Date: 19980623
Docket: T-359-98
OTTAWA, ONTARIO, WEDNESDAY, JUNE 24, 1998
PRESENT: The Honourable Mr. Justice Rothstein
BETWEEN:
WESTWOOD SHIPPING LINES INC.,
Plaintiff,
- and -
GEO INTERNATIONAL INC. and
GARRY HUNTLEY,
Defendants.
ORDER
IT IS HEREBY ORDERED:
The plaintiff shall have judgment in the following terms.
1. The unsold balance of the hiker shoes in the possession of the defendant Geo International Inc. ("Geo") shall be returned to the plaintiff within seven days of the date of judgment.
2. Pursuant to Rule 218 of the Federal Court Rules, 1998, SOR/98-106, Geo shall pay into Court 90% of the invoice amount (the Canadian equivalent, based on the rate of exchange at the close of business on the date of judgment, of US $145,035.49) within seven days of the date of judgment. Alternatively, at the option of Geo, Geo may pay to the solicitors for the plaintiff the sum of US $145,035.49 on the condition that the plaintiff's solicitors shall hold the funds in trust and pay out the funds only in accordance with the order of this Court.
3. The parties may apply to the Court for an expedited hearing on the issue of the value of the hiker shoes and the actual amount that should be recovered by the plaintiff.
4. Either party may request that the process be case-managed and/or may seek directions.
5. The plaintiff is entitled to costs which the Court shall fix as a lump sum inclusive of disbursements upon the application of either party.
6. This order is subject to further order of the Court.
J U D G E
Date: 19980624
Docket: T-359-98
BETWEEN:
WESTWOOD SHIPPING LINES INC.
Plaintiff,
- and -
GEO INTERNATIONAL INC. and
GARRY HUNTLEY,
Defendants.
REASONS FOR ORDER
ROTHSTEIN J.
[1] The plaintiff moves for summary judgment against the defendant, Geo International Inc. ("Geo") on the basis that Geo converted goods to which the plaintiff had a lawful right of possession.
[2] The plaintiff was the carrier from China to Canada of three containers of hiker shoes. The goods were loaded on board an ocean vessel on or about October 11, 1997 and reached Canada in early November, 1997. Bills of lading covering the shipment were delivered to the shipper, Yancheng Eagle Shoes Co. Ltd. ("Yancheng"). The bills of lading indicated that the goods were consigned "to order", that the "Notify Party" was the defendant Geo and that the place of delivery was Toronto.
[3] In early November 1997, the defendant Garry Huntley, General Manager of Geo, contacted the plaintiff to seek delivery of the goods. He was told by Nikki Lawson, Import Customer Service Representative of the plaintiff, that in order to obtain the goods, Geo would have to pay the freight and terminal charges and surrender the original endorsed ocean bills of lading for the goods shipped.
[4] Over the course of the next few weeks, the freight charges were paid to the plaintiff. As to the presentation of the endorsed bills of lading, there is a dispute as to what was represented by Mr. Huntley. The plaintiff says that Huntley fraudulently misrepresented to Lawson that the original bills of lading had been delivered by Yancheng to Geo. Huntley denies that he made any such representation. It is not necessary for the purposes of this motion to resolve that dispute. It is sufficient to find on the basis of the uncontradicted evidence, that the plaintiff provided Geo with "pick up" numbers which enabled Geo to attend at the place where the goods were located in Toronto and to take possession of them. The original endorsed bills of lading were never surrendered to the plaintiff.
[5] On November 27, 1997, after Geo had picked up the goods, Yancheng instructed the plaintiff not to release the goods to Geo. At this point, the plaintiff set about trying to recover the goods from Geo. On December 18, 1997, counsel for the plaintiff wrote to Geo demanding either the original bills of lading or the return of the goods.
[6] The goods were never returned. On February 20 and 27, 1998, Geo sold approximately 90% of the goods. By reason of an interim injunction granted by the Court, Geo was enjoined from disposing of the balance of the goods. Geo still retains these goods.
[7] The plaintiff says Geo converted the goods and seeks judgment for US $160,515.00, being what the plaintiff thought was the invoice price for the goods. The plaintiff says that Yancheng is seeking this amount from it. (An answer undertaken to be provided by Geo indicates that Geo agreed to pay Yancheng US $161,150.54.)
[8] Geo says that the plaintiff voluntarily released the goods and is now estopped from alleging conversion by Geo. Geo also says the goods were defective and that it would be unjust for the plaintiff to obtain a judgment for an amount that could never be recovered by the vendor Yancheng.
[9] The principles of conversion are not disputed by Geo. However, I will briefly set out those that are applicable to this case. The right of a bailee to recover goods or a complete equivalent of them for conversion is established in The Winkfield,[1902] P.D.A. 42 where at page 60, Collins M.R. states:
Therefore, as I said at the outset, and as I think I have now shewn by authority, the root principle of the whole discussion is that, as against a wrongdoer, possession is title. The chattel that has been converted or damaged is deemed to be the chattel of the possessor and of no other, and therefore its loss or deterioration is his loss, and to him, if he demands it, it must be recouped. His obligation to account to the bailor is really not ad rem in the discussion. It only comes in after he has carried his legal position to its logical consequence against a wrongdoer, and serves to soothe a mind disconcerted by the notion that a person who is not himself the complete owner should be entitled to receive back the full value of the chattel converted or destroyed. There is no inconsistency between the two positions; the one is the complement of the other. As between bailee and stranger possession gives title - that is, not a limited interest, but absolute and complete ownership, and he is entitled to receive back a complete equivalent for the whole loss or deterioration of the thing itself. As between bailor and bailee the real interests of each must be inquired into, and, as the bailee has to account for the thing bailed, so he must account for that which has become its equivalent and now represents it.
[10] In Toronto Dominion Bank v. Dearborn Motors Ltd. (1968), 64 W.W.R. 577 (B.C.S.C.), Verchere J. quotes with approval Salmond on Torts, 14th ed.,[1] at page 158:
Whenever goods have been converted, an action will lie at the suit of any person in actual possession or entitled at the time of the conversion to the immediate possession of them. It is not necessary for the plaintiff to show that he is the owner of the goods. One who has actual possession or an immediate right to possession at the time of the conversion can sue even though he is not the owner of the property. Hence not merely can a bailee at will sue but also his bailor and one who has a lien over the goods.
[11] Conversion is established when goods are dealt with in a manner inconsistent with the right of the person entitled to them. In Lancashire and Yorkshire Railway et al v. MacNicoll (1918), 88 L.J.K.B. 601 Atkin J. states at page 605:
It appears to me plain that dealing with goods in a manner inconsistent with the right of the true owner 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.
[12] Geo has not paid for the goods. Nonetheless, it refused to return them when demand was made for them and later sold 90% of them and retained the proceeds. This is conclusive proof that Geo took the goods as its own and used them as its own. Conversion is therefore established.
[13] Geo's estoppel argument is not persuasive. The plaintiff released the goods at the request of Geo. Even if the plaintiff was negligent in releasing the goods without first obtaining the endorsed bills of lading, it is not reasonable that Geo would simply take the goods without making some arrangements for payment, especially in view of the fact that, as was conceded by Huntley, Lawson had indicated that the original bills of lading were required. In Lancashire, Lawrence J. states at page 603:
He has contended that the proximate or real cause of what the defendant did in taking this carbolic acid to his farm and using it was the conduct of the railway company's servants at Abergele Station. What was that conduct? I agree with him that it was negligent, but that is not sufficient to create an estoppel. It must be such conduct on their part-such a representation to be acted upon-as would induce a reasonable person-a reasonable consignee-to act upon it, and convert the goods to his own use.
Lawrence J. continued, at page 604:
He had to ask himself whether the defendant's servants were induced, by a representation of the railway company which they as reasonable men could act upon, to convert the carbolic acid to their own use.
....
It is said, however, that both parties were perfectly careless in the matter. That will not do; a person must act reasonably on a representation which is made to him and intended to be acted upon.
[14] I am satisfied, on the basis of Lancashire, that the release of the goods by the plaintiff is not sufficient to create an estoppel. It cannot be said that the plaintiff induced the defendants, by releasing the goods without obtaining the endorsed bills of lading, to convert the goods to their own use without making any arrangement for payment.
[15] Indeed, Geo did not base its defence on estoppel, which is addressed in Lancashire, but on promissory estoppel. In Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50 Sopinka J. states at page 57:
The principles of promissory estoppel are well settled. The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position. In John Burrows Ltd. v. Subsurface Surveys Ltd., [1968] S.C.R. 607, Ritchie J. stated, at p. 615:
It seems clear to me that this type of equitable defence cannot be invoked unless there is some evidence that one of the parties entered into a course of negotiation which had the effect of leading the other to suppose that the strict rights under the contract would not be enforced, and I think that this implies that there must be evidence from which it can be inferred that the first party intended that the legal relations created by the contract would be altered as a result of the negotiations.
This passage was cited with approval by McIntyre J. in Engineered Homes Ltd. v. Mason, [1983] 1 S.C.R. 641, at p. 647. McIntyre J. stated that the promise must be unambiguous but could be inferred from circumstances.
[16] I will assume, without deciding, that some form of legal relationship exists between the plaintiff and Geo, i.e. relating to Geo's obligation to provide the plaintiff with endorsed bills of lading in order to obtain release of the goods. While the plaintiff's voluntary release of the goods changed that obligation, Geo does not indicate what the changed relationship was. In many cases the nature of the changed legal relations will be obvious in light of the circumstances of the representation, but that is not the case here. If the Court is to infer a change in the legal relations between the parties there must be some evidence from which the Court may ascertain what the new relationship is to be. However, Geo simply says the plaintiff's voluntary release changed the legal relation but does not indicate what the altered relationship was to be. At the very least the plaintiff's alleged promise is ambiguous. I certainly cannot infer from the circumstances that the voluntary release of the goods by the plaintiff constituted a promise or assurance to Geo that Geo was entitled to convert the goods.
[17] I am therefore satisfied that the plaintiff is not estopped from seeking the return of, or compensation for, the converted goods.
[18] Geo argues that the thrust of the plaintiff's statement of claim is fraudulent misrepresentation. The plaintiff does allege fraudulent misrepresentation and that issue is contested in the affidavit evidence. This question cannot be resolved on summary judgment and would have to go to trial. However, proof of conversion does not depend on fraudulent misrepresentation. I am satisfied that conversion has been proven and that on this point there is no genuine issue for trial.
[19] The plaintiff shall have judgment in the following terms. According to the evidence, approximately 90% of the goods were sold by Geo. The unsold balance shall be returned to the plaintiff within seven days of the date of judgment.
[20] Insofar as the value of the approximately 90% sold is concerned, there is some dispute in the evidence. Geo agreed to pay Yancheng US $161,150.54. Geo says that it sold these goods for Cdn $40,000.00. I am not satisfied that I am able to determine the value of the sold goods. However, as plaintiff's counsel puts it, if the contractual arrangements had been adhered to by Geo, it would have paid the invoice amount for the goods before they were released. It cannot put itself in a better position by having converted the goods.
[21] Pursuant to Rule 218 of the Federal Court Rules, 1998, SOR/98-106, Geo shall pay into Court 90% of the invoice amount (the Canadian equivalent, based on the rate of exchange at the close of business on the date of judgment, of US $145,035.49) within seven days of the date of judgment. Alternatively, at the option of Geo, Geo may pay to the solicitors for the plaintiff the sum of US $145,035.49 on the condition that plaintiff's solicitors shall hold the funds in trust and pay out the funds only in accordance with the order of this Court. The parties may then apply to the Court for an expedited hearing on the issue of the value of the goods and the actual amount that should be recovered by the plaintiff. Either party may request that the process be case-managed and/or may seek directions.
[22] The plaintiff is entitled to costs which the Court shall fix as a lump sum inclusive of disbursements upon application of either party.
Marshall Rothstein
J U D G E
OTTAWA, ONTARIO
JUNE 24, 1998
FEDERAL COURT OF CANADA TRIAL DIVISION
NAMES OF SOLICITORS AND SOLICITORS ON THE RECORD
COURT FILE NO.: T-359-98
STYLE OF CAUSE: WESTWOOD SHIPPING LINES INC. v. GEO INTERNATIONAL INC. ET AL
PLACE OF HEARING: Vancouver, British Columbia DATE OF HEARING: June 12, 1998
REASONS FOR ORDER BY THE HONOURABLE MR. JUSTICE ROTHSTEIN
DATED: June 24, 1998
APPEARANCES:
Mr. David McEwen for Plaintiff
Mr. Kimberly Campbell for Defendant
SOLICITORS OF RECORD:
McEwen Schmitt for Plaintiff Vancouver, B. C .
Shapiro Hankinson for Defendant Vancouver, B. C.
[1] The current edition, Salmond & Heuston on the Law of Torts, 21st ed., 1996, contains an updated version of this quotation. The 21st edition states, at page 108:
Whenever goods have been converted, an action will lie at the suit of any person in actual possession or entitled at the time of the conversion to the immediate possession of them. It is not necessary for the plaintiff to show that he is the owner of the goods. Hence not merely can a bailee at will sue, but also his bailor, and only one who has a lien over the goods, or has an equitable title to them, as distinct from a mere contractual right.
The 21st edition describes the rule somewhat more narrowly than it is described in the 14th edition. Nevertheless, it remains clear that a bailee may bring an action in respect of conversion of goods under bailment.