Chattels or Fixtures New Test Applied #260

Nov 01, 1996

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By Gerry Neely
B.A., LL.B.

Column #247 referred to a case in which the judge laid down six rules for deciding whether or not an article is a chattel or a fixture. Since that case, another judge who said that the rules were of material assistance, has applied them to decide which of the following items are fixtures and which are chattels.

Fixtures

The electrical unit of the garage door opener, although it could be unplugged, it could not easily be removed from the brackets holding it and, in addition, was attached to another portion of the garage door opener. By itself it would be useless. (Rules 3 & 4) A display shelf attached to the wall by screws, because the removal of the screws would damage the wall. (Rule 3) A Jennaire cooktop on a range which was built into a countertop, was an essential part of the range. (Rule 4)

Chattels

A built-in Frigidaire convection oven, because it could be removed by unplugging it from the electrical outlet. (Rule 2) The cannister portion of a built-in vacuum system, because it could be unplugged and removed from the bracket holding it, without damage to the wall. (Rule 4)

Differing conclusions between the Jennaire cooktop and the cannister indicate that fine distinctions will still be made. This decision was made in the context of a foreclosure action. if the court had been interpreting paragraph seven of the Contract of Purchase and Sale which states that the purchase price includes, "fixtures, appurtenances and attachments thereto", a strong argument would be made that a cannister is an attachment. However, in view of this decision, where a house has a built-in vacuum system, it would be prudent to add the cannister to the items to be included in the purchase.1

***

In the good old days, in the late 1980s, in Ontario, when the condominium market was overheated, a saleswoman sold 320 condominium units in three projects. By the time the projects were registered in 1991 134 buyers had defaulted, some of them forfeiting deposits of $20,000 each and others, $60,000 each.

The saleswoman was employed by a licensed real estate agency, which in turn was employed by a developer, with whom the agency had had a working relationship over a number of years. She was to receive draws against commissions on the sales contract negotiated by her. There was no discussion as to her entitlement, in the event of the defaults which occurred several years later.

The agency chose not to sue the developer for payment of commissions from the deposits, as they wished to retain its good will, a decision which resulted in their negotiating reduced commissions on the resale of a number of the units. Eventually all units were sold, the agency received the reduced commissions, but no payment was made to the saleswoman for the 134 collapsed sales.

In the litigation that followed, the agency's defense was that commissions were eamed only when the sales were completed. This argument was rejected by the judge, who said that if that condition was intended to be part of the terms of the contract, the onus was on the agency to make that clear to the saleswoman.

The judge also stated that the agency could not waive its right to commission to obtain an advantage for itself through the resale of the units, when waiving this right to commission deprived the saleswoman of her rights.

The agency's obligation was to make every effort to collect the commission, or to negotiate a reasonable settlement. This conclusion was based upon an earlier Ontario case, where a broker was held not to be in breach of a duty to the salesperson when it acted reasonably in negotiating a reduced commission.

In this case, the judge concluded that the agency did not act reasonably, but for its own benefit, and gave judgment in favour of the saleswoman.2

  1. Pemberton Holmes Ltd. v. Ulaszonek, S.C.B.C., Victoria Registry #95 1452, Reasons for judgment, January 31, 1996.
  2. Crompton v. Norman Hill Realty Inc., 50 R.P.R., (2d), p. 42.

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