked the Court to strike out the distress proceeding in its entirety. The Applicant Pitre/Penobscot Poultry submits that the distress is wrongful because: (i) the rent claimed is not owing; (ii) the distress is excessive in any event, because more goods were taken than reasonably sufficient to satisfy any rent and arrears and the costs of distress; and (iii) the distress is improper, because the appraisers employed by the Respondents are not qualified and are not disinterested in the subject matter of the distress proceeding. Both Applicants submit that the Respondents have distrained against goods that belong to a person other than the tenant, namely the Applicant Pitre Developments Inc. [4] At issue is (i) the rent, if any, due; (ii) the goods subject to distress; (iii) whether the appraisals were properly conducted; and (iv) whether the distress was excessive. [5] The premises was previously used as a beef processing plant. Mr. Pitre intended to develop the plant for poultry processing. During the Pitre tenancy, Mr. Pitre brought a lot of processing equipment onto the premises, and some of that equipment was installed into the premises. Randy Pitre c.o.b. Penobscot Poultry purchased a small amount of equipment, comprised mostly of cutting tables, from IMP, for $5, Mr. Pitre deposed that Pitre Development Inc., not Randy Pitre c.o.b. Penobscot Poultry, purchased extensive processing equipment from US interests, for the amounts of $16, US and $42, US, totalling $59, US, being $73, Can.; and a further $105, Can. from an unstated Canadian interest.

4 Page: 2 [6] Pitre Development Inc. is a body corporate, in which one Mable Pitre is the sole shareholder, and Randy Pitre is the principal officer, but not a shareholder. [7] IMP had been financed by Farm Credit Corporation (FCC) and PEI Business Development. Those lenders held security over IMP s real and personal property, including the premises. Mr. Pitre was not aware of the particulars or status of that security. [8] It is common ground that the tenant Pitre paid the rent for the months of May, June, and July. For the period of occupancy under the Rental Agreement after that, the evidence of the parties is in conflict. [9] Whatever transpired between the parties after that, it is a matter of fact that on November 9, 2004, FCC published a Notice of Mortgage Sale regarding the IMP property comprising the premises; on December 9, 2004, FCC conducted mortgage sale proceedings regarding the IMP property; at that sale, no bid satisfactory to FCC was received, and the property was not sold; and thereafter, FCC changed the locks on the IMP building comprising the premises. [10] IMP commenced its distress proceedings under the Landlord and Tenant Act, R.S.P.E.I Cap. L-4 to distrain against the assets of Pitre located at the plant on December 1, That was after the FCC Notice of Mortgage Sale was published and before the FCC mortgage sale occurred. On IMP s instructions, the Sheriff for Queens County issued a Notice of Distress, which advised that as bailiff for IMP he had distrained on the premises for the sum of $22, for rent due and in arrears to [IMP] from August 1, The Sheriff made an inventory of the goods, chattels, and tenant s fixtures distrained. IMP issued a Notice to the tenant Pitre for the amount of rent demanded, and advised that the amount included rent and costs of utilities accrued since August 1 st. In conjunction with IMP, the Sheriff commissioned two appraisers, Byron Ferguson and Alden Ford, to make a true appraisement for the value of the property distrained. Both appraisers were certified before a Justice of the Peace, and both brought forth appraisals. The Ferguson appraisal was $30,800. The Ford appraisal, filed as Island Mercantile, was $28,000. IMP had the tenant s goods and chattels advertised for sale by Sheriff s Auction to take place on December 21, 2004.

5 Page: 3 [11] The Applicants brought an Application to stop the sale on December 17, The distress sale was put off. The application was adjourned to February 4, In the meantime, the parties appeared on an Interlocutory Motion on January 12, Distress [12] Assuming rent was due and in arrears, the starting point for this analysis is that IMP was entitled to distrain when it did on December 1, IMP was a landlord and Penobscot Poultry and/or Randy Pitre was a tenant under a lease that created a demise. According to the evidence, IMP never terminated the Rental Agreement. On December 9, 2004 or shortly thereafter, FCC took possession of the property comprising the premises under its higher title, which would have then ended IMP s reversionary interest, and Pitre s rights under the IMP Rental Agreement. [13] Distress for rent is a common law summary remedy allowed to a landlord during the term, or within six months after its determination if the title of the landlord and the possession of the tenant continue. A landlord may not hold the goods of a tenant without a distress: See Williams & Rhodes Canadian Law of Landlord and Tenant Sixth Edition, at p. 8-1; and the Landlord and Tenant Act, Section 26. [14] The right to distrain is a particular remedy which arises on non-payment of rent; it then comes into existence; it is not assignable. At common law, no distress could be levied against an over-holding tenant because of the determination of the lease. That limitation was modified by s. 26 of the Landlord and Tenant Act, which stipulates an extension of the right of distress for six months after determination of the lease, during the continuance of the landlord s title or interest and possession of the tenant from whom the arrears of rent became do. Upon lawful entry, the tenancy is at an end; there can be no distress after expiration of the tenancy, except by virtue of s. 26: See Williams and Rhodes, supra, at pp. 8-1, 8-2 and [15] In the present case, the Rental Agreement was a lease, and the lease was extant when the landlord distrained for rent due and in arrears. Rent, if any, due and in arrears [16] Rent due and owing and in arrears is calculated pursuant to the Rental Agreement based on obligations accrued and payments made. To the extent there

6 Page: 4 was rent due and in arrears, IMP was entitled to distrain. If there was no rent in arrears at the time of making the distress, it is illegal: See Williams and Rhodes, supra, at p [17] The Rental Agreement stipulates the rental amount, the due dates; for the tenant to pay all utilities needed by the tenant; and for the tenant to pay late charge of 6% of the current rental amount if rent is not paid when due. [18] The tenant Pitre refutes IMP s claim for rent due and in arrears in its entirety. Pitre submits that after taking into account payment made, set-offs to be applied, and deductions for time when FCC became involved onward, no rent is due. [19] Section 69 of the Landlord and Tenant Act makes provision for set-off against rent due. The tenant is thereby required to give notice in writing of the claim for setoff, which notice may be given before or after seizure; and upon giving of that notice, the landlord is entitled to distrain or proceed with the distress, as the case may be, for the balance of the rent due. [20] Upon reading the Affidavit evidence, and hearing the viva voce evidence of Randy Pitre and Troy Yeo, I am able to make a number of findings: 1. Composition of the landlord s claim Monthly rent for August to December x 5 months = $20, Electrical bill paid by landlord on behalf of tenant and not reimbursed = 2, Interest or late 6% per rental agreement Section 11 [plugged figure] = Total rent arrears demanded: $22, Deductions for rent paid but not credited (i) deduct rent claimed after December 9, 2004, when FCC went into possession $2,728 (ii) deduct rent payment received in fall, 2004, not previously acknowledged by IMP 5,500 (iii) deduct payment received in September, 2004, acknowledged by IMP on December 17, $9,028

7 Page: 5 The tenant claims further deductions, which I find should not be made, being: $4,000 for the August rent: Mr. Pitre said he paid it, and IMP denies having received it. There is no evidence of that payment having been made. In declining to make this adjustment, I bear in mind that the relationship between the parties had become quite unbusinesslike by August, that the landlord ultimately has the onus of proving rent due, and that the tenant has the onus of proving deductions from the landlord s claim. The rent was due under the lease. IMP claims that the rent was increased from $4,000 to $5,500 per month for the period September 2004 onward: I find this claim is not sustainable, and no adjustment for $4,935 to December 9 th or for any lesser amount should be made. The lease was in writing, rent is a fundamental term, and there is no writing regarding this alleged material change. IMP relies on anecdotal evidence that the tenant paid $5,500 for September. Mr. Pitre refutes IMP s assertion. He further points out that the $5,500 payment was not accounted for at all in the distress proceeding. Upon considering all the evidence, including the facts of the distress proceeding, Mr. Yeo s testimony regarding the composition of the aggregate distress demand, and Mr. Pitre s sworn evidence, this additional landlord claim is not proven. [21] The tenant s assertion is that there is no rent due. In my assessment, Mr. Pitre s accounting is incomplete. It runs only to the end of October, and does not cover the period of November 1 onward. The best deduction I can make from the evidence in this hearing is that IMP s interest as landlord continued until FCC took possession of the premises on or about December 9 th. Notice of the mortgage sale on November 9 th did not affect possession of the premises. That Pitre did not actively use the plant from October onward does not avoid the obligation to pay rent under the Rental Agreement. The rent due for the period November 1st to December 8 th would have been $5, Set-offs for obligations paid by the tenant on behalf of the landlord (i) Maritime Electric balance of account attributable to pre-may, 2004 (acknowledged by Mr. Yeo for convenience of proceeding) $ (ii) Superior Propane boiler payment made by tenant on behalf of landlord 1, $1,647.69

8 Page: 6 4. Adjustment to the interest or late charge The landlord s calculation of rent due and in arrears, before late charges, was $22,153. Aggregate allowed credits for deductions and set-offs are $10,676. After adjustments, net rent due and in arrears, before late charges, was $11,477. Assuming, but not finding, as valid the late charge provision under the lease, late charges would be reduced to $ Rent due after adjustments and set-off Rent due and in arrears after the foregoing adjustments was $12,146. That does not include the costs of the distress proceeding. Goods subject to distress [22] At common law, the general rule was that all goods and chattels found on the demised premises may be distrained, whether those of the tenant or a stranger. There are exceptions to the common-law rule; and in addition, this rule has been modified by statute: See Williams & Rhodes at p Section 39 of the Landlord and Tenant Act stipulates the goods and chattels on a premises that are subject to distress: 39. No goods and chattels are liable to be taken under a distress for rent excepting the goods and chattels of the tenant, and (a) goods and chattels which are claimed by a person other than the tenant (i) by virtue of any execution against the tenant, (ii) by virtue of any purchase, gift, transfer or assignment from the tenant, whether absolute or in trust or by way of mortgage or otherwise, (iii) being the wife, husband, daughter, son, daughter-in-law or son-in-law of the tenant or any other person who lives as a member of the tenant s household upon the premises, in respect of which the rent distrained for is payable,

9 Page: 7 (iv) which have been in the possession, order or disposition of the tenant for one year or upwards under such circumstances that such tenant is the reputed owner thereof; (b) the interest of the tenant in any goods and chattels under a contract for the purchase thereof or under a contract whereby the tenant may become the owner thereof upon the performance of any condition; (c) goods and chattels which have been exchanged between the tenant and another person, or which have been borrowed by the one from the other, for the purpose of defeating the claim of or the right of distress by the landlord. [23] Mr. Pitre asserts that most of the chattels were owned by Pitre Development Inc. IMP refutes that assertions and submits that Mr. Pitre arranged with the outside supplier for it to appear that those goods were owned by Pitre Development Inc. to avoid his creditors, including IMP, and asserts that arrangement is a sham. [24] In the circumstances of this case, the goods and chattels were in the premises for the apparent purpose of comprising a poultry processing operation. The operator was to be Penobscot Poultry, not Pitre Development Inc. I discern from the discussion in Williams & Rhodes at 8:23:3 that the onus is on the Applicants to show the goods and chattels are not goods and chattels owned by the tenant or otherwise subject to be taken under a distress for rent in accordance with s. 39 of the Landlord and Tenant Act. [25] Upon considering all the evidence, which admittedly is sometimes challenging to fathom, I am satisfied that it is shown that the goods and chattels which the Applicants assert are owned by a person other than the tenant, namely, Pitre Development Inc., are a property of Pitre Development Inc., and are not property of the tenant, and that none of those chattels are subject to the landlord s distress. Mr. Pitre has given sworn evidence and responded on cross-examination. Bills of sales, invoices or equipment lists are dated March, May and August, 2004, refer to Pitre Development Inc. I do take into account that there are limits on the reliability of the Applicant s evidence. Randy Pitre purports to speak for both Applicants; there is no independent evidence from any supplier; and there is no evidence from Mable Pitre.

10 Page: 8 On the other hand, the evidence brought forth by IMP is not sufficient to refute the Applicant s evidence. Troy Yeo has not shown himself to be any more reliable than Randy Pitre, and Mr. Yeo s evidence that the outside equipment supplier David Dodge told him that Mr. Pitre requested him to issue amended invoices in mid- December, 2004, is unsubstantiated hearsay which, in any event, post-dates the Applicant having filed the Application that included the original evidence regarding ownership. I note in passing that Randy Pitre and Mable Pitre may well be related; but it is not shown by evidence in this Application that Mable Pitre is a person within any of the listed categories in s. 39(a)(iii). Pitre Development Inc. appears to be a Pitre family company; however, its goods and chattels are not covered by s. 39. Connecting the dots suggests to me that the tenant Penobscot Poultry clearly had some interest in acquiring those goods and chattels, and that it is reasonable to conclude that they were purchased with Pitre Development Inc. funds and owned by Pitre Development Inc. at that time as a matter of convenience. I am not satisfied it is shown they were held by Pitre Development Inc. to avoid the tenant s creditors. Pitre Development Inc. appears to be a separate legal entity from the tenant. Until the tenant obtained its financing, as mentioned in the evidence, it is entirely plausible that those goods would have remained in Pitre Development Inc. The Pitre Development Inc. property is not subject to the Respondents distress proceeding. [26] Regarding the items sold by IMP to Pitre, Pitre submits those goods are not subject to distress either. Mr. Pitre deposed that after he acquired those goods, FCC advised him in writing that it claims those goods under a higher security right. In response, Troy Yeo deposed and testified that he had verbal permission from FCC to sell those goods to Pitre, and that FCC is not making any claim on those goods in this on proceeding. In the circumstances, that statement is not enough. It is incumbent upon the Respondents to confirm Mr. Yeo s assertion that the goods are free and clear. Pitre paid good consideration to IMP for those goods. If title is not clear, then Pitre would have a claim against the Respondents in that regard; and those goods would not be subject to being distrained by IMP. If those goods are owned by the tenant, then they are subject to the distress to the extent they are listed in the Sheriff s inventory. Qualified appraisals? [27] The Applicants submit that the appraisals were not properly conducted, and that one of the appraisers, Ford, had an interest in the property. The Respondents answer that the appraisers were retained and the appraisals were conducted pursuant to and in accordance with the Landlord and Tenant Act. Under the scheme of the Act, under Section 43 a landlord making a distress shall, at that time, make an inventory of the property distrained. IMP had the Sheriff make an inventory. Under

11 Page: 9 s. 47, where the tenant does not replevy within four days, then the landlord causes the goods and chattels distrained to be appraised by two appraisers, and then proceeds with sale. Section 48 stipulates the requirements for the appraisers: 48. The Appraisers shall be competent, disinterested persons, appointed by the person distraining, and shall, before acting, be sworn before a Justice of a Judge appointed under the Provincial Court Act... to make true appraisement of the value of the property distrained. [28] Williams & Rhodes at p provides some guidance regarding qualifications. The appraisers must be reasonably competent, but need not be professionals; but the party distraining cannot be an appraiser. [29] The dirth of evidence before the Court on this application makes it a formidable challenge to assess whether the landlord satisfied the requirements of the Act to have the tenants goods and chattels appraised by two appraisers. Mr. Pitre deposed that Byron Ferguson and Alden Ford are close personal friends, and that Alden Ford is a close personal friend with the Respondents. He submits that the vast discrepancy between the purchase price of the purchased assets mentioned in this judgment, approximately $190,000, and the appraisals, $28,000 - $30,800, make it manifest that the appraisals were not either competent or conducted by disinterested persons. The Respondent s answer that the appraisers were appointed by the Sheriff and sworn in accordance with the Act is not compelling. Under the Act, the landlord is responsible to ensure the competency and independence of the appraisers, and the Sheriff is acting as the landlord s agent. Being sworn under the Act does not assure either competence or disinterest. In the face of the tenant s challenge, the landlord has an onus to justify that the appraisers were appointed and the appraisals conducted in accordance with the Act. Here, that proof is not before the Court. It could well be that the vast difference between purchase price and appraised value is justifiable; however, that information is not presently before the Court. [30] There is not sufficient information before me upon which to confirm the appraisers qualifications under s. 48 of the Act. Nor is there sufficient information upon which to declare the appraisals deficient of void. Should either party wish to pursue that issue, and any claim for consequent damages, then leave is hereby granted for it to be an issue for a trial. At this stage, I can only observe that under the cloud of this issue, IMP would proceed with sale of any of the distrained tenant s goods and chattels at its peril.

12 Page: 10 Excessive distress [31] Williams & Rhodes, at 8:24:2 considers the subject of excessive distress in two aspects: (1) where the rent distrained for is all due but an excessive quantity of goods is seized; and (2) where a distress is made for more rent than is due and an excessive quantity of goods is taken, whether in relation to the amount due or the amount claimed. This case falls into the second category, where a distress is made for more rent than is due, and an excessive quantity of goods is taken in relation, first to the amount claimed, and second to the amount due. [32] If no rent is in arrears, the distress is illegal, the distrainer is a trespasser ab initio and a suit for conversion with lie against the person in possession of the goods; but that is not so if there is some rent in arrears. Where the distress is lawful and the quantity of goods taken is not excessive, a claim by the landlord for more rent than is actually due is not actionable; the landlord may rectify by selling the goods for the amount actually due. However, if an untrue claim is followed by a sale of more goods than is sufficient to raise the amount of rent really in arrears with lawful charges, the excessive sale gives the tenant a cause of action against the landlord. A taking may constitute an excessive distress, either by being one that would have been excessive in any event, or one that became excessive because the amount claimed is much greater than the amount actually due. Williams & Rhodes annotates many cases where distress was held to be or not to be excessive: see Williams & Rhodes, at pp [33] The Landlord and Tenant Act stipulates as to the amount of goods and chattels that can be distrained and the consequences of excessive distress. Section 28 states: 28(1) No person shall take under distress more goods than are reasonably sufficient to satisfy the rent in arrears and the costs of the distress. (2) Where chattels are distrained for rent due, the person making the distress is not liable to any action for excessive distress, if within seven days after the making of the distress he abandons the excess and thereafter holds under the distress no more chattels than are reasonably necessary to satisfy the rent due with the coss of the distress. [34] Following the distress, inventory, and appraisal, IMP did not at any time determine on its own that there was an excessive distress or abandon any excess.

13 Page: 11 [35] Mr. Pitre claimed the distress was excessive, at the latest by December 17, 2004, when he commenced this proceeding. On the other hand, Mr. Yeo deposed that a meeting between legal counsel for the parties on December 7, 2004, revealed the tenant s dispute over the amount of rent claimed in arrears by the landlord. According to Mr. Yeo, it was agreed on that date that Mr. Pitre s lawyer would provide a detailed statement of the amounts in dispute together with proof of any payments made by Pitre in support of the disputed amounts, and no such statement was ever provided. Mr. Yeo deposed that Counsel for Mr. Pitre subsequently advised the Respondents that from December 15, 2004, he no longer represented the Pitre interests. [36] In all the circumstances, this Court cannot make a determination at this stage whether the distress was excessive. If the appraisals do not stand, then the distress would be excessive. If the appraisals were determined to be qualified, then a finding of excessive distress is uncertain. In that scenario, the landlord would have distrained property worth $28,000 - $30,000 for rent thought to be in arrears of almost $23,000; and with a subsequent breakdown in communication by the tenant not following through with substantiation of a lower amount of rent due, the landlord would not have realized his error at that time. [37] In these circumstances, I cannot make a final determination as to whether the distress was excessive. Either party has leave to bring the question of excessive distress, and consequent damages, to a trial. Relief against forfeiture [38] The Applicants seek relief against forfeiture under s. 15(2) of the Landlord and Tenant Act. I find that s. 15(2) of the Act has no application to this proceeding. The landlord was not seeking re-entry or forfeiture for non-payment of rent; it was pursuing a distress proceeding. Summary (1) The landlord IMP was entitled to commence a distress proceeding for rent due and in arrears by the tenant Penobscot Poultry and/or Randy Pitre on December 1, (2) The rent claimed due was $22, The rent due and in arrears,

14 Page: 12 after applicable deductions and set-offs, was $12,167. The goods and chattels subject to distress comprise only the goods and property that belonged to Penobscot Poultry and/or Randy Pitre; this explicitly excludes goods and chattels supplied to Pitre Development Inc. for the aggregate purchase price of approximately $187,500. The right to distrain against the goods and chattels sold by IMP to the tenant is subject to the cloud of a prior FCC charge. (3) The qualifications of the appraisers remains in issue, and leave is granted for this matter, and any consequent claim for damages, to be decided at trial. (4) Whether the distress was excessive remains in issue, and leave is granted for this matter, and any related claim for damages, to be decided at trial. (5) Relief against forfeiture has no place in this proceeding. Costs [39] Although the parties had a Rental Agreement, they conducted their business affairs in a somewhat loose and ad hoc manner. Cash payments were not effectively accounted for. Following the distress proceeding, the tenant objected to the process, the amount claimed, and the amount and ownership of the property distrained against, but Mr. Pitre did not take advantage of the opportunity to ameliorate the subject of these complaints. The landlord maintained its distress in spite of notice from the tenant that most of the goods and chattels were owned by a person other than the tenant, and that the stated rent due and in arrears was substantially overstated. Although some rent is shown to be due and in arrears, the Applicant has experienced substantial success on this Application. It is fair that the Respondents pay some contribution toward the Applicant s costs of this proceeding. The Applicant being, as applicable, self-represented or without the expense of legal counsel, the Respondents shall reimburse the Applicant for his out-of-pocket expenses on this Application. In order to avoid further controversy, I hereby fix the Applicant s disbursements at $600, which amount the Respondent shall pay to him within 30 days. Justice David H. Jenkins

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