In brief, this recent Court of Appeal decision confirms that a commercial landlord who takes (and disposes of) a tenant’s chattel mortgaged equipment after the tenant abandoned the premises, must pay the Chattel Mortgagee market value for that property, and not the amount the tenant owed to the Chattel Mortgagee. In this case, this was not a trivial difference: the Chattel Morgagee was owed roughly $120,000, and the market value of that pledged property was roughly $215,000.
In addition, the appellate court also considered it appropriate to award $10,000.00 in punitive damages against the landlord for knowingly either disposing of, or repurposing, the equipment despite the Chattel Mortgagee attending shortly after the tenant vacated the premises, to stake claim to that mortgaged restaurant equipment formally secured through a PPSA.
The appellate court rejected of all the landlord’s grounds of appeal based on the argument that ownership of the equipment transferred to the landlord after the Chattel Mortgagee failed to pick-up the equipment, because this argument was never raised during the trial: it was a new allegation, first raised at the appeal, and no leave was sought to add this ground of appeal.
1027410 Ontario Inc. v. 2384589 Ontario Limited, 2022 ONCA 688 (CanLII)
https://www.canlii.org/en/on/onca/doc/2022/2022onca688/2022onca688.html