Tuesday, January 27, 2009

Antiques and the Courts’ Use of Extraordinary Remedies

Legally speaking . . .

A frustrating aspect of the law is its occasional unfairness to those who lead their lives honestly. Consumers and business owners often lament that the unscrupulous, often with deep pockets, somehow figure out how to avoid paying the piper, despite laudable efforts of our legislators, courts and judges. But our legal system does have mechanisms to make justice prevail and catch the unsavory. And cases involving antiques illustrate how it can be done, by availing ourselves of extraordinary remedies.

Courts were originally created to provide financial compensation for perpetrated wrongs. But that didn’t always result in justice. So centuries ago in England a second level of court developed, known as the court of equity. Its job was to apply established concepts of law, but using principles of ethics and fairness, combined with good common sense and judgment … not always an easy task. In fact Charles Dickens’ Bleak House parodied the excessive time and expense associated with the Court of Chancery (the court hearing equity lawsuits) in 19th century England.

The most common extraordinary remedy, originally used in the English courts of equity, is the injunction. An injunction either requires that someone do something, or not do something. It’s customized to a specific set of facts and in general will be granted only where monetary damages are inadequate. It can be granted on a temporary basis, very quickly, and even without advance notice to the person it affects.

JUSTICE PREVAILS

The British Columbia case of Kay Minge v. J.W. Oak Furniture Imports Ltd. and William Heinhuis illustrates how this extraordinary remedy is particularly suited to claims involving antiques. Kay Minge was an antique automobile collector, residing in Norway. He agreed to purchase a 1932 Chrysler Imperial Le Baron Roadster for $124,800 (USD) from the defendants. The defendants admitted that Mr. Minge paid that amount within about ten days, but they refused to deliver the car. They said the contract was for the Le Baron and a 1976 John Deere Model 450 Tractor for an additional $50,000; that part of the sum was for the Le Baron, and part for the tractor; and that the agreement was that the vehicles wouldn’t be delivered until payment had been received in full for both. The plaintiff sued to get the Le Baron, and the defendants countersued for the balance.

On the face of that evidence, the defendants’ case seemed suspect: Mr. Heinhuis admitted that there was a deal for $124,800, and that the money had been paid … but part of that money was for the tractor sale and therefore neither vehicle had been paid for in full, all rather curious. However, there was fax and other evidence lending some credence to his position.

The proceeding was a motion brought by Mr. Minge, before trial, requesting interim delivery of the car pending trial. There was only affidavit evidence, so the Master of The Court didn’t hear oral testimony, note the demeanor of the witnesses, and examine all of the documents.

Just as with any rare antique or piece of art where ownership is in dispute, if the item remains with the vendor pending trial he can dispose of it, or it could be stolen or destroyed by fire. It wouldn’t be enough for Mr. Minge to eventually get his money back, because the vehicle was one-of-a-kind, and money wouldn’t be adequate compensation for the deal not coming to fruition.

The Master carefully considered the range of remedies available, deciding:
1) Provided the plaintiff pay into court money as security for the defendants’ counterclaim (i.e. the tractor payment), they shall release the Le Baron to Mr. Minge; should they retain the tractor they shall keep it insured; and, pending delivery of the car to Mr. Minge they shall not expose it to inclement weather and keep it insured.
2) If the plaintiff elects to not pay the additional sum of money into court as security, the defendants shall retain both vehicles, insured and protected from inclement weather.
In both instances, the interim order provided for inspection by the other side and proof of insurance coverage.

Mr. Minge gets his vintage vehicle, at his option either in his possession immediately or protected for him pending trial, and the defendants’ rights are preserved should they wish to pursue their counterclaim for sale of the tractor. In addition, the order could be registered with provincial government ministries, to prevent the defendants from mortgaging or disposing of the Le Baron before trial.

AND CATCHES THE UNSAVORY

Earlier this year a lawsuit was brought before the Ontario Superior Court involving a collection of 14 classic cars valued at $350,000 (CDN), in more dire circumstances. The saga began with a franchise known as O.K. Tire Stores suing former licensee James McLaughlin Jr. and his corporation, Ace Tire. In May, 2007, O.K. Tire obtained a temporary injunction restraining the defendants from using the plaintiff’s trade marks and trade name. In September, a judgment made the injunction permanent and ordered McLaughlin and his company to pay damages for an outstanding debt, passing off, and costs, totaling $199,830.25.

In February of this year, O.K. Tire commenced a second proceeding, O.K. Tire Stores Inc. v. McLaughlin, suing McLaughlin, Ace Tire, and four members of the McLaughlin family. Of the total owing, O.K. Tire had only recovered $1,674.71, through garnishment.

In the new proceeding, the plaintiff alleged that in 2004, McLaughlin submitted a credit application, representing that he owned the home in which he resided, the classic car collection, and more, and that his net worth was $641,700. After obtaining the judgment, O.K. Tire learned, amongst other things, that the home had been transferred into the name of Charlotte Murphy McLaughlin and James McLaughlin Sr. and that 9 motor vehicles had been transferred to McLaughlin’s wife, Debra. In addition, while McLaughlin had stated that he had “walked away” from the Ace Tire business, the plaintiff learned that the Ace Tire business location was being operated by McLaughlin’s brother, Martin.

O.K. Tire asked a judge, without giving notice to the defendants, to require that the McLaughlins preserve their assets and allow the plaintiff to put liens (certificates of pending litigation) on real estate, including the home. The basic allegation was that McLaughlin and his family had wrongfully taken steps including transferring property, with the intention of avoiding paying O.K. Tire. A concern was that the if the defendants knew that O.K. Tire was going to ask the court for such an order, it would give them time to dispose of everything, before a court order was made.

The judge’s order, made February 14, 2008, without the defendants knowing that the plaintiff had even started the new proceeding, included these terms, pending further court order:
1) The defendants or anyone acting on their behalf are restrained from directly or directly taking any steps to sell, transfer or otherwise deal with the vehicles and shall preserve and maintain insurance on them;
2) The defendants are to within ten days provide the plaintiff with a sworn statement stating the location of the vehicles, and by not doing so they will be in contempt of court and may be liable to be imprisoned or fined;
3) The plaintiff is granted permission to but a lien on the two pieces of real estate in issue in the case, including the home;
4) Any interested party can apply to amend the order;
5) The plaintiff is required to serve the order and the court proceeding (claim) as soon as possible.

Two points are noteworthy: Firstly, none of these allegations (which do not constitute all those which were made) have been proven to be true at a trial, and in fact they represent only a summary of the plaintiff’s version of the facts. Secondly, as of June, 2008, according to the lawyer representing the plaintiff, the plaintiff and the defendants were is settlement negotiations, and no further court order had been made.

The plaintiff didn’t want Mr. Mclaughlin’s antique cars or his home. All he wanted was that the debt ordered by the court to be paid, be satisfied. On the face of the allegations it appeared that McLaughlin, with the help of his family, was trying to arranged his affairs to avoid paying the debt, if not fraudulently then certainly by taking illegal steps. You can sell or dispose of property, as long as your motivation is not to defeat another’s claim.

SUMMARY

An injunction is an extraordinary remedy available to Canadian courts today, historically rooted in the British court of equity, designed to meet specific, often urgent, fact situations. It can be used to protect the rights of an antique collector, to ultimately acquire a unique piece, where money would be inadequate compensation. It can be granted on a temporary basis, fast and without notice to the people it affects, where there’s a danger of irreparable harm to the innocent. Even when the gate has been closed after the horse has left the barn, justice can still prevail.

- Alvin Starkman M.A., LL.B., Oaxaca

Alvin Starkman is a member of The Law Society of Upper Canada. However, this article is not intended to be and should not be relied upon as constituting legal advice or opinion. Alvin and Arlene, former Toronto residents and collectors of Canadiana, moved to Mexico in 2004. They operate Casa Machaya Oaxaca Bed & Breakfast - http://www.oaxacadream.com

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