384238 Ontario Limited v. The Queen, 84 DTC 6101, [1984] CTC 523 (FCA)

Stone, J:—The questions for decision on this appeal arise out of seizures at the instance of an officer of the Department of National Revenue of certain goods belonging to the appellant numbered company by the sheriffs of the counties of Hastings and Gray in the province of Ontario in June of 1980. Writs of execution were taken out by that Department in aid of recovering judgments obtained against Kenneth Richard Allen and Ken Allen and Sons Limited for unpaid income tax, and for unpaid contributions to the Canada Pension Plan as well as to unemployment insurance totalling in excess of $70,000. The trial was heard by Walsh, J who, on June 22, 1981, dismissed the action in which damages flowing from the alleged wrongful seizure and detention of the goods were claimed by the appellants.

The “Allendale Farms’’ operation was carried on by Kenneth Allen at Markdale in the county of Gray. He was a successful breeder of purebred horses which he trained to work in teams and also exhibited at fairs and exhibitions. Allen also became active in the real estate development business which he carried on through a company called Kenneth Allen and Sons Limited, incorporated in April of 1972. A subdivision plan was approved and $500,000 was spent to install services. Prefabricated houses were purchased for resale to buyers of lots in the subdivision and large sums of money were laid out. Fourteen of these houses had been sold when it was discovered that the lots could not be supplied with hydro electricity. The venture turned sour. Judgments were obtained against the company for return of deposits which it was unable to repay to purchasers. The indebtedness in respect of which the seizures were carried out arose out of these farming and real-estate development operations. It relates to the years commencing in 1966 and extending through 1972.

On March 21, 1977, April 8, 1980 and May 23, 1980 certificates were registered in this Court with a view to collecting the amounts due and unpaid. Such certificates, upon registration took on the same force and effect as if they were judgments.* [1] The learned Trial Judge concluded that Allen must have been well aware of his tax indebtedness long before the certificates were registered. It was clear that at time of their seizure all of the goods belonged to the appellant 384238 Ontario Limited and that the appellant Maple Leaf Lumber Company Limited had no legal interest in any of them. For convenience, the numbered company is referred to herein as “the Appellant”.

The reasons for judgment of the learned Trial Judge present somewhat confusing circumstances surrounding the ownership and transfer of assets employed by Ken Allen in his Allendale Farms operation. Clearly, Ken Allen and Sons Limited became at least a participant in that operation for, in January of 1974, the Royal Bank of Canada, as mortgagee, released to Ken Allen and Sons Limited all of its interest in the real property on which Allendale Farms was operated in Markdale. Later, on August 4, 1976, that company entered into a chattel mortgage in favour of Emily Allen, wife of Kenneth Allen, in the face amount of $100,000 on the goods that were later seized by the sheriffs. There were then outstanding 51 executions registered against the company and Emily Allen admitted that at the time of the mortgage transaction she was aware of the judgments upon which they were based. Kenneth Allen was forced to concede at trial that his company was “virtually bankrupt in 1976”, during which year executions registered against his company totalled $237,108.56. In due course, Emily Allen foreclosed the chattel mortgage and claimed thereby to have become owner of the goods. The learned Trial Judge had no difficulty in finding on the evidence that her “title to the assets was defective for want of consideration”.

On the other hand, he reluctantly found that as a matter of strict law, the purchase of the goods by the appellant who had no notice of the defect in her title, was valid. That transaction was carried out under two separate instruments, being a written agreement made between the two Allens and One Walker and Norguard who were shareholders of the appellant, and a bill of sale. The written agreement stated that the transfer of the goods was “by way of loan”, but Emily Allen insisted at trial that ownership of the goods had been sold and conveyed outright. The solicitors who drafted the agreement testified that the term “loan” was used for tax purposes when funds in payment of the assets were withdrawn from the appellant. A separate bill of sale made on June 1, 1978 between Emily Allen as vendor and the appellant as purchaser supported her contention that she had indeed intended to sell and convey outright all her interest in the horses and equipment that were later seized by the sheriffs. In exchange, she was given a promissory note in respect of the purchase price of the goods. The written agreement provided that Kenneth Allen “will have chequewriting authority from the company for day to day operations”. There was also evidence that Kenneth Allen would be employed by the appellant to manage its business at a salary of $300 per week. Norguard maintained that Allen was never paid any salary although, subsequently, Emily Allen was paid a salary for looking after the books of the appellant. The learned Trial Judge concluded that Allen had requested that the appellant credit his salary to his wife.

Having regard to the findings of the learned Trial Judge it is apparent that Allen played an extremely active part in the operation of Allendale Farms after the sale and transfer of assets to the appellant on June 1, 1978 To begin with, the operation was continued under the name of “Allendale Farms”, a name which was widely known and closely identified with Kenneth Allen and his family. The learned Trial Judge found that none of the purebred horses conveyed to the appellant were registered in its name in the records required to be kept under the Livestock Pedigree Act, (RSC 1970, c L-10). In fact, as of June, 1980, the name of Kenneth Allen appeared in those records as the owner of four of the horses. Moreover, it was not until September 1980, three months after the seizures were carried out, that Allendale Farms took steps to qualify itself to register its purebred horses in those records. When, in November 1979, a horse born in April of that same year was sold by the appellant, Kenneth Allen made a written representation to the person in charge of those records that he was that horse’s “owner at birth”. He declared in a sworn statement required to be filed with that person pursuant to the statute:

I hereby declare that I owned the above-named animal at the time of birth, that the foregoing information is in accordance with my private record, and is to the best of my knowledge and belief true.

In this way, as was pointed out by the learned Trial Judge, Kenneth Allen “continued to indicate to the public that he was the owner of horses which were clearly owned”’ by the appellant. The learned Trial Judge also considered that failure on the part of the appellant to register any horses in its name “is clearly misleading to third parties” and that “toleration by it of Ken Allen keeping some of them registered in his own name confused creditors seeking to check ownership by obtaining information” from the records kept under the Livestock Pedigree Act.

In the Spring 1980 issue of “Draft Horse Journal”, a United States publication apparently having wide circulation in Canada and the United States, there was published a large advertisement for Allendale Farms in which Kenneth Allen was again described as “owner”. As to this advertisement, the learned Trial Judge noted that “third parties had every reason to believe that there had been no change whatsoever in the operation of the business which had for so many years been operated by Mr Allen especially as he had been given a free hand by Mr Norguard and Mrs Walker to conduct it as he always had”.

The person in charge of executing process against goods of Allen and his company was one William O’Neill an employee of the Department of National Revenue. There can be no doubt that being her employee, the respondent would be vicariously liable for his tortious acts done, as here, in the course of his employment.* [2] The learned Trial Judge found that before directing the sheriffs of Hastings and Gray to seize the goods, O’Neill had taken a number of steps to ascertain their ownership. He spent two days reviewing records kept by the Canadian National Livestock Records in Ottawa seeking information concerning the ownership of the horses and found that, while the appellant was not shown as the registered owner of any of them, some of the horses were registered in the name of Kenneth Allen. He spoke to the lawyer acting for the appellant but was denied information on the basis of “solicitor and client privilege’’. On April 9, 1980, he spoke to Kenneth Allen who refused to show him any records and was abusive. He spoke to the licensor of the farm on which the Allens’ horse- breeding operation was carried on at Markdale and was shown a licensing agreement signed by Allen whereby the property was licensed to Kenneth Allen and Kenneth Allen and Sons Limited, but made no mention of the appellant. He inquired of a veterinarian employed by the Department of Agriculture concerning certificates of tests performed by him on the horses on May 14, 1980 which certificates showed Kenneth Allen as “the owner’’. He inquired of the Canadian National Exhibition Horse Show at Toronto and found that some of the horses were entered under the name of “Ken Allen and Sons — Owner’’, and that prize money in respect of such horses was paid by cheque issued to Ken Allen and Sons on September 15, 1978.

It was only after these steps had been taken and after discussing the matter with his supervisor that O’Neill decided to seize and remove the goods. Subsequent to the seizure it was found that some of the horses taken had been purchased by the appellant some time after June 1, 1978. All the goods seized were returned to the appellants within three days and there they remained under a technical seizure. In October 1980 it was ordered by the Trial Division that the goods should continue to remain in the possession of the appellant who could sell them provided any proceeds of sale were held in trust but that the appellants would be paid certain operating expenses, and any balance would be paid to the sheriffs. On March 19, 1981 the respondent entered a confession of judgment in this action with the result that some of the goods seized by the sheriffs were released from the technical seizure, leaving eight horses and four colts together with various items of equipment subject to it. In his judgment of June 22, 1981 the learned Trial Judge ordered the release of all assets remaining under seizure save for the balance due on the promissory note in favour of Emily Allen.

After reviewing these facts, the learned Trial Judge concluded that the seizure of the goods was attributable to the appellant’s own fault. He stated:

I am unable to conclude that there was any negligence whatsoever on Mr O’Neill’s part in the instructions he gave to the sheriffs. If, as a result, assets were seized which should not have been seized for any tax indebtedness of Ken Allen or Ken Allen and Sons Limited, and later some of them had to be released this was entirely the fault of the numbered company whose officers permitted Mr Allen to continue to operate exactly as he had in the past with every indication that the horses and farming equipment was still owned by him or Ken Allen and Sons Limited despite the bill of sale from Emily Allen to the numbered company.

Later in his reasons he found that despite the sale of the goods to the appellant, Kenneth Allen

. . . continued to carry on the horse breeding business exactly as he had before, using interchangeably the names Ken Allen and Sons Limited, Allendale Farms or his own name. His principal business activity therefore was never interrupted despite his financial difficulties. It is incredible that Mr Norguard who has an apparently successful contracting business of his own and Mrs Walker who was a real estate agent, both of whom might be expected to have at least some elementary knowledge of corporate operations, necessity of written documentation, the distinction between a company and its individual shareholders, and other elementary legal principles, should have permitted the business of the numbered company to be managed and operated in this manner. Mr Norguard in evidence admitted that one can make a good business deal with people in trouble. He undoubtedly felt that he and Mrs Walker were making a good deal. The lawyer who drew up the agreement admitted that Mr Allen had stated that his wife was to be the eventual shareholder of the numbered company because of his financial difficulties. Mrs Walker asked no questions when Mr Allen requested that his salary of $300.00 a week be credited to his wife. The attorney who incorporated the Maple Leaf Lumber Company was aware of the many executions against Allen and testified that Mr Allen was very conscious of his financial problems and planned carefully.

Further, while reluctantly concluding that the appellant acquired good title to the goods in its purchase transaction with Emily Allen of June 1, 1978, the learned Trial Judge made important findings of fact as to the knowledge of the appellant regarding the financial difficulties of Allen and his company and of attempts made by him to avoid his creditors. He stated that:

... the subsequent conduct of Mr Allen in managing the company’s affairs, the request made that instead of receiving a salary this would be credited to Mrs Allen, and other information learned as time went on must have made it clear that the Allens had acted in such a manner as to avoid payment to certain creditors, including Defendant

The question before the learned Trial Judge was whether in these circumstances there had been a “wrongful seizure” of the goods so as to entitle the appellant to damages. He found that the respondent was not liable, stating:

It is not sufficient for plaintiffs to establish that damages have been caused as a result of the detention and seizure, even to the extent that they can do so, as in order for them to have a valid claim to such damages they must establish fault on the part of the defendant, and in this they have failed.

The appellant contends that the learned Trial Judge erred in law and asserts that the respondent is liable in damages for its losses flowing from the wrongful seizure which it characterizes as “nothing more or less than trespass to or conversion of the goods seized” regardless of whether O’Neill may have honestly or reasonably believed that the goods belonged to Kenneth Allen or his company, the execution debtors. In fact, counsel freely conceded that O’Neill “acted reasonably and without negligence . . . on the evidence that Allen was the owner of the assets, thereby rendering them subject to the Writs of Execution”, and that O’Neill’s instructions to the sheriffs for the seizure of the goods “were given on reasonable grounds and without negligence”.

I deal first with the issue of conversion. While it is true that goods were taken away by the sheriffs for a period of three days, they were not used or otherwise dealt with by the Department of National Revenue in any way as its own goods. A review of the cases convinces me that it is only where there has been some use made of goods taken by a defendant or some other dealing with them by him, that a conversion occurs. Such was not the case here. Thus, in Hollins v Fowler, [1874-80] All ER 118 the defendant Hollins, a cotton broker, entered into a transaction with one Bayley, who purported to sell to him a quantity of cotton in bales. In fact, Bayley, who was also a broker, had no authority to sell the goods generally but only to a named third party. The defendant, being ignorant of this situation, took possession of the goods and agreed to sell them to a firm of cotton spinners, Messrs Micholls, Lucas & Co. He paid Bayley for the goods and in turn was paid by Micholls who spun them into yarn. The true owner, Fowler, brought action against Hollins for conversion. The case went to the House of Lords where it was held that a conversion had indeed occurred, Lord Chelmsford stating (at 122) that

. . . any person who, however innocently, obtains possession of the goods of a person who has been fraudulently deprived of them, and disposes of them, whether for his own benefit or that of another person, is guilty of a conversion.

In that case, unlike the present one, the defendant after taking possession of the goods dealt with them to his own commercial advantage even though in ignorance of the plaintiffs interest in the goods. A further example may be found in Lancashire and Yorkshire Railway et al v MacNicholl (1919), 88 LJ (KB) 601. There a quantity of drums was mistakenly delivered into the possession of the defendant. The mistake was not discovered until after the defendant had poured the contents of the drums into his own tank. On the question of whether this amounted to a conversion, Atkin, J, in holding that it did, stated (at 605):

It seems to me plain that dealing with goods in a manner inconsistent with the right of the true owners 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. Here there is no question but that the defendant did use the goods as his own. He poured them . .. into his own vat or tank.

More recently, in 1968, Diplock, LJ was even more emphatic as to what in law amounts to a conversion of goods and of the consequences thereof. In the case of Marfani & Co Ltd v Midland Bank Ltd, [1968] 1 WLR 969 the question was whether the defendant was liable in conversion for taking and afterward dealing with the plaintiffs cheque in the ordinary course of its business as bankers. A thief had delivered the cheque to the defendant who had no actual knowledge of the theft. The defendant accepted and cleared the cheque in the normal course of its business and credited the amount to the thief s account. Afterward the thief withdrew the funds and disappeared. The case was primarily concerned with whether the defendant could take advantage of a statutory defence, but before dealing with that question Diplock, LJ used the occasion to discuss the nature of the tort of conversion and its consequences at common law. He stated (at 970- 71):

At common law one’s duty to one’s neighbour who is the owner, or entitled to possession, of his goods is to refrain from doing any voluntary act in relation to his goods which is a usurpation of his proprietary or possessory rights in them. Subject to some exceptions which are irrelevant for the purposes of this present case, it matters not that the doer of the act of usurpation did not know, and could not by the exercise of any reasonable care have known, of his neighbour’s interest in the goods. The duty is absolute; he acts at his peril.

While no authorities in support of this principle were cited, it does not appear that Diplock, LJ intended anything more than to restate the law as it had stood in England for many years, and examples of which are to be found in the cases discussed above as well as in Mills v Brooker, [1919] 1 KB 555 and Sanderson v Marsden and Jones, [1923] Lloyd’s 467. In Canada, the recent decision of the Court of Appeal for Ontario in Simpson v Gowers (1981), 32 OR (2d) 385 contains apt illustrations of acts that amounted in law to conversion. Although the defendant in that case was innocent of the interest in the goods claimed by the plaintiff, he had dealt with them in a manner inconsistent with the right of the plaintiff by throwing some away, spreading others on his land and selling the remainder.

In my view, there was not in the present case any dealing by the Department of National Revenue with the appellant’s goods following seizure in June of 1980 such as would in law amount to a conversion. That there was a temporary interference with the appellant’s possession is undeniable, but I do not think that that fact alone renders the Department guilty of a conversion. In my opinion, the appellant’s contention on this branch of his appeal must fail.

I turn next to consider the appellant’s contention that the respondent is liable in trespass for wrongful seizure of the goods. That is an entirely separate question. There can be no doubt that the common law has traditionally viewed wrongful seizure of goods as an act of trespass for which the wrongdoer will be answerable in damages. Thus, in Colwill v Reeves (1811), 2 Camp 575 a bankrupt, in order to protect his goods from his creditors, conspired with the plaintiff that the latter should deliver to him some articles of his furniture to be mixed with those of the bankrupt. A sofa that was delivered was seized by the defendant when it was mistaken for the goods of the bankrupt. It argued that, in the circumstances, the defendant ought not to be held liable in trespass but the Court disagreed, Lord Ellenborough stating that “the goods in question remained distinct” and that, as the defendant “might have discovered that they belonged to the plaintiff’, he “took them at his peril”. In Jarmain v Hooper (1843), G M & G 827 the defendant had secured judgment against one “Joseph Jarmain” after which he took out a writ of fl fa. In consequence the sheriff levied against the goods of the debtor’s father, also named “Joseph Jarmain”. The plaintiff sued both the sheriff, who had effected the seizure, and the defendant who had procured it by direction given by his attorney. Tindal, CJ in finding the defendant liable in trespass, stated that he “must stand the consequences” of his agent, the attorney, acting “inadvertently or ignorantly”. The case of Wilson v Tumman (1843), G M & G 236 was decided by Tindal, CJ in the same year. The issue there was whether the ratification by the judgment creditor of a wrongful seizure made subsequent to the seizure rendered the sheriff, who carried it out pursuant to a valid writ, liable. The learned judge, while deciding in favour of the sheriff on the main point, added these words by way of dictum (at 244):

If the defendant Tumman had directed the sheriff to take the goods of the present plaintiff, under a valid writ, requiring him to take the goods of another person than the defendant in the original action, such previous direction would undoubtedly have made him a trespasser, on the principle that all who procure a trespass to be done are trespassers themselves, and the sheriff would be supposed not to have taken the goods merely under authority of the writ, but as servant of the plaintiff.

That principle was applied in England by the Court of Appeal in the case of Morris v Salberg (1889), 22 QBD 614. There, the defendant took out a writ of fi fa so as to levy execution against the goods of the judgment debtor. The solicitor acting for the judgment creditor endorsed the writ in such a way that he inadvertently directed the sheriff to seize goods of the debtor’s father. In an action by the father in trespass, the judgment debtor was found to be liable. More recently, in Clissold v Cratchley, [1910] 2 KB 244, due to inadvertence on the part of the defendant’s solicitors, execution was levied against the plaintiffs goods after the judgment debt had been satisfied. The judgment creditor and his solicitor were found liable in trespass on the ground that, upon satisfaction of the judgment debt, the writ had become null and void.

There has been a dearth of reported cases in this country dealing with this question but the results of them are, I believe, in harmony with the principles laid down in the cases already discussed. I refer by way of example to Park v Taylor (1852), 1 UCCP 414, Wilkinson v Harvey (1887), 15 OR 346, and Meadow Farm Ltd v Imperial Bank of Canada (1922), 66 DLR 743, which were also cited before us.

The respondent submitted that the law as laid down in the earlier cases is no longer applicable in this country. She contended that modern case law here has established that a defendant who is entirely without fault in a case of this kind has a good defence to an action in trespass. She relied in particular on a decision of the majority of the Supreme Court of Canada in Cook v Lewis, [1951] SCR 830. In that case, during a bird-hunting expedition, the respondent was struck in the face by bird-shot and was injured. It was not clear on the evidence which of the appellant and another hunter had caused the injury but that each had discharged his firearm simultaneously and in the general direction of the plaintiff at a bird on the wing. Both hunters were joined as defendants. In upholding the decision of the Court of Appeal for British Columbia directing a new trial, Cartwright, J, speaking for a majority of the Court, laid down the following principle (at 839):

In my view, the cases collected and discussed by Denman J in Stanley v Powell (1891), 1 QBD 86, establish the rule (which is subject to an exception in the case of highway accidents with which we are not concerned in the case at bar) that where a plaintiff is injured by force applied directly to him by the defendant his case is made by proving this fact and the onus falls upon the defendant to prove “that such trespass was utterly without his fault”. In my opinion Stanley v Powell rightly decides that the defendant in such an action is entitled to judgment if he satisfies the onus of establishing the absence of both intention and negligence on his part.

That principle has been applied in Canada ever since in cases involving direct trespass to the person causing injury to him: Walmsley v Humenick, [1954] 2 DLR 232, Woodward v Begbie, [1962] OR 60, Dahlberg v Naydiuk (1970), 10 DLR (3d) 319, Larin v Goshen (1975), 56 DLR (3d) 719, and Doyle v Garden of the Gulf (1980), 24 Nfld & PEIR 133. Similarly, it has been applied in cases involving direct trespass to chattels causing injury to them: Bell Canada v Bannermount Ltd, [1973] 2 OR 811, Bell Canada v Cope* [3] The law in England has developed along parallel lines with one important difference. There, it is the plaintiff who must carry the burden of proving that the act that caused the injury was either intentional or negligent. Fowler v Lanning, [1959] 1 QB 426, Letang v Cooper, [1965] 1 QB 232.

No case was called to our attention in which the principle of Cook v Lewis has been applied to the wrongful seizure of goods where, as here, no physical injury resulted. I do not think that common law in this country has developed to the point where a person who, in execution of process, seizes the goods of another under the honest though mistaken belief that they belonged to his judgment debtor, will escape liability in trespass by proving that his act was neither intentional nor negligent. Liability in trespass for wrongful seizure of chattels has stood on a different footing as a separate and distinct cause of action unlike that which lies when the act consists of a direct act against a person or a chattel resulting in injury. In such a case, the law has viewed inevitable accident as a defence: National Coal Board v Evans, [1951] 2 KB 861, on the basis that the defendant’s act was “utterly without his fault’’. The fact that a seizure of goods is made under the honest though mistaken belief that they belonged to the judgment debtor has not been seen as a defence. I therefore conclude that the act of O’Neill in instructing the sheriffs of the counties of Hastings and Gray to seize the goods resulted in a wrongful seizure of and a trespass against those goods unless the respondent is able to set up a defence.

The respondent asserts that a good defence does exist in this case and that it lies in estoppel by the appellant’s conduct. The appellant argues that the opposite is true but, in any event, submits that the respondent cannot present that argument at this stage because it was not expressly pleaded. Counsel for the respondent contends that all of the material facts necessary to found the argument were pleaded, but asked leave to further amend her amended defence if it be necessary to do so. The appellant alleged in paragraph 4 of its amended statement of claim that the seizure and removal of the goods “at the instance of the servants of the Minister of National Revenue” was done “without cause” and “with the knowledge on the part of the servants of the Minister that the assets were not the property of Kenneth Richard Allen and were the property of the Plaintiff company” or, that, in the alternative, the seizure and removal was done “with reckless disregard as to the ownership of the assets”. These allegations were denied by the respondent in her amended defence in which it was also alleged, in paragraph 3(b), that there were “reasonable grounds to believe” that the assets did belong to the judgment debtors. The appellant joined issue. The facts pleaded and proven by the respondent were directed at the conduct of the appellant in allowing a situation to develop at Allendale Farms that led O’Neill into believing, on reasonable grounds, that the goods belonged to the judgment debtors. The learned Trial Judge obviously agreed that this was so for, after seeing and hearing the witnesses and considering the evidence, he found as a fact that the seizure of the assets ‘’was entirely the fault” of the appellant “whose officers permitted Mr Allen to continue to operate exactly as he had in the past with every indication that the horses and farm equipment were still owned by him or Ken Allen and Sons Limited” despite the transfer from Emily Allen to the appellant.

It was on the basis of these broadly worded allegations of fact that the bearing of the appellant’s conduct upon the defence of reasonable belief was explored at trial and that findings were made with reference thereto. The appellant had a full opportunity at that stage of establishing, if he could do so, that O’Neill ought not to have been induced by that conduct to seize the goods in question. Obviously, the learned Trial Judge thought otherwise. I therefore fail to see how the Appellant could claim surprise by the position of the respondent taken on this appeal that its conduct precludes it from recovering damages. That position, it seems to me, goes no further than to take the facts as pleaded and as proven at trial and to argue from them that they result in estoppel by conduct.* [4] That the respondent was entitled to do so is clear on the authorities. The principle was discussed and applied by Lord Denning in Re Vandervell’s Trust (No 2), [1974] 3 All ER 205 where he stated (at 213):

Counsel for the executors stressed that the points taken by counsel for the trustee company were not covered by the pleadings. He said time and again: “This way of putting the case was not pleaded”; “No such trust was pleaded’’. And so forth. The more he argued, the more technical he became. I began to think we were back in the bad old days . . . when pleadings had to state the legal result; and a case could be lost by the omission of a single averment (see Bullen and Leake Precedents of Pleadings (3rd Edn 1868), p 147). All that has been long swept away. It is sufficient for the pleader to state the material facts. He need not state the legal result. If, for convenience, he does so, he is not bound by, or limited to, what he has stated. He can present, in argument, any legal consequence of which the facts permit. The pleadings in this case contained all the material facts. It does appear that counsel for the trustee company put the case before us differently from the way in which it was put before the judge: but this did not entail any difference in the facts, only a difference in stating the legal consequences. So it was quite open to him.

I do not think it was necessary, in the circumstances, for the respondent to have gone farther than it did in its pleadings by labelling this conduct on the part of the appellant as “estoppel” and, as such, that it precludes recovery of damages. In point of fact, as was held by the learned Trial Judge, that conduct did induce O’Neill to take the action that he did. Had an express plea of estoppel been necessary, I would have been inclined to allow it in the circumstances.f [5]

The final question then is whether the facts make out an estoppel. It was the very strong view of the learned trial Judge that the seizure of the goods was brought about by the appellant’s own conduct. He viewed that conduct, so graphically described in his reasons for judgment, as having induced O’Neill into reasonably believing that the goods belonged to the judgment debtors. In my view, that conduct does preclude the appellant from now asserting the contrary and from recovering its damages.* [6] Even if the appellant and O’Neill were each innocent, the appellant must still sustain the loss by allowing Allen to operate as he did. Such is in accordance with the general principle stated by Ashhurst, J. in Lickbarrow v Mason] [7] namely, that:

. . . whenever one of two innocent parties must suffer by the acts of a third, he who has enabled such third party to occasion the loss must sustain it.

That principle was approved by the Privy Council in Commonwealth Trust v Atokey, [1926] AC 73 at 76, and, although it must be applied with some caution, [8] J I think it may be appropriately applied in the circumstances of this particular case.

The appellant has suggested that O’Neill knew that it claimed ownership of the goods before the seizure was carried out but I find nothing in the reasons for judgment of the learned trial Judge that would clearly support this suggestion. As this appeal was heard, upon the unopposed application of the appellants, on the basis that those reasons should alone constitute the record, we have no way of knowing whether support for this suggestion may be found in the evidence tendered at trial. There is mention in the reasons for judgment of O’Neill conceding at trial that “there had been some claim to ownership by others’’ but the learned trial Judge did not identify those “others’’ nor state the precise nature of the “claim’’. In view of his central finding that it was the conduct of the Appellant that led to the seizure of the goods, he appears to have been well satisfied that O’Neill did not act in the face of a claim made by the Appellant such as effectively put him on notice that the goods about to be seized were its property rather than the property of the judgment debtors.

I would therefore dismiss this appeal with costs.

Lalande, DJ:—This appeal is from the dismissal of an action for damages to the owner resulting from a trespass to chattels by way of a seizure under writ of execution.

The respondent having made good a defence of estoppel based upon the numbered appellant’s conduct, I agree with Mr Justice Stone that the appeal must be dismissed with costs.