A-505-81
384238 Ontario Limited and Maple Leaf Lumber
Company Limited (Appellants) (Plaintiffs)
v.
The Queen in right of Canada (Respondent)
(Defendant)
Court of Appeal, Urie, Stone JJ. and Lalande
D.J.—Toronto, November 14; Ottawa, December
23, 1983.
Income tax — Seizures — Appeal from Trial Division
judgment dismissing action for damages arising from alleged
wrongful seizure and detention of assets pursuant to judg
ments for, inter alia, tax indebtedness — Confusing circum
stances surrounding ownership and transfer of assets — Con
version and trespass alleged — Allegation of conversion
unfounded as goods not used by Department as own goods —
Honest belief no defence to liability in trespass for wrongful
seizure of chattels — Although not expressly pleaded in
defence, estoppel by conduct bars appellant numbered com
pany from recovering damages — Appeal dismissed — Income
Tax Act, R.S.C. 1970, c. I-S, s. 178(2) — Canada Pension
Plan Act, R.S.C. 1970, c. C-5, s. 24(2) — Unemployment
Insurance Act, R.S.C. 1970, c. U-2, s. 104(3) — Crown Liabil
ity Act, R.S.C. 1970, c. C-38, ss. 3(1)(a), 4(2) — Livestock
Pedigree Act, R.S.C. 1970, c. L-10.
Torts — Trespass — Sheriffs seizing assets under writs of
execution — Judgments for unpaid income tax, C.P.P. and
U.I.C. contributions — Confusing circumstances surrounding
ownership and transfer of assets — Honest belief no defence to
liability in trespass for wrongful seizure of chattels
Although not expressly pleaded in defence, estoppel by con
duct bars appellant from recovering damages for trespass.
Torts — Conversion — Seizure and detention of assets —
Writs of execution — Judgments for unpaid income tax,
C.P.P. and U.I.C. contributions — Allegation of conversion
unfounded as goods not used by Department as own goods —
Appellant's possession only temporarily interfered with.
Crown — Torts — Liability of Crown for alleged wrongful
seizure and detention of assets — Sheriffs seizing goods under
writs of execution — Allegations of conversion and trespass —
Allegation of conversion unfounded — Honest belief no
defence to liability in trespass — Estoppel by conduct bar to
allegation of trespass — Crown Liability Act, R.S.C. 1970, c.
C-38, ss. 3(1)(a), 4(2).
Estoppel — Seizure and detention of assets — Trespass
alleged — Express plea of estoppel not necessary when clearly
resulting from facts pleaded and proven — Appellant barred
by own conduct from recovering damages for trespass.
Certain assets belonging to the appellant numbered company
(the "appellant") were seized by sheriffs at the instance of an
officer of the Department of National Revenue pursuant to
judgments against Kenneth Allen and Ken Allen and Sons
Limited in respect of indebtedness for income tax, Canada
Pension Plan and Unemployment Insurance Commission con
tributions. The assets had been validly purchased from Mr.
Allen's wife who had irregularly obtained them from her
husband's company by foreclosing a chattel mortgage entered
into at a time when, to her knowledge, the company was
virtually bankrupt. The action for damages for wrongful seizure
and detention was dismissed by the Trial Judge upon finding
that the seizure was attributable to the appellant's rather than
respondent's fault. The appellant appeals that decision, alleging
trespass and conversion.
Held, the appeal should be dismissed.
Per Stone J. (Urie J. concurring): The allegation of conver
sion is unfounded as the goods were not used by the Depart
ment of National Revenue as its own goods; there was only a
temporary interference with the appellant's possession.
As for the allegation of trespass, there is no doubt that the
common law has traditionally viewed wrongful seizure of goods
as an act of trespass. The fact that the seizure was made under
the honest though mistaken belief, as in this case, that the
goods belonged to the judgment debtor is no defence. While not
pleaded as a defence, the doctrine of estoppel by conduct
applied since it was the legal result of the facts pleaded and
proven. On the evidence, the conduct of the appellant precludes
it from asserting that the respondent was not induced into
believing that the goods belonged to the judgment debtors, and
the appellant is therefore barred from recovering damages.
Per Lalande D.J.: The respondent having made good a
defence of estoppel based upon the appellant numbered compa-
ny's conduct, the appeal must be dismissed.
CASES JUDICIALLY CONSIDERED
APPLIED:
Hollins, et al. v. Fowler, et al., [1874-80] All E.R. Rep.
118 (H.L.); Lancashire & Yorkshire Railway, et al. v.
MacNicoll, [1919] 88 L.J.K.B. 601; Marfani & Co. Ltd.
v. Midland Bank Ltd., [1968] 1 W.L.R. 956 (Eng. C.A.);
Colwill v. Reeves (1811), 2 Camp. 575; 170 E.R. 1257
(N.P.); Jarmain the Elder v. Hooper, et al. (1843), 6 M
& G 827; 134 E.R. 1126 (C.P.); Wilson et al. v. Tumman
et al. (1843), 6 M & G 236; 134 E.R. 879 (C.P.); Morris
v. Salberg (1889), 22 Q.B.D. 614 (Eng. C.A.); Clissold v.
Cratchley et al., [1910] 2 K.B. 244 (Eng. C.A.); Re
Vandervell's Trust (No. 2), [1974] 3 All E.R. 205 (C.A.);
Lickbarrow et al. v. Mason, et al. (1787), 2 T.R. 63; 100
E.R. 35 (K.B.); Commonwealth Trust, Limited v.
Akotey, [1926] A.C. 72 (P.C.); Zwicker, et al. v. Feindel
(1899), 29 S.C.R. 516; Re Montgomery v. E. Diamond,
[1925] 4 D.L.R. 736 (P.E.I.S.C.); Minchau v. Busse,
[1940] 2 D.L.R. 282 (S.C.C.).
DISTINGUISHED:
Cook v. Lewis, [1951] S.C.R. 830; National Coal Board
v. J. E. Evans & Co. (Cardiff) Ld. et al., [1951] 2 K.B.
861; Barnett and Wise v. Wise, [1961] O.R. 97 (C.A.).
REFERRED TO:
Mills v. Brooker, [1919] 1 K.B. 555; Sanderson v. Mars-
den & Jones (1922), 10 LI. L. Rep. 529 (Eng. CA.);
Simpson v. Cowers et al. (1981), 32 O.R. (2d) 385
(C.A.); Park v. Taylor (1852), 1 U.C.C.P. 414; Wilkin-
son v. Harvey et al. (1887), 15 O.R. 346 (C.P.); Meadow
Farm Ltd. v. Imperial Bank of Canada (1922), 66
D.L.R. 743 (Alta. S.C. App. Div.); Walmsley et al. v.
Humenick et al., [1954] 2 D.L.R. 232 (B.C.S.C.);
Woodward v. Begbie et al., [1962] O.R. 60 (H.C.);
Dahlberg v. Naydiuk (1970), 10 D.L.R. (3d) 319 (Man.
C.A.); Larin v. Goshen (1975), 56 D.L.R. (3d) 719
(N.S.S.C. App. Div.); Doyle v. Garden of the Gulf
(1980), 24 Nfld. & P.E.I.R. 123 (P.E.I.S.C.); Bell
Canada v. Bannermount Ltd., [1973] 2 O.R. 811 (CA.);
Bell Canada v. Cope (Sarnia) Ltd. (1981), 15 C.C.L.T.
190 (Ont. C.A.), affirming (1980), 11 C.C.L.T. 170
(H.C.); Fowler v. Lanning, [1959] 1 Q.B. 426; Letang v.
Cooper, [1965] 1 Q.B. 232.
COUNSEL:
R. J. Reynolds for appellants (plaintiffs).
M. A. Kelen for respondent (defendant).
SOLICITORS:
Reynolds, Hunter, Sullivan & Kline, Belle-
ville, Ontario, for appellants (plaintiffs).
Michael A. Kelen, Ottawa, for respondent
(defendant).
The following are the reasons for judgment
rendered in English by
STONE J.: The questions for decision on this
appeal arise out of seizures at the instance of an
officer of the Department of National Revenue of
certain goods belonging to the appellant numbered
company by the sheriffs of the counties of Has-
tings and Gray in the Province of Ontario in June
of 1980. Writs of execution were taken out by that
Department in aid of recovering judgments
obtained against Kenneth Richard Allen and Ken
Allen and Sons Limited for unpaid income tax,
and for unpaid contributions to the Canada Pen
sion Plan as well as to unemployment insurance
totalling in excess of $70,000. The trial [[1981]
CTC 295] was heard by Walsh J. who, on June 22,
1981, dismissed the action in which damages flow
ing from the alleged wrongful seizure and deten
tion of the goods were claimed by the appellants.
The "Allendale Farms" operation was carried
on by Kenneth Allen at Markdale in the County of
Gray. He was a successful breeder of purebred
horses which he trained to work in teams and also
exhibited at fairs and exhibitions. Allen also
became active in the real estate development busi
ness which he carried on through a company called
Ken Allen and Sons Limited, incorporated in April
of 1972. A subdivision plan was approved and
$500,000 was spent to install services. Prefabricat
ed houses were purchased for resale to buyers of
lots in the subdivision and large sums of money
were laid out. Fourteen of these houses had been
sold when it was discovered that the lots could not
be supplied with hydro-electricity. The venture
turned sour. Judgments were obtained against the
company for return of deposits which it was unable
to repay to purchasers. The indebtedness in respect
of which the seizures were carried out arose out of
these farming and real estate development opera
tions. It relates to the years commencing in 1966
and extending through 1972.
On March 21, 1977, April 8, 1980 and May 23,
1980 certificates were registered in this Court with
a view to collecting the amounts due and unpaid.
Such certificates, upon registration took on the
same force and effect as if they were judgments.'
The learned Trial Judge concluded that Allen
must have been well aware of his tax indebtedness
long before the certificates were registered. It was
clear that at the time of their seizure all of the
goods belonged to the appellant 384238 Ontario
Limited and that the appellant Maple Leaf
Lumber Company Limited had no legal interest in
any of them. For convenience, the numbered com
pany is referred to herein as "the appellant".
The reasons for judgment of the learned Trial
Judge present somewhat confusing circumstances
surrounding the ownership and transfer of assets
employed by Kenneth Allen in his Allendale
Farms operation. Clearly, Ken Allen and Sons
Limited became at least a participant in that
operation for, in January of 1974, The Royal Bank
of Canada, as mortgagee, released to Ken Allen
and Sons Limited all of its interest in the real
property on which Allendale Farms was operated
in Markdale. Later, on August 4, 1976, that com
pany entered into a chattel mortgage in favour of
Emily Allen, wife of Kenneth Allen, in the face
amount of $100,000 on the goods that were later
seized by the sheriffs. There were then outstanding
51 executions registered against the company and
Emily Allen admitted that at the time of the
mortgage transaction she was aware of the judg
ments upon which they were based. Kenneth Allen
was forced to concede at trial that his company
was "virtually bankrupt in 1976", during which
year executions registered against his company
totalled $237,108.56. In due course, Emily Allen
foreclosed the chattel mortgage and claimed there
by to have become owner of the goods. The
learned Trial Judge had no difficulty in finding on
the evidence that her "title to the assets was
defective for want of consideration".
On the other hand, he reluctantly found that as
a matter of strict law, the purchase of the goods by
the appellant who had no notice of the defect in
her title, was valid. That transaction was carried
' Income Tax Act, R.S.C. 1970, c. I-5, s. 178(2); Canada
Pension Plan Act, R.S.C. 1970, c. C-5, s. 24(2); Unemployment
Insurance Act, R.S.C. 1970, c. U-2, s. 104(3).
out under two separate instruments, being a writ
ten agreement made between the two Aliens and
one Walker and Norguard who were shareholders
of the appellant, and a bill of sale. The written
agreement stated that the transfer of the goods
was "by way of loan", but Emily Allen insisted at
trial that ownership of the goods had been sold and
conveyed outright. The solicitors who drafted the
agreement testified that the term "loan" was used
for tax purposes when funds in payment of the
assets were withdrawn from the appellant. A sepa
rate bill of sale made on June 1, 1978 between
Emily Allen as vendor and the appellant as pur
chaser supported her contention that she had
indeed intended to sell and convey outright all her
interest in the horses and equipment that were
later seized by the sheriffs. In exchange, she was
given a promissory note in respect of the purchase
price of the goods. The written agreement provided
that Kenneth Allen "will have cheque-writing au
thority from the company for day to day opera
tions". There was also evidence that Kenneth
Allen would be employed by the appellant to
manage its business at a salary of $300 per week.
Norguard maintained that Allen was never paid
any salary although, subsequently, Emily Allen
was paid a salary for looking after the books of the
appellant. The learned Trial Judge concluded that
Allen had requested that the appellant credit his
salary to his wife.
Having regard to the findings of the learned
Trial Judge it is apparent that Allen played an
extremely active part in the operation of Allendale
Farms after the sale and transfer of assets to the
appellant on June 1, 1978. To begin with, the
operation was continued under the name of
"Allendale Farms", a name which was widely
known and closely identified with Kenneth Allen
and his family. The learned Trial Judge found that
none of the purebred horses conveyed to the appel
lant were registered in its name in the records
required to be kept under the Livestock Pedigree
Act. 2 In fact, as of June, 1980, the name of
Kenneth Allen appeared in those records as the
owner of four of the horses. Moreover, it was not
2 R.S.C. 1970, c. L-10.
until September 1980, three months after the sei
zures were carried out, that Allendale Farms took
steps to qualify itself to register its purebred horses
in those records. When, in November 1979, a
horse born in April of that same year was sold by
the appellant, Kenneth Allen made a written
representation to the person in charge of those
records that he was that horse's "owner at birth".
He declared in a sworn statement required to be
filed with that person pursuant to the statute:
I hereby declare that I owned the above-named animal at the
time of birth, that the foregoing information is in accordance
with my private record, and is to the best of my knowledge and
belief true.
In this way, as was pointed out by the learned
Trial Judge, Kenneth Allen "continued to indicate
to the public that he was the owner of horses
which were clearly owned" by the appellant. The
learned Trial Judge also considered that failure on
the part of the appellant to register any horses in
its name "is clearly misleading to third parties"
and that "toleration by it of Ken Allen keeping
some of them registered in his own name confused
creditors seeking to check ownership by obtaining
information" from the records kept under the
Livestock Pedigree Act.
In the spring 1980 issue of Draft Horse Journal,
a United States publication apparently having
wide circulation in Canada and the United States,
there was published a large advertisement for
Allendale Farms in which Kenneth Allen was
again described as "owner". As to this advertise
ment, the learned Trial Judge noted that "third
parties had every reason to believe that there had
been no change whatsoever in the operation of the
business which had for so many years been oper
ated by Mr. Allen especially as he had been given
a free hand by Mr. Norguard and Mrs. Walker to
conduct it as he always had."
The person in charge of executing process
against goods of Allen and his company was one
William O'Neill an employee of the Department
of National Revenue. There can be no doubt that
being her employee, the respondent would be
vicariously liable for his tortious acts done, as
here, in the course of his employment. 3 The
learned Trial Judge found that before directing the
sheriffs of Hastings and Gray to seize the goods,
O'Neill had taken a number of steps to ascertain
their ownership. He spent two days reviewing
records kept by the Canadian National Livestock
Records in Ottawa seeking information concerning
the ownership of the horses and found that, while
the appellant was not shown as the registered
owner of any of them, some of the horses were
registered in the name of Kenneth Allen. He spoke
to the lawyer acting for the appellant but was
denied information on the basis of "solicitor and
client privilege". On April 9, 1980, he spoke to
Kenneth Allen who refused to show him any
records and was abusive. He spoke to the licensor
of the farm on which the Allens' horse breeding
operation was carried on at Markdale and was
shown a licensing agreement signed by Allen
whereby the property was licensed to Kenneth
Allen and Ken Allen and Sons Limited, but made
no mention of the appellant. He inquired of a
veterinarian employed by the Department of
Agriculture concerning certificates of tests per
formed by him on the horses on May 14, 1980
which certificates showed Kenneth Allen as "the
owner". He inquired of the Canadian National
Exhibition Horse Show at Toronto and found that
some of the horses were entered under the name of
"Ken Allen and Sons—Owner", and that prize
money in respect of such horses was paid by
cheque issued to Ken Allen and Sons on Septem-
ber 15, 1978.
It was only after these steps had been taken and
after discussing the matter with his supervisor that
O'Neill decided to seize and remove the goods.
Subsequent to the seizure it was found that some
of the horses taken had been purchased by the
appellant some time after June 1, 1978. All the
goods seized were returned to the appellants within
three days and there they remained under a tech
nical seizure. In October 1980 it was ordered by
the Trial Division that the goods should continue
to remain in the possession of the appellant who
could sell them provided any proceeds of sale were
held in trust but that the appellants would be paid
certain operating expenses, and any balance would
3 Crown Liability Act, R.S.C. 1970, c. C-38, ss. 3(1)(a) and
4(2).
be paid to the sheriffs. On March 19, 1981 the
respondent entered a confession of judgment in
this action with the result that some of the goods
seized by the sheriffs were released from the tech
nical seizure, leaving eight horses and four colts
together with various items of equipment subject
to it. In his judgment of June 22, 1981 the learned
Trial Judge ordered the release of all assets re
maining under seizure save for the balance due on
the promissory note in favour of Emily Allen.
After reviewing these facts, the learned Trial
Judge concluded that the seizure of the goods was
attributable to the appellant's own fault. He stated
[at page 308]:
I am unable to conclude that there was any negligence whatso
ever on Mr O'Neill's part in the instructions he gave to the
sheriffs. If, as a result, assets were seized which should not have
been seized for any tax indebtedness of Ken Allen or Ken Allen
and Sons Limited, and later some of them had to be released
this was entirely the fault of the numbered company whose
officers permitted Mr Allen to continue to operate exactly as he
had in the past with every indication that the horses and
farming equipment were still owned by him or Ken Allen and
Sons Limited despite the bill of sale from Emily Allen to the
numbered company.
Later in his reasons [at pages 309-310] he found
that despite the sale of the goods to the appellant,
Kenneth Allen
... continued to carry on the horse-breeding business exactly as
he had before, using interchangeably the names Ken Allen and
Sons Limited, Allendale Farms or his own name. His principal
business activity therefore was never interrupted despite his
financial difficulties. It is incredible that Mr Norguard who has
an apparently successful contracting business of his own and
Mrs Walker who is a real estate agent, both of whom might be
expected to have at least some elementary knowledge of corpo
rate operations, the necessity of written documentation, the
distinction between a company and its individual shareholders,
and other elementary legal principles, should have permitted
the business of the numbered company to be operated in this
manner. Mr Norguard in evidence admitted that one can make
a good business deal with people in trouble. He undoubtedly
felt that he and Mrs Walker were making a good deal. The
lawyer who drew up the agreement admitted that Mr Allen had
stated that his wife was to be the eventual shareholder of the
numbered company because of his financial difficulties. Mrs
Walker asked no questions when Mr Allen requested that his
salary of $300 a week be credited to his wife. The attorney who
incorporated the Maple Leaf Lumber Company was aware of
the many executions against Allen and testified that Mr Allen
was very conscious of his financial problems and planned
carefully.
Further, while reluctantly concluding that the
appellant acquired good title to the goods in its
purchase transaction with Emily Allen of June 1,
1978, the learned Trial Judge made important
findings of fact as to the knowledge of the appel
lant regarding the financial difficulties of Allen
and his company and of attempts made by him to
avoid his creditors. He stated [at page 310] that:
... the subsequent conduct of Mr Allen in managing the
company's affairs, the request made that instead of receiving a
salary this would be credited to Mrs Allen, and other informa
tion learned as time went on must have made it clear that the
Aliens had acted in such a manner as to avoid payment to
certain creditors, including defendant....
The question before the learned Trial Judge was
whether in these circumstances there had been a
"wrongful seizure" of the goods so as to entitle the
appellant to damages. He found that the respond
ent was not liable, stating [at pages 312-313):
It is not sufficient for plaintiffs to establish that damages
have been caused as a result of the detention and seizure, even
to the extent that they can do so, as in order for them to have a
valid claim to such damages they must establish fault on the
part of the defendant, and in this they have failed.
The appellant contends that the learned Trial
Judge erred in law and asserts that the respondent
is liable in damages for its losses flowing from the
wrongful seizure which it characterizes as "noth-
ing more or less than trespass to or conversion of
the goods seized" regardless of whether O'Neill
may have honestly or reasonably believed that the
goods belonged to Kenneth Allen or his company,
the execution debtors. In fact, counsel freely
conceded that O'Neill "acted reasonably and with
out negligence ... on the evidence that Allen was
the owner of the assets, thereby rendering them
subject to the writs of execution", and that
O'Neill's instructions to the sheriffs for the seizure
of the goods "were given on reasonable grounds
and without negligence".
I deal first with the issue of conversion. While it
is true that goods were taken away by the sheriffs
for a period of three days, they were not used or
otherwise dealt with by the Department of Nation
al Revenue in any way as its own goods. A review
of the cases convinces me that it is only where
there has been some use made of goods taken by a
defendant or some other dealing with them by
him, that a conversion occurs. Such was not the
case here. Thus, in Hollins, et al. v. Fowler, et a1. 4
the defendant Hollins, a cotton broker, entered
into a transaction with one Bayley, who purported
to sell to him a quantity of cotton in bales. In fact,
Bayley, who was also a broker, had no authority to
sell the goods generally but only to a named third
party. The defendant, being ignorant of this situa
tion, took possession of the goods and agreed to
sell them to a firm of cotton spinners, Messrs.
Micholls, Lucas & Co. He paid Bayley for the
goods and in turn was paid by Micholls who spun
them into yarn. The true owner, Fowler, brought
action against Hollins for conversion. The case
went to the House of Lords where it was held that
a conversion had indeed occurred, Lord Chelms-
ford stating (at page 122) that:
... any person who, however innocently, obtains possession of
the goods of a person who has been fraudulently deprived of
them, and disposes of them, whether for his own benefit or that
of another person, is guilty of a conversion.
In that case, unlike the present one, the defendant
after taking possession of the goods dealt with
them to his own commercial advantage even
though in ignorance of the plaintiff's interest in the
goods. A further example may be found in Lanca-
shire & Yorkshire Railway, et al. v. MacNicoll. 5
There a quantity of drums was mistakenly deliv
ered into the possession of the defendant. The
mistake was not discovered until after the defend
ant had poured the contents of the drums into his
own tank. On the question of whether this amount
ed to a conversion, Atkin J., in holding that it did,
stated (at p. 605):
It appears to me plain that dealing with goods in a manner
inconsistent with the right of the true owners amounts to a
conversion, provided that it is also established that there is also
an intention on the part of the defendant in so doing to deny the
owner's right or to assert a right which is inconsistent with the
owner's right. That intention is conclusively proved if the
defendant has taken the goods as his own or used the goods as
his own. Here there is no question but that the defendant did
4 [1874-80] All E.R. Rep. 118 (H.L.).
5 [1919] 88 L.J.K.B. 601.
use the goods as his own. He poured them ... into his own vat
or tank.
More recently, in 1968, Diplock L.J. was even
more emphatic as to what in law amounts to a
conversion of goods and of the consequences there
of. In the case of Marfani & Co. Ltd. v. Midland
Bank Ltd. 6 the question was whether the defend
ant was liable in conversion for taking and after
ward dealing with the plaintiff's cheque in the
ordinary course of its business as bankers. A thief
had delivered the cheque to the defendant who had
no actual knowledge of the theft. The defendant
accepted and cleared the cheque in the normal
course of its business and credited the amount to
the thief s account. Afterward the thief withdrew
the funds and disappeared. The case was primarily
concerned with whether the defendant could take
advantage of a statutory defence, but before deal
ing with that question Diplock L.J. used the occa
sion to discuss the nature of the tort of conversion
and its consequences at common law. He states (at
pages 970-971):
At common law, one's duty to one's neighbour who is the
owner, or entitled to possession, of any goods is to refrain from
doing any voluntary act in relation to his goods which is a
usurpation of his proprietary or possessory rights in them.
Subject to some exceptions which are irrelevant for the pur
poses of this present case, it matters not that the doer of the act
of usurpation did not know, and could not by the exercise of
any reasonable care have known, of his neighbour's interest in
the goods. The duty is absolute; he acts at his peril.
While no authorities in support of this principle
were cited, it does not appear that Diplock L.J.
intended anything more than to restate the law as
it had stood in England for many years, and
examples of which are to be found in the cases
discussed above as well as in Mills v. Brooker' and
Sanderson v. Marsden & Jones.' In Canada, the
recent decision of the Court of Appeal for Ontario
in Simpson v. Gowers et al., 9 contains apt illustra
tions of acts that amounted in law to conversion.
Although the defendant in that case was innocent
6 [1968] 1 W.L.R. 956 (Eng. C.A.).
[1919] 1 K.B. 555.
8 (1922), 10 LI. L. Rep. 529 (Eng. C.A.).
9 (1981), 32 O.R. (2d) 385 (C.A.).
of the interest in the goods claimed by the plain
tiff, he had dealt with them in a manner inconsist
ent with the right of the plaintiff by throwing some
away, spreading others on his land and selling the
remainder.
In my view, there was not in the present case
any dealing by the Department of National Reve
nue with the appellant's goods following seizure in
June of 1980 such as would in law amount to a
conversion. That there was a temporary interfer
ence with the appellant's possession is undeniable,
but I do not think that that fact alone renders the
Department guilty of a conversion. In my opinion,
the appellant's contention on this branch of his
appeal must fail.
I turn next to consider the appellant's contention
that the respondent is liable in trespass for wrong
ful seizure of the goods. That is an entirely sepa
rate question. There can be no doubt that the
common law has traditionally viewed wrongful
seizure of goods as an act of trespass for which the
wrongdoer will be answerable in damages. Thus, in
Co/will v. Reeves 10 a bankrupt, in order to protect
his goods from his creditors, conspired with the
plaintiff that the latter should deliver to him some
articles of his furniture to be mixed with those of
the bankrupt. A sofa that was delivered was seized
by the defendant when it was mistaken for the
goods of the bankrupt. It argued that, in the
circumstances, the defendant ought not to be held
liable in trespass but the Court disagreed, Lord
Ellenborough stating that "the goods in question
remained distinct" and that, as the defendant
"might have discovered that they belonged to the
Plaintiff", he "took them at his peril". In Jarmain
the Elder v. Hooper, et al." the defendant had
secured judgment against one "Joseph Jarmain"
after which he took out a writ of fi fa. In conse
quence the sheriff levied against the goods of the
debtor's father, also named "Joseph Jarmain".
The plaintiff sued both the sheriff, who had effect
ed the seizure, and the defendant who had pro
cured it by direction given by his attorney. Tindal
C.J. in finding the defendant liable in trespass,
stated that he "must stand the consequences" of
10 (1811), 2 Camp. 575; 170 E.R. 1257 (N.P.).
" (1843), 6 M & G 827; 134 E.R. 1126 (C.P.).
his agent, the attorney, acting "inadvertently or
ignorantly". The case of Wilson et al. v. Tumman
et al. 12 was decided by Tindal C.J. in the same
year. The issue there was whether the ratification
by the judgment creditor of a wrongful seizure
made subsequent to the seizure rendered the she
riff, who carried it out pursuant to a valid writ,
liable. The learned Judge, while deciding in favour
of the sheriff on the main point, added these words
by way of dictum (at page 244) [E.R. 883]:
If the defendant Tumman had directed the sheriff to take the
goods of the present plaintiff, under a valid writ, requiring him
to take the goods of another person than the defendant in the
original action, such previous direction would undoubtedly have
made him a trespasser, on the principle that all who procure a
trespass to be done are trespassers themselves, and the sheriff
would be supposed not to have taken the goods merely under
the authority of the writ, but as servant of the plaintiff.
That principle was applied in England by the
Court of Appeal in the case of Morris v. Salberg. 13
There, the defendant took out a writ of fi fa so as
to levy execution against the goods of the judg
ment debtor. The solicitor acting for the judgment
creditor endorsed the writ in such a way that he
inadvertently directed the sheriff to seize goods of
the debtor's father. In an action by the father in
trespass, the judgment debtor was found to be
liable. More recently, in Clissold v. Cratchley et
al., 14 due to inadvertence on the part of the
defendant's solicitors, execution was levied against
the plaintiff's goods after the judgment debt had
been satisfied. The judgment creditor and his
solicitor were found liable in trespass on the
ground that, upon satisfaction of the judgment
debt, the writ had become null and void.
There has been a dearth of reported cases in this
country dealing with this question but the results
of them are, I believe, in harmony with the princi
ples laid down in the cases already discussed. I
12 (1843), 6 M & G 236; 134 E.R. 879 (C.P.).
13 (1889), 22 Q.B.D. 614 (Eng. C.A.).
14 [1910] 2 K.B. 244 (Eng. C.A.).
refer by way of example to Park v. Taylor, 15
Wilkinson v. Harvey et a1., 16 and Meadow Farm
Ltd. v. Imperial Bank of Canada," which were
also cited before us.
The respondent submitted that the law as laid
down in the earlier cases is no longer applicable in
this country. She contended that modern case law
here has established that a defendant who is
entirely without fault in a case of this kind has a
good defence to an action in trespass. She relied in
particular on a decision of the majority of the
Supreme Court of Canada in Cook v. Lewis. 18 In
that case, during a bird-hunting expedition, the
respondent was struck in the face by bird-shot and
was injured. It was not clear on the evidence which
of the appellant and another hunter had caused the
injury but that each had discharged his firearm
simultaneously and in the general direction of the
plaintiff at a bird on the wing. Both hunters were
joined as defendants. In upholding the decision of
the Court of Appeal for British Columbia direct
ing a new trial, Cartwright J. [as he then was],
speaking for a majority of the Court, laid down the
following principle (at page 839):
In my view, the cases collected and discussed by Denman J. in
Stanley v. Powell (1891) 1 Q.B.D. 86, establish the rule (which
is subject to an exception in the case of highway accidents with
which we are not concerned in the case at bar) that where a
plaintiff is injured by force applied directly to him by the
defendant his case is made by proving this fact and the onus
falls upon the defendant to prove "that such trespass was
utterly without his fault". In my opinion Stanley v. Powell
rightly decides that the defendant in such an action is entitled
to judgment if he satisfies the onus of establishing the absence
of both intention and negligence on his part.
That principle has been applied in Canada ever
since in cases involving direct trespass to the
person causing injury to him: Walmsley et al. v.
Humenick et a1., 19 Woodward v. Begbie et al., 2°
Dahlberg v. Naydiuk, 21 Larin v. Goshen 22 and
15 (1852), 1 U.C.C.P. 414.
16 (1887), 15 O.R. 346 (C.P.).
17 (1922), 66 D.L.R. 743 (Alta. S.C. App. Div.).
18 [1951] S.C.R. 830.
19 [1954] 2 D.L.R. 232 (B.C.S.C.).
20 [1962] O.R. 60 (H.C.).
21 (1970), 10 D.L.R. (3d) 319 (Man. C.A.).
22 (1975), 56 D.L.R. (3d) 719 (N.S.S.C. App. Div.).
Doyle v. Garden of the Gulf. 23 Similarly, it has
been applied in cases involving direct trespass to
chattels causing injury to them: Bell Canada v.
Bannermount Ltd., 24 Bell Canada v. Cope (Sarnia)
Ltd. 25 The law in England has developed along
parallel lines with one important difference. There,
it is the plaintiff who must carry the burden of
proving that the act that caused the injury was
either intentional or negligent. Fowler v. Lan-
ning, 26 Letang v. Cooper. 27
No case was called to our attention in which the
principle of Cook v. Lewis has been applied to the
wrongful seizure of goods where, as here, no physi
cal injury resulted. I do not think that the common
law in this country has developed to the point
where a person who, in execution of process, seizes
the goods of another under the honest though
mistaken belief that they belonged to his judgment
debtor, will escape liability in trespass by proving
that his act was neither intentional nor negligent.
Liability in trespass for wrongful seizure of chat
tels has stood on a different footing as a separate
and distinct cause of action unlike that which lies
when the act consists of a direct act against a
person or a chattel resulting in injury. In such a
case, the law has viewed inevitable accident as a
defence: National Coal Board v. J. E. Evans &
Co. (Cardiff) Ld. et al., 28 on the basis that the
defendant's act was "utterly without his fault".
The fact that a seizure of goods is made under the
honest though mistaken belief that they belonged
to the judgment debtor has not been seen as a
defence. I therefore conclude that the act of
O'Neill in instructing the sheriffs of the counties
of Hastings and Gray to seize the goods resulted in
a wrongful seizure of and a trespass against those
goods unless the respondent is able to set up a
defence.
23 (1980), 24 Nfld. & P.E.I.R. 123 (P.E.I.S.C.).
24 [1973] 2 0.R. 811 (C.A.).
25 (1980), 11 C.C.L.T. 170 (Ont. H.C.); affd. on appeal
(1981), 15 C.C.L.T. 190 (C.A.).
26 [1959] 1 Q.B. 426.
27 [1965] 1 Q.B. 232.
28 [1951] 2 K.B. 861.
The respondent asserts that a good defence does
exist in this case and that it lies in estoppel by the
appellant's conduct. The appellant argues that the
opposite is true but, in any event, submits that the
respondent cannot present that argument at this
stage because it was not expressly pleaded. Coun
sel for the respondent contends that all of the
material facts necessary to found the argument
were pleaded, but asked leave to further amend
her amended defence if it be necessary to do so.
The appellant alleged in paragraph 4 of its amend
ed statement of claim that the seizure and removal
of the goods "at the instance of the servants of the
Minister of National Revenue" was done "without
cause" and "with the knowledge on the part of the
servants of the Minister that the assets were not
the property of Kenneth Richard Allen and were
the property of the Plaintiff company" or, that, in
the alternative, the seizure and removal was done
"with reckless disregard as to the ownership of the
assets". These allegations were denied by the
respondent in her amended defence in which it was
also alleged, in paragraph 3(b), that there were
"reasonable grounds to believe" that the assets did
belong to the judgment debtors. The appellant
joined issue. The facts pleaded and proven by the
respondent were directed at the conduct of the
appellant in allowing a situation to develop at
Allendale Farms that led O'Neill into believing, on
reasonable grounds, that the goods belonged to the
judgment debtors. The learned Trial Judge obvi
ously agreed that this was so for, after seeing and
hearing the witnesses and considering the evi
dence, he found [at page 308] as a fact that the
seizure of the assets "was entirely the fault" of the
appellant "whose officers permitted Mr Allen to
continue to operate exactly as he had in the past
with every indication that the horses and farm
equipment were still owned by him or Ken Allen
and Sons Limited" despite the transfer from Emily
Allen to the appellant.
It was on the basis of these broadly worded
allegations of fact that the bearing of the appel
lant's conduct upon the defence of reasonable
belief was explored at trial and that findings were
made with reference thereto. The appellant had a
full opportunity at that stage of establishing, if he
could do so, that O'Neill ought not to have been
induced by that conduct to seize the goods in
question. Obviously, the learned Trial Judge
thought otherwise. I therefore fail to see how the
appellant could claim surprise by the position of
the respondent taken on this appeal that its con
duct precludes it from recovering damages. That
position, it seems to me, goes no further than to
take the facts as pleaded and as proven at trial and
to argue from them that they result in estoppel by
conduct. 29 That the respondent was entitled to do
so is clear on the authorities. The principle was
discussed and applied by Lord Denning in Re
Vandervell's Trust (No. 2) 30 where he stated (at
page 213):
Counsel for the executors stressed that the points taken by
counsel for the trustee company were not covered by the
pleadings. He said time and again: "This way of putting the
case was not pleaded"; "No such trust was pleaded". And so
forth. The more he argued, the more technical he became. I
began to think we were back in the bad old days ... when
pleadings had to state the legal result; and a case could be lost
by the omission of a single averment (see Bullen and Leake
Precedents of Pleadings (3rd Edn, 1868), p. 147). All that has
been long swept away. It is sufficient for the pleader to state
the material facts. He need not state the legal result. If, for
convenience, he does so, he is not bound by, or limited to, what
he has stated. He can present, in argument, any legal conse
quence of which the facts permit. The pleadings in this case
contained all the material facts. It does appear that counsel for
the trustee company put the case before us differently from the
way in which it was put before the judge: but this did not entail
any difference in the facts, only a difference in stating the legal
consequences. So it was quite open to him.
I do not think it was necessary, in the circum
stances, for the respondent to have gone farther
than it did in its pleadings by labelling this con
duct on the part of the appellant as "estoppel"
and, as such, that it precludes recovery of dam
ages. In point of fact, as was held by the learned
Trial Judge, that conduct did induce O'Neill to
take the action that he did. Had an express plea of
estoppel been necessary, I would have been
inclined to allow it in the circumstances. 31
29 Zwicker, et al. v. Feindel (1899), 29 S.C.R. 516.
30 [1974] 3 All E.R. 205 (C.A.).
31 Barnett and Wise v. Wise, [1961] O.R. 97 (C.A.).
The final question then is whether the facts
make out an estoppel. It was the very strong view
of the learned Trial Judge that the seizure of the
goods was brought about by the appellant's own
conduct. He viewed that conduct, so graphically
described in his reasons for judgment, as having
induced O'Neill into reasonably believing that the
goods belonged to the judgment debtors. In my
view, that conduct does preclude the appellant
from now asserting the contrary and from recover
ing its damages. 32 Even if the appellant and
O'Neill were each innocent, the appellant must
still sustain the loss by allowing Allen to operate as
he did. Such is in accordance with the general
principle stated by Ashhurst J. in Lickbarrow et
al. v. Mason, et a1. 33 namely, that:
... wherever one of two innocent persons must suffer by the
acts of a third, he who has enabled such third person to
occasion the loss must sustain it.
That principle was approved by the Privy Council
in Commonwealth Trust, Limited v. Akotey 34 and,
although it must be applied with some caution, 35 I
think it may be appropriately applied in the cir
cumstances of this particular case.
The appellant has suggested that O'Neill knew
that it claimed ownership of the goods before the
seizure was carried out but I find nothing in the
reasons for judgment of the learned Trial Judge
that would clearly support this suggestion. As this
appeal was heard, upon the unopposed application
of the appellants, on the basis that those reasons
should alone constitute the record, we have no way
of knowing whether support for this suggestion
may be found in the evidence tendered at trial.
There is mention in the reasons for judgment of
O'Neill conceding at trial that "there had been
some claim to ownership by others" but the
learned Trial Judge did not identify those "others"
nor state the precise nature of the "claim". In view
of his central finding that it was the conduct of the
appellant that led to the seizure of the goods, he
appears to have been well satisfied that O'Neill did
32 Re Montgomery v. E. Diamond, [1925] 4 D.L.R. 736
(P.E.I.S.C.).
33 (1787), 2 T.R. 63, at p. 70; 100 E.R. 35 (K.B.), at p. 39.
34 [1926] A.C. 72 (P.C.), at p. 76.
35 Minchau v. Busse, [1940] 2 D.L.R. 282 (S.C.C.), per Duff
C.J. at p. 303.
not act in the face of a claim made by the appel
lant such as effectively put him on notice that the
goods about to be seized were its property rather
than the property of the judgment debtors.
I would therefore dismiss this appeal with costs.
URIE J.: I Concur.
* * *
The following are the reasons for judgment
rendered in English by
LALANDE D.J.: This appeal is from the dismis
sal of an action for damages to the owner resulting
from a trespass to chattels by way of a seizure
under writ of execution.
The respondent having made good a defence of
estoppel based upon the numbered appellant's con
duct, I agree with Mr. Justice Stone that the
appeal must be dismissed with costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.