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SECURED TRANSACTIONS - Enforcement on default - Rights of secured party on default

Wednesday, September 22, 2021 @ 6:19 AM  

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Appeal by the purchasers from the dismissal of their counterclaim for breach of contract and conversion. Cross-appeal by the respondents from the damages award. Two years after the appellants purchased the respondents’ business through an asset purchase agreement, they defaulted on a promissory note, secured by certain assets including heavy construction equipment. The agreement provided that if the appellants defaulted on any payments under the agreement, the respondents were to give 15 days’ notice before seizing the purchased assets. Without notice, the respondents seized the assets, putting the appellants out of business. The trial judge awarded the respondents $200,865 for the money still owing and dismissed the counterclaim on the basis the respondents were not required to provide notice prior to seizing the assets.

HELD: Appeal allowed. The trial judge erred in finding the Personal Property Security Act relieved the respondents of the obligation to give the appellants notice of their intention to seize the secured assets. Section 63(7)(c) of the Act had no application at the pre-seizure stage. At common law and under the terms of the parties’ agreement, the appellants were entitled to notice before the equipment was seized. The respondents’ seizure without notice amounted to a breach of contract. The case was remitted to the Superior Court for an assessment of damages. There was no error in the trial judge’s assessment of damages in the main action.

1758704 Ontario Inc. v. Priest, [2021] O.J. No. 4494, Ontario Court of Appeal, M.L. Benotto, B. Miller and G.T. Trotter JJ.A., August 30, 2021. Digest No. TLD-September202021006