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The Legality of Storage Wars Canada

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This Thursday is the premiere of Storage Wars Canada, the newest of the raft of storage type auction shows.  This one tracks a group of auction hunters around Ontario, apparently following the formula from previous incarnations of Storage Wars. Given that the laws surrounding the sale of storage units in Ontario can be somewhat complex, how does the show stack up against Ontario laws?

For those that have not seen Storage Wars, the concept is relatively straightforward. Some unknown person has defaulted on paying for their storage unit, so the unit goes up for auction. A group of bargain hunters get a few minutes to peer into the storage unit from the outside in, and then it is auctioned off as a single lot to the highest bidder.  Then the show follows the buyers as they loot through the storage unit for valuables.

But is this technically legal in Ontario?  The short answer is, not really - at least not without a lot of risk on the part of the storage company.

The Repair and Storage Liens Act

The sale of the contents of storage units to recover unpaid storage fees is primarily covered in Ontario by the Repair and Storage Liens Act (the "RSLA").  The RSLA creates lien rights for repairers and storers of goods, which lets them sell the goods if their bills are unpaid, and they jump through a number of technical hoops (such as sending notices to the owner), which I won't bore you with.

Assuming that the Storage Wars people have jumped through these technical hoops, the biggest isssue when selling the contents of a storage locker is section 15(4) of the RSLA:

(4) The article may be sold in whole or in part, by public or private sale, at any time and place, on any terms, so long as every aspect of the sale is commercially reasonable.

The "commercially reasonable" part is what should concern the storage company who is auctioning the storage units.  The courts have held that this means that the seller must essentially act like the owner's agent, and try to get the best possible price for the goods.  What this means depends on the circumstances of each case, but generally it will mean that the seller should have the goods appraised (or at least inventoried) and sold by publicly advertised sale to obtain the maximum possible value.

The risk to the seller in these circumstances is that it may be liable to the owner of the goods for the difference between what they were sold for, and what they should have sold for in a "commercially reasonable" sale.  So, for example, if there was a diamond ring worth $10,000 sitting in a box in the storage unit, but the storage unit only sold for $1,000 because nobody saw the ring, then the seller could be on the hook for the $9,000 difference.  Given that these types of surprise finds are what the show is based on, the potential risk is high.

Past Cases on Storage Locker Sales

The vast majority of sales under the RSLA don't make it to court.  If a person has abandoned a storage locker without at least coming in to pick up any valuable items first, then they are not often going to be going to court over an improvident sale.  This is not always the case, though, as a few court decisions show how things can go horribly wrong for sellers under the RSLA.  

In the case of Carr v. 1181607 Ontario Inc. (c.o.b. Elf Mini Storage), [2002] O.J. No. 3250, the contents of two storage lockers were sold in a very Storage Wars type manner - all of the items in the lockers were sold as one lot by an auctioneer, and none of the potential buyers had much of a chance to inspect the contents before bidding.  The judge found that the sale was not commercially reasonable:

I cannot think of a way to sell items less likely to be fair or sensible, except for disposition of stored junk, which seems to have been the assumption made about what had been in the lockers concerned. It would not have been difficult to prepare a list, allow for short and supervised inspection by prospective bidders at the auction, or even deal with one or more items separately by box or unit, or in some other way ensure that everything was sold but that there was something that made identification of product and assessment of value possible. The only thing that played a part was blind luck and perhaps sometimes valid assumptions about the unlikelihood of storage customers leaving anything of value without any effort to forestall sale.

Of course, having found this, the case then turned on what the value of the goods in the storage lockers were.  The former owner of the goods felt that the goods in the unit were priceless, while the seller felt they were worthless.  The problem being that, having not done a proper inventory of what was in the storage lockers, the seller was not in a good position to argue about the value of the goods.  Which emphasizes the importance of doing, at a minimum, a proper inventory of everything in a storage unit before putting it up for sale.

In another case of Melrose v. Halloway Holdings Ltd., 2004 CanLII 50135, a storage company sold the contents of a storage unit to an auctioneer for $800. When the owner of the goods (who was the then-separated wife of the person who was supposed to have been paying for the storage unit) found this out, she sued the storage company, alleging that the goods had been worth $60,000. Tellingly, the auctioneer who had purchased the goods for $800 refused to sell the goods back (presumably because they were worth substantially more than $800).  The judge held that since $800 was a mere fraction of what the goods had potentially been worth, it could not have been a commercially reasonable sale.  

More importantly, this case also deals with the fact that the storage contract had provisions that were intended to let the storage company off the hook, even in the case of an unreasonable sale.  The judge held that these provisions were unenforceable, as they were unfair to the person whose goods were sold.  This does not necessarily mean that all such provisions will be unenforceable, but it shows that it can be tough for a storage business to fully protect themselves if they choose to sell in a manner that's not necessarily commercially reasonable.

What Does This All Mean?

Just because this type of process, where the locker is sold as one unit without giving perspective buyers an opportunity to fully inspect it first, may not technically be legal does not necessarily mean it doesn't happen.  In many cases, storage businesses may make a decision that the risk of being sued by someone who abandoned a storage locker is small enough that they are prepared to take the chance (presumably after taking some steps to inventory the contents).  From a more cynical perspective, it may be that the storage business or the show producers have been through each of the lockers for sale, and are confident that there is nothing of value in it (or that anything of value was planted by the show).  Either way, one would hope, for the sake of the storage company, that there is much more going on behind the scenes that we don't see where they are taking prudent steps to protect themselves from allegations of an improvident sale.

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