Case: Koeneman v. Horne, 2024 MBCA 36 (CanLII)

Keywords: conversion; possessory interest; joint and several liability

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Synopsis:

The defendant, Mr. Keith Horne, hires a third party, Mr. John Demars, to remove four pieces of used equipment from his property (i.e., a 1975 Caterpillar 235 backhoe, a 1970 Ford dump truck, a Dynapac asphalt roller, and a Clairco asphalt elevator), and sell them as scrap. (See paras. 1, 6). General Scrap Partnership (“General Scrap”) purchases the scrap for $17,874.25USD. Half is paid to Mr. Horne, as agreed. (See para. 1).

Problem: the scrap does not belong to Mr. Horne.

A contractor, Mr. Richard Koeneman, had arranged to leave the equipment on Mr. Horne’s property. (See para. 6). Mr. Koeneman later testifies the equipment had been owned by two corporations. Though Mr. Koeneman and his partner previously dissolved the corporations, he continues to use the equipment to carry on his contracting business. (See para. 8).

When he notices the equipment had gone, Mr. Koeneman reports the matter to police. Mr. Horne is charged and eventually pleads guilty to theft. His sentence includes a restitution payment in the amount of $7,937.12USD. (See para. 7).

Mr. Koeneman then sues Mr. Horne and General Scrap for conversion. Mr. Horne is later noted in default and does not participate. (See para. 2). The claim is for damages equal to the value of the equipment before it was turned to scrap. The Trial Judge (Grammond J.) grants the contractor’s claim and awards damages of $100,653.55USD. She also grants General Scrap’s claim for contribution and indemnity against Mr. Horne and Mr. Demars. (See paras. 2-3).

The Court of Appeal (Rivoalen C.J., Mainella and Kroft JJ.) dismisses the appeal and cross appeal. (See para. 5).

Importance:

This case provides a helpful outline of the law of conversion in Canada. As described by the Court of Appeal, the elements of the tort are as follows:

    • a plaintiff must have a “possessory interest in the property in question”;
    • the property in question must be “specific personal property”; and
    • the act in question must be “intentional interference with the property, inconsistent with an actual or immediate right to possession thereof”. (See para. 11).

The Court outlined some further principles at paras. 25-26:

    • conversion is a strict liability tort;
    • any person who receives and disposes of personal property without satisfying themselves as to the state of the title does so at their own peril (e.g., the fact a wrongful act was committed innocently or in good faith will not excuse a defendant);
    • the law treats a conversion as resulting in a forced sale of the plaintiff’s property; and
    • each person in a series of conversions is considered to have wrongfully excluded the plaintiff from possession of the property.

On appeal, General Scrap and Mr. Demars argued the Trial Judge erred in law and fact by concluding Mr. Koeneman’s interest in the equipment was sufficient. (See para. 13). The Court of Appeal determined the proper focus is on possession, rather than ownership:

Important to my view is that with the tort of conversion, the right at issue is a possessory right, not an ownership right. Conversion does not protect the ownership of personal property but, rather, regulates rights of possession. As such, a claim is available to the person whose right to possession is better than the person who seriously interfered with that right. (See para. 19).

As a result, any effect the administrative dissolutions of the corporations may have had on title to the equipment was “not essential to deciding the case”. (See para. 19). For the Court of Appeal, the Trial Judge’s conclusion that Mr. Koeneman had a possessory interest in the equipment was “a finding of fact available to her on the totality of the evidence” and one which was “entitled to deference absent a palpable and overriding error”. (See paras. 20-21).

Although the appeal and cross appeal were dismissed, the Court of Appeal found that the Trial Judge erred by finding General Scrap and Mr. Demars “jointly and severally liable”. The reason being that, since each conversion is a separate tort carrying separate liability, each of General Scrap, Mr. Demars, and Mr. Horne “is independently liable to Koeneman in an amount equal to the fair market value of the equipment at the time Koeneman was deprived possession of the equipment”. (See para. 33).

However, for the Court of Appeal, the Trial Judge’s finding of joint and several liability was a “harmless” error in the sense that “it had no material impact on her conclusion respecting the measure of damages”. (See para. 33). Ultimately, the Court declined to overturn the decision and concluded that General Scrap, Mr. Demars, and Mr. Horne are “each independently liable” to Mr. Koeneman for the damages. (See para. 43; see also Papasotiriou-Lanteingne v. Tsitsos, 2023 MBCA 66 at para. 17).

Counsel for the Appellants: Khurram Awan and Craig Savoie (Miller Thomson, Regina)

Counsel for the Respondent (Mr. Koeneman): Alain Hogue (Alain J. Hogue Law Corporation, Winnipeg)

Counsel for the Respondent (Mr. Demars): Melanie LaBossiere (Thompson Dorfman Sweatman LLP, Winnipeg)

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