Court File and Parties
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Corey Thomas, Respondent (Plaintiff)
and:
Advantagewon Inc., Appellant (Defendant)
BEFORE: The Honourable Mr. Justice M. D. Parayeski
COUNSEL: James C. Studer, for the Respondent (Plaintiff)
Ali A. Chabar, for the Appellant (Defendant)
HEARD: March 14, 2011
Endorsement
1This is an appeal of a trial ruling by Deputy Judge Bogden of the Small Claims Court made on April 14th, 2010.
Background
2The plaintiff had borrowed money from the defendant to finance repairs to a motor vehicle that he had leased. The terms of the loan were documented in a written contract entered into by the parties. Additionally, the defendant had registered a lien against the vehicle in accordance with the Repair and Storage Liens Act.
3The plaintiff defaulted on one or more of his obligations under the contract. The defendant seized the vehicle in accordance with the contract and the statute referred to above. The plaintiff sued, seeking return of the vehicle and damages allegedly sustained by him as a result of the seizure. After a trial, Deputy Judge Bogden found in favour of the plaintiff and ordered return of the vehicle and several types of damages.
Analysis
4With due respect, the Small Claims Court judge made a number of errors in law and/or in mixed law and fact, such that it is appropriate to set aside his ruling.
5In my view, the judge below made the following errors:
a) he applied the wrong statute to the case;
b) he interpreted the written contract erroneously;
c) he vitiated the defendant’s right to seize the vehicle based upon an alleged breach of a term in the contract by it while overlooking the plaintiff’s own default; and
d) he awarded damages that were inappropriate.
6The judge below was clearly of the opinion that the seizure was wrong because it was not “commercially reasonable”, as defined by him. He seems to have based his conclusion that the entire collection process had to conform to that notion under the terms of the Personal Property Security Act. This transaction is not governed by that statute. While any disposition of the asset by the creditor would obviously have to be done fairly and on a commercially reasonable basis, initiation of the collection process, once default by the debtor is proven, is at the creditor’s discretion in accordance with the contractual and applicable statutory terms.
7Deputy Judge Bogden found that the defendant was not acting in a commercially reasonable manner in initiating the collection process on the following bases:
a) that the priority of the defendant’s lien was such that it was unlikely that it would net any money after paying out the lien of the lease;
b) that the collection, repossession, and disposition costs would amount to more than the amount of money owed by the debtor on the contract; and
c) the defendant did not provide the plaintiff with advance written notice of its intention to seize the vehicle.
8The Repair and Storage Liens Act, which does govern this transaction, creates a priority for the defendant, such that point a) immediately above is simply incorrect. The defendant would stand ahead of the lessee in terms of priority.
9As to point b) immediately above, it is open to a creditor to take lawful steps to collect upon what it is owed even if the costs inherent in so doing might be greater than the amount in question. The contract in this case makes reasonable and incurred recovery costs payable by the plaintiff. Moreover, even if it didn’t, the defendant has every right to attempt to collect upon the debt owed to it. It could do so even if it were to cost itself money in the process. The Small Claims Court judge appears to have overlooked the business reality that sometimes lenders have to demonstrate that they will take a hard stand to prove that they aren’t prepared to forgive debts when they reach a relatively low amount. What might not make abundant sense in the case of an individual debt might be eminently sensible in the context of an entire lending business. Appearing to be weak in that marketplace is itself not “commercially reasonable”.
10With respect to point c) immediately above, neither the contract nor the governing statute created any obligation on the defendant to send the plaintiff written notice of its intention to seize the vehicle. While doing so might have been in keeping with the defendant’s gratuitous practice in instances of earlier defaults by the plaintiff, it had no duty to do so.
11I agree with the Deputy Judge’s conclusion that the figures contained in the defendant’s notice and demand delivered to the plaintiff when seizure was initiated are not based upon even a semblance of adequate evidence. However, I do not accept that those figures, even if they do amount to a breach by the defendant, are such that the right to seize the vehicle as part of a collection process is somehow negated absolutely as a result. The contract makes it abundantly clear that the defendant is only entitled to reasonable and actually incurred recovery costs at the end of the day, and after seizure and sale the plaintiff would be entitled to a full accounting with recovery costs on that basis being a factor. In addition, the decision below appears to take nothing meaningful from the undisputed fact that the plaintiff was also in default.
12Turning to the damages awarded by the Deputy Judge, they may be summarized as follows, and are in addition to an order that the vehicle be returned to the plaintiff:
a) payment of $5,242.72, representing lease payments that the plaintiff made to the lessee since the date of seizure;
b) payment of $2,800.00 for loss of use of the vehicle;
c) payment of $200.00 for chattels taken with the vehicle when it was seized; and
d) payment of $1,500.00 for depreciation of the vehicle.
13In combination, these damages put the plaintiff into a better position than he would have been had the vehicle not been seized. There was no hard evidence that rationalized the loss of use figure, which the trial judge based upon $50.00 per week, a number clearly guessed at by him. The figure for depreciation is similarly without a solid evidentiary basis. In addition, of course, there appears to have been no set-off for the acknowledged indebtedness of the plaintiff to the defendant.
14It is appropriate that the judgment below be set aside. The defendant is at liberty to sell the vehicle at a commercially reasonable price following which the plaintiff is entitled to a full accounting. That accounting must include, but is not limited to, proof that all recovery costs being charged to him are both reasonable and were actually incurred.
15If the parties are not able to agree upon costs of the trial below and of this appeal, they may make brief, written submissions to me in these regards. Such submissions, if any, are to be no more than two typewritten pages in length each. The appellant’s submissions are to be sent to me, with a copy to the respondent’s counsel, on or before April 15th, 2011. The respondent then has a further 15 days to reply, with a copy of his submissions being sent simultaneously to me and to counsel for the appellant.
Parayeski J.
Date: March 18, 2011