Oct 26, 2015

COURT OF APPEAL SUMMARIES (OCTOBER 19, 2015 – OCTOBER 23, 2015)

Connolly v. Advantagewon Inc., 2015 ONCA 709 (CanLII)

[Feldman, Juriansz and Brown JJ.A.]

Counsel:

P. Gemmink, for the appellant

A. Chahbar, for the respondent

Keywords: Civil Law, Commercial Liability, Possessory Lien, Non-Possessory Lien, Repair, Loan, Default on Loan Arrangement, Repair and Storage Liens Act, ss.3(1), 3(4), 3(5), 7(1),Personal Property Security Act, Mechanic’s Lien Act s. 52, Royal A. Vaillancourt Co. Ltd. v Trans Canada Credit Corporation Ltd., [1963] 1 OR 411 (CA)

Facts:

The appellant, Connolly, appeals from the judgment of Douglas J which declared that the respondent, Advantagewon Inc., was entitled to a non-possessory lien under Part II of theRepair and Storage Liens Act, 1990 (RSLA).

In 2013, the appellant purchased automotive parts for his vehicle from Xclusive. To finance the purchase, he entered into an agreement with the respondent for a loan totalling $4,124.21. The appellant defaulted on his monthly payment obligations under the loan agreement. The respondent attempted to seize the vehicle based on a purported non-possessory lien under the RSLA. The appellant commenced an application seeking a declaration that the respondent does not have a lien under the RSLA fov the Vehicle.

The application judge declared that the respondent is entitled to a non-possessory lien on the vehicle.

Issues:

(1) Did the judge make a palpable and overriding error in finding that the respondent as a non-possession lien based on the finding of fact that Xclusive installed the rims and tires?

(2) Did a non-possessory lien arise under contract?

(3) Did Xclusive have deemed possession of the Vehicle under RSLA s. 3(4)?

Holding: Appeal allowed. The judgment is set aside and an order declaring that no lien on the vehicle arose under the RSLA is granted. The respondent is to pay the appellant $6,000 and $2,000 for the cost of the application.

Reasoning:

(1) The application judge made a palpable and overriding error of fact in finding that the third-party, Xclusive, had performed the installation work. The appellant installed the tires and rims on the vehicle after their purchase. In emails between the appellant and Xclusive, Xclusive said that they do not physically install them. The respondent did not file evidence. Therefore, the evidence before the application judge established that neither Xclusive nor the respondent had possessed the vehicle or installed the rims and tires. The application judge erred in finding that Xclusive performed the installation work.

Part I of the RSLA creates “Possessory Liens.” This part of the statute codifies the common law right to a lien by providing that a repairer has a lien against an article that the repairer has repaired “and the repairer may retain possession of the article until the amount is paid.”

The usual conditions necessary to create a Part I possessory lien against the vehicle did not arise.

(2) No. A non-possessory lien does not arise under the contract. A lien under Parts I and II of the RSLA arises by operation of statute, not by contract. For a valid lien to arise, a lien claimant must satisfy the requirements of the RSLA.

Xclusive did not satisfy the requirements. For a possessory lien to arise against an article, a person must have “repaired” the article. The definition of “repair” in s. 1 of the RSLA includes “an expenditure of money on, or the application of labour, skill or materials to, an article for the purpose of altering, improving or restoring its properties.” However, Xclusive did not expend any money on, nor did it apply any “labour, skill or materials” to the Vehicle. Xclusive simply sold tires and rims to the appellant, who later attached them to his Vehicle. Accordingly, Xclusive did not make a “repair” to the Vehicle within the meaning of the Act. As a result, no possessory or non-possessory repairer’s lien arose in favour of Xclusive which it could assign to the respondent.

(3) No. Section 3(4) does not need to be interpreted definitively, but it is clear that it has no application to the facts of this case. The lien claimant was a vendor of personal property who never applied any labour, skill or materials to the article against which a lien is claimed.

First, the judge did not accept the evidence on the invoicing to mounting and balancing referred to placing the tires on the rims. The respondent did not file any evidence from Xclusive to explain the invoice’s language.

Second, s. 3(4) must be read with s. 3(5). They address a situation where a repairer makes a repair to an article at a location away from the repairer’s premises, and the article remains in the actual possession of the person entitled to it. Section 3(4) deems the repairer to have gained possession of the article when the repairer is commenced, and then deems the repairer to have given up possession when the repair is completed or abandoned. By deeming the repairer to have gained possession of an article despite the repairer’s lack of actual possession, s. 3(4) enables the repairer to obtain a possessory lien. When the deemed possession ends, the repairer may either remove the article from the premises on which the repair is made under s. 3(5) or register a non-possessory lien under Part II of the RSLA.

This reasoning is supported by the scheme’s legislative history, a Ministry discussion paper, and a commentary paper published in the Canadian Business Law Journal.

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