CITATION: VG Automobiles v. The Auto Show Inc., 2015 ONSC 7292
DIVISIONAL COURT FILE NO.: 585/14
DATE: 20151123
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MOLLOY J.
BETWEEN:
VG AUTOMOBILES
Plaintiff/Applicant
– and –
THE AUTO SHOW INC.
Defendant/Respondent
Self-represented
Self-represented
HEARD: October 6, 2015
MOLLOY J.
The Appeal
[1] VG Automobiles (“VG”) appeals to this Court from the decision of Deputy Judge Genova of the Toronto Small Claims Court, dated November 14, 2014, VG’s action without costs.
[2] VG is a used car dealer. On November 13, 2013, VG purchased a used 2004 Nissan from The Auto Show Inc. at a Toronto auction run by ADESA, a public auction service provider. The Auto Show Inc. (“the Auto Show”) is a used car dealership. VG paid a purchase price of $3000.15 including HST. VG purchased the car for resale, intending to make a profit of $1000-$1500. The next day, after a mechanical inspection, VG discovered that the car was not roadworthy and would require repairs of over $1700.00. The Auto Show refused to take the car back and refund VG’s loss. VG sued the Auto Show in Small Claims Court, seeking damages of $2,661.13, being the cost of the repair and extra sale and depreciation costs.
[3] The Auto Show defended on the basis that the Nissan was sold on an “as is” basis, without any warranty that it was roadworthy.
[4] The trial proceeded before D.J. Genova in the Toronto Small Claims Court on Sheppard Avenue. Both parties were represented by employees who were acting with the consent and authorization of the companies’ owners – Natalia Gancharenka for VG, and Nancy Brettone for the Auto Show. Those same representatives appeared as representatives of the parties before this Court, and I gave them permission to make submissions on the appeal.
[5] At the conclusion of the evidence, the trial judge dismissed the plaintiff’s claim, but awarded no costs.
The Decision of the Trial Judge
[6] The trial judge gave oral reasons for his decision. He noted that the plaintiff had made a “very persuasive” argument citing statutory obligations and case law in support of the plaintiff’s position that “as is” does not mean that a dealer can “blindly” place a motor vehicle into the market for sale. He also agreed with the plaintiff that parties cannot contract out of their legal and statutory obligations. However, he then went on to hold that the plaintiff’s claim failed for two reasons.
[7] The first reason cited by the trial judge was that the plaintiff had failed to establish that a reasonable inspection by the Auto Show would have revealed the problem with the car (which was a faulty timing chain). In the absence of evidence that the timing chain had failed prior to the sale, he concluded that the problem did not exist at the time the vehicle was sold.
[8] Secondly, the trial judge held that the plaintiff failed to mitigate its claim by accepting an offer from the Auto Show, which would have reduced its loss to a few hundred dollars, rather than the amount of damages ultimately claimed.
Position of the Parties
[9] The plaintiff/appellant submits that the trial judge’s decision should be set aside because it is based on issues of causation and failure to mitigate, neither of which were pleaded or argued by the defendant. The plaintiff further argues that if the defendant had taken the position that the car failed only after the point of sale, the plaintiff would have called the mechanic as a witness to testify as to how long the problem would have existed.
[10] The defendant/respondent reiterated its argument made at trial that the car was sold “as is” and that the Auto Show, as a high volume wholesaler, does not do any inspection of the vehicles it sells. The defendant also pointed out that it offered to take the car back for a full refund plus half the auction fee, but VG refused.
Analysis
[11] I agree with the submission of the appellant that it was unfair in the circumstances to dismiss the plaintiff’s case on the basis of something that was not pleased and not argued by the defence. The plaintiff’s mechanic found the defect in the car immediately, the day after it was purchased. There was no issue raised by the defence as to the car being defective, nor with respect to when the defect arose. Rather, the defence position was simply that it had no knowledge of any defect because its policy is not to inspect the vehicles it offers at auction on an “as is” basis. The defence therefore argued that although the car was not roadworthy the plaintiff assumed that risk by buying it at auction on an “as is” basis and the Auto Show was not in breach of any of its obligations under statute or the code of ethics by which auto dealers are bound.
[12] In these circumstances, it is not surprising that the plaintiff saw no reason to call evidence to establish how long this problem with the vehicle must have been present, and in particular that it must have been present on the day of the sale, which was only one day before it was found by the plaintiff’s mechanic.
[13] In my view, it was a fundamental error to decide the case based on a matter not raised by the parties and upon which the plaintiff had no opportunity to present evidence or argument. The plaintiff has been prejudiced by this aspect of the decision. The only remedy that would redress the unfairness is a new trial.
[14] While that finding disposes of the appeal, the mitigation issue was fully argued and I will address it.
[15] I do not agree with the appellant’s position that the issue of mitigation had not been raised by the defendant at trial. In its statement of defence, and its evidence at trial, the defendant asserted that it had made a reasonable offer to compensate the plaintiff and that it had been refused. This issue was, therefore, squarely before the trial judge.
[16] However, in my view, the trial judge erred in law in the manner in which he dealt with the mitigation issue. A failure to mitigate is a factor that can reduce damages to which a party is otherwise entitled. It may also be a factor in awarding costs. However, unless the offer made by the defendant would make the plaintiff whole, the failure of the plaintiff to accept is not something that undermines the cause of action. While it might have been reasonable and sensible to take a loss of a few hundred dollars, as suggested by the trial judge, the failure to accept such an offer does not defeat the claim. The plaintiff sought rescission, which would require the defendant to put the plaintiff back into the position it would have been but for the breach. The defendant refused to do that. Therefore, the plaintiff took steps to minimize its loss, first by trying to sell the vehicle in its current condition with disclosure of the problem, and when that was unsuccessful, by repairing the defect and then selling the vehicle. The reasonableness of those steps may be assessed as against the total damages claimed, and there might or might not be some reduction in those damages. However, it cannot be a basis for dismissing the claim altogether.
Order
[17] The decision dated November 14, 2014 is set aside. This matter is remitted to the Small Claims Court for a new trial.
[18] VG, as the successful party, is entitled to its reasonable costs. If the parties are unable to agree on costs, the issue may be addressed by written submissions, with supporting documents such as receipts, attached. VG shall deliver its submissions to the Auto Show and within 30 days of the release of these Reasons. The Auto Show shall deliver its responding materials within 15 days after receipt of VG’s submissions. VG shall then have a right to make a very brief reply within 7 days. All of those submissions shall be filed as well in the Divisional Court office.
MOLLOY J.
Released: November 23, 2015
CITATION: VG Automobiles v. The Auto Show Inc., 2015 ONSC 7292
DIVISIONAL COURT FILE NO.: 585/14
DATE: 20151123
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MOLLOY J.
BETWEEN:
VG AUTOMOBILES
Plaintiff/Applicant
– and –
THE AUTO SHOW INC.
Defendant/Respondent
REASONS FOR JUDGMENT
Molloy J.
Released: November 23, 2015