121897 Ontario Limited o/a Castle Auto Collision & Mechanical Service v. Certas Insurance

CITATION: 121897 Ontario Limited o/a Castle Auto Collision & Mechanical Service v. Certas Insurance, 2016 ONSC 354 DIVISIONAL COURT FILE NO.: 333/14 DATE: 2016-01-18

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

1218897 ONTARIO LIMITED o/a CASTLE AUTO COLLISION & MECHANICAL SERVICE Appellant

– and –

CERTAS INSURANCE Respondent

COUNSEL: Mark A. Klaiman, W. Xavier Navarrete, for the Appellant Lisa M. Carr, for the Respondent

HEARD at Toronto: November 19, 2015

BEFORE: M.A. Sanderson J.

REASONS FOR DECISION

Introduction

[1] The appellant, 1218897 Ontario Limited ("Castle Auto or Castle") appeals the decision of Deputy Judge Ashby of the Toronto Small Claims Court dated June 11, 2014.Counsel for Castle submits that the trial judge erred in failing to hold that the Repair Service Agreement “the Agreement” required Certas to pay Castle $100 per day, the rate specified in the Agreement signed by the insured Vladmirs Kolesnikovs for 64 days (the “storage period”).

The Parties

[2] Castle Auto, the appellant, is an auto body repair business in Toronto.

[3] Certas Direct Insurance, improperly named as Certas Insurance, is an insurer. Certas entered into a Standard Form Policy of Automobile Insurance with the insured, Vladmirs Kolesnikovs, the owner of a 2000 Mercedes Benz that was in effect at all material times.

Outline of the Issues on Appeal

[4] Counsel for Castle submitted that the trial judge erred in law in failing to hold that Certas was bound by the Repair Service Agreement signed by the insured Kolesnikovs that specified that Castle would charge Kolesnikovs $100.00 per day to store his vehicle [after it was damaged in a motor vehicle accident and towed to Castle for possible repair].

[5] Counsel for Castle submitted that the trial judge erred in law in failing to hold that once the Agreement had been entered into, Certas, as Kolesnikovs’ auto insurer, (“the insurer”) was bound to pay that storage rate over the duration of the storage period and/or in failing to find that Kolesnikovs was bound to pay Castle and that Certas was required to indemnify Kolesnikovs for the full amount.

[6] While counsel for Certas did not contest that Kolesnikovs had signed the Agreement, she submitted that the trial judge was correct in finding there was no binding agreement with respect to the amount of the storage fees, that a reasonable storage rate was $60 per day, and that the trial judge did not err in ordering Certas to pay Castle $60 per day for storage of the vehicle for 40 days.

[7] Counsel for Castle further submitted that the trial judge erred in law in failing to find that because Certas ultimately refused to provide coverage for property damage under the policy, Certas had no standing to bring an application under s.24 of the Repair and Storage Liens Act or to challenge Castle’s daily storage rate.

Facts

[8] On March 14, 2011, a 2000 Mercedes Benz, “the vehicle” owned by Kolesnikovs and insured by Certas, was damaged in a motor vehicle accident.

[9] On March 15, 2011, the vehicle was towed to Castle Auto.

[10] Castle Auto sent Kolesnikovs a Repair Service Agreement by fax on March 21, 2011.

[11] On March 21, 2011, Certas’ appraiser attended at Castle Auto to examine the damage to the vehicle.

[12] By March 23, 2011, Certas had already concluded that the vehicle would be written off/would not be repaired.

[13] At that time, Kolesnikovs’ property damage claim under the policy was still under investigation. [Despite Certas’ subsequent denial of coverage under the policy, I have referred to Kolesnikovs throughout these Reasons as the insured, because a valid policy of insurance was in force at the time].

[14] On March 24, 2011, Certas contacted Castle Auto seeking copies of its invoices for the storage of the vehicle. Its representative learned that Castle was seeking payment for storage fees of $100 per day, back to March 15, 2011. Certas took the position that Castle’s storage claims were excessive and refused to pay them.

[15] On March 28, 2011, Castle indicated to Certas that it would not release the vehicle unless it had received $100 per day for storage and the other fees set out in the Agreement.

[16] On March 31, 2011, Kolesnikovs, knowing that the vehicle would not be repaired, attended at Castle Auto to retrieve his personal possessions from it. When he was there, he signed the Agreement.

[17] Mr. Chris Borson, one of the principals of Castle, gave evidence at trial that on that day, he explained the Agreement to Kolesnikovs, who indicated that he understood it. However, there was no reference in Borson’s evidence to any discussion about the total storage fees to that date or about other charges said to be owing as of March 31, 2011 or any reference to the likely duration of the storage after that date.

[18] Counsel for Certas submitted that Castle Auto should have released the vehicle at that time and that Certas attempted unsuccessfully to negotiate reasonable storage fees with Castle.

[19] Counsel for Certas submitted that in all of the circumstances and especially given Castle’s refusal to release the vehicle unless excessive storage fees were paid, it was reasonable for Certas to take steps to mitigate its or its insured’s potential loss.

[20] On April 26, 2011, more than a month after Certas had decided not to repair the vehicle, the vehicle was still being stored at Castle Auto.

[21] In order to get it released, starting on April 14, 2011, Certas took steps under s24 of the RSLA. On April 26, 2011, it issued an Initial Certificate in the name of Certas, and it deposited $7,065.89 into Court. As of that date, Castle was claiming storage of $4400 plus HST for 44 days storage. It was also claiming a $275.00 administration fee, an environmental levy of $475.00, a damage report fee of $150.00, a towing fee of $1,665.00 and a labour charge of $321.60, for a total of $7,286.60, plus HST of $947.26.]

[22] At trial, Ms. Williamson, a representative of Certas, gave evidence that at the time that Certas commenced the s.24 RSLA application, Certas had not yet confirmed it would provide Kolesnikovs with coverage for his property damage claim under the policy.

[23] After the Initial Certificate was issued on April 28, 2011, Castle issued a Notice of Objection under s24 of the RSLA requiring Certas to pay additional funds into court as a precondition of releasing the vehicle.

[24] On May 4, 2011, Certas received Castle’s Notice of Objection.

[25] On May 10, 2011, after paying additional monies into Court, Certas obtained a Final Certificate.

[26] Eight days later, on May 18, 2011, 64 days after the storage period commenced, Certas removed the vehicle from the Castle premises.

[27] On June 16, 2011, Castle issued a Claim in Small Claims Court, naming Certas as the Defendant and claiming inter alia, storage fees of $6,400 ($100 x 64) plus HST.

[28] After the exchange of pleadings in the Small Claims Court action, Certas denied Kolesnikovs’s property damage claim under the policy. However, Certas continued to defend the Small Claims Court action that Castle had brought against Certas.

[29] Counsel for Certas did not call Kolesnikovs to give evidence at the trial.

The Reasons of the Trial Judge

[30] The Reasons of the trial judge included the following:

…This same plaintiff instituted an almost identical action against Intact Insurance Company in claim Number SC-11-918-00. Deputy Judge Papageorgiou issued detailed reasons for judgment on March 25, 2013 and at the conclusion of this trial, I was advised her decision was under appeal, such appeal to be heard on May 21, 2014. Accordingly, I reserved my judgment until that appeal was disposed of. However, for reasons unknown to me, the appeal was abandoned.

I completely adopt the reasons of Deputy Judge Papageorgiou with respect to the conclusions she reached regarding the claims advanced in this action.

On March 14, 2011 a car belonging to Vladimirs Kolesnikovs was involved in an accident and it was towed eventually to the plaintiff’s premises for inspection. The owner had a Repair Service Agreement faxed to him which I assume was signed by him, which contains rates that will be charged by the plaintiff. The defendant is the insurer of the vehicle and after an inspection declared the vehicle to be a write off. After a great deal of correspondence of various kinds, no agreement was reached over charges levied by the plaintiff, so monies were paid into court and the vehicle was released.

Unlike the decision referred to above, I did not hear from the owner of the vehicle concerning the “agreement” to pay the charges levied by the plaintiff. However I agree with Deputy Judge Papageorgiou that there is no binding agreement with this defendant. Thus I must determine the fair value for towing, storage and other charges.

Deputy Judge Papageorgiou heard much, if not more evidence, than I did about storage rates, and she did an analysis of the evidence and cases, which led her to conclude that $60.00 a day plus HST was the fair rate. I agree.

Similarly, I agree with her conclusion as to towing fees and conclude that $166.00 plus HST is appropriate for towing and in this case there were 2 tows, one from the accident to the pound and the other from the pound to the plaintiff’s premises. Thus the total allowed is $375.16. There is no basis for a mark up of this amount.

An environmental fee and an administration fee are claimed by the plaintiff and for the same reasons given in the earlier decision, I conclude those charges are not allowable. A fee of $150.00 plus HST for a damage report is allowed.

The only remaining issue is the number of days allowable for storing the vehicle. The plaintiff claims 64 days from 16 March to 18 May, the latter date being the day the car was finally removed. The defendant concedes 17 days. The certificate confirming payment into court was applied for and issued on 26 April, although the plaintiff objected to the amount paid in. Clearly, the parties were at odds over the charges, but the defendant is experienced enough to know that it was possible to obtain the vehicle using the Act sooner than it did. The plaintiff was in almost constant correspondence with the defendant’s representatives to have the vehicle removed. In all the circumstances, I conclude 40 days is reasonable.

Thus, the claim of the plaintiff is allowed at 40 x $67.80 = $2712.00 plus $375.16 plus $169.50 for a grand total of $2918.66. This amount is payable out of the funds in court to the plaintiff and the balance is returnable to the defendant, although not until 31 days from the date of these reasons.

This is not a case for either aggravated or punitive damages.

If the parties are unable to agree on costs, they may make submissions in writing to me within 21 days of the release of these reasons.

[31] After the reasons were released, the parties agreed that no costs of the trial would be payable by either party.

The Standard of Review

[32] The Supreme Court of Canada has set out the standard of review applicable in appeals from judge’s orders in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 SCR 235:

(a) On questions of law the standard is correctness;

(b) On questions of fact, the standard is palpable and overriding error;

(c) On questions of mixed law and fact, where there is an extricable legal principle, the standard of review is correctness. However, with respect to the application of the correct legal principles to the evidence, the trial judge’s interpretation of the evidence as a whole, the standard is palpable and overriding error.

Was there a Binding Amount Agreed Upon for Storage Under s4(1) of the RSLA

[33] The trial judge wrote: I did not hear from the owner of the vehicle concerning the “agreement” to pay the charges levied by the plaintiff. However, I agree with Deputy Judge Papageorgiou that there is no binding agreement with this defendant.

Section 4(1)

[34] Section 4(1) of the Repair and Storage Liens Act ("RSLA")provides as follows:

4. (1) Subject to subsection (2), a storer has a lien against an article that the storer has stored or stored and repaired for an amount equal to,

(a) the amount agreed upon for the storage or storage and repair of the article;

(b) where no such amount has been agreed upon, the fair value of the storage or storage and repair…

[35] Counsel for Certas submitted that the trial judge found as a fact that was no "amount agreed upon" for the storage of the vehicle.

[36] I note that in the decision to which the trial judge was referring, 1218897 Ontario Limited o/a Castle Auto Collision v Intact Insurance Company on behalf of Grande National Leasing March 25, 2013, Deputy Judge Papageorgiou also held that the there was no amount agreed upon for storage within the meaning of s4(1) of the RSLA.

[37] Counsel for Castle submitted that there was an amount agreed upon for the storage of the vehicle under s4 (1) (a) [$100 per day for so long as Castle stored the vehicle]. There was no need for the trial judge to consider what rate would have been reasonable under s.4(1)(b) of the RSLA.

[38] Under the RSLA, Castle has a right to a lien against an article for an amount equal to ''the amount agreed upon".

[39] Counsel for Castle Auto submitted that the trial judge erred in principle in finding that there was no binding agreement here. There was no evidence contradicting the evidence of Borson that Kolesnikovs understood the terms of the Agreement when he signed it.

[40] While the trial judge did not go through the Reasons of Deputy Judge Papageorgiou and compare the facts in each case, he did say that Castle had started an almost identical action in Claim SC-11-918-00. In both cases, the insured had signed identical Repair Services Agreements. The trial judge here adopted Deputy Judge Papageorgiou’s reasons which included a reference to the Repair Services Agreement as being “lengthy and densely worded, the details of the various different payments possible required are imbedded in very small print in one small section of the agreement”, [It] “requires some effort to actually understand and then calculate the final amount. It is clear that Mr [S.] would never have executed an agreement that said in clear language that he agreed to pay Castle $2994.50.”

[41] In this case, Borson gave no evidence about any discussion with Kolesnikovs about the likely length of the storage or about Kolesnikovs’ understanding about the likely duration of the storage. He did not give evidence that he had brought the outstanding balance owing for storage to the insured’s attention before Kolesnikovs signed the Agreement. Borson did not assert that Kalashnikov agreed to pay the daily rate whatever the duration of the storage.

Conclusion on Whether There was an Agreed upon Amount for the Storage

[42] It was open to the trial judge to conclude on the facts that Kolesnikovs [knowing that the vehicle was not being repaired] did not agree to pay for 64 days of storage/did not agree upon an amount for storage within the meaning of s4(1)(a) of the RSLA.

[43] The evidence was uncontradicted that by March 31, the insured knew that the vehicle would not be repaired. He came to Castle on that day to remove his personal belongings from the vehicle. I infer that in those circumstances he did not know, was not told and did not agree to pay a further month and a half of storage fees for a car that had already been declared to be a write off. I infer that he was not aware and would not have expected that the vehicle would continue to be stored at Castle between March 31 and until May 18.

[44] When Kolesnikovs signed the Agreement on March 17, 20011, he would have reasonably understood that the vehicle would either be shortly repaired or if a decision was made not to repair, the storage would be discontinued. He did not agree to pay for storage for as long as 60 days. By March 23, Certas had determined the vehicle would not be repaired. He did not expressly agree to pay more than $9,000 for storage of a car not worth repairing.

[45] I find that Kolesnikovs had no agreement with Castle on the final or total amount for the storage of his vehicle.

Conclusion on the S4 of the RSLA

[46] Since there was no agreed upon amount, the trial judge did not err in holding that s4(1)(a) did not apply.

S 4(4) and (6)

[47] Counsel for Castle submitted that the trial judge made a palpable and overriding error in failing to consider s.4(4) of the RSLA and to apply it to the evidence at trial.

[48] Counsel for Castle submitted that the Divisional Court in Halton Regional Pound Facility v Holland ONSCDC 3776 paras 23-25 noted that even in situations where a storer receives an article from a party other than the owner, the RSLA requires only that notice be given to other parties 60 days after taking possession of the article. He submitted that the implication is clear, that the RSLA recognizes that even in circumstances when someone other than the owner has requested that a vehicle be stored, the store’s lien is not defeated. Instead, the storage claim may be limited to 60 days.

[49] Stated differently, he submitted that an insurer only has a right to challenge the storage rate after 60 days have passed. Prior to the expiration of the 60 day period, the insurer is bound by whatever rate to which insured has agreed. For the first 60 days, Certas cannot challenge the rate of $100 per day.

[50] Counsel for Certas submitted that sections 4(4) and (6) of the RSLA have no application in the circumstances here. They apply only when the lienholder has received an article from a person other than its owner [for instance, a stolen motor vehicle recovered by the police].

Conclusion on ss4(4) and (6)

[51] In my view s 4 ss(4) and (6) do not apply on the facts in this case. Here Castle received the vehicle with the knowledge and consent of the owner the insured Kolisnikovs.

S 7(5) and 7(6)

[52] Sections 7(5) and (6)of the RSLA, provide as follows:

Acknowledgment of indebtedness required

[5] A non-possessory lien is enforceable only if the lien claimant obtains a signed acknowledgment of the indebtedness which acknowledgment may be on an invoice or other statement of account.

[6] An acknowledgment of indebtedness under subsection (5) is without prejudice to the right of the owner or any other person to dispute in a proceeding the amount that the lien claimant is owed.

[53] Counsel for Certas submitted that under s 7 of the RSLA, although a storer may recover storage fees if it has an acknowledgement of indebtedness, the store’s right is without prejudice to the owner’s right to challenge the amount of the storage fees. While the insured’s signature may have constituted an acknowledgement of indebtedness, Certas can dispute the amount of the storage fees under s7.

[54] Counsel for Castle submitted that Section7 applies only if a lienholder has voluntarily given up possession of the stored article. Section 7(6) has no application to a storer that has given up an item after a s.24 RSLA application has been made. Under s.24 the money paid into Court acts as a substitute for the security otherwise provided by the article being stored.

Conclusion on s7

[55] After Certas paid amounts into court under s24 of the RSLA, the possessory lien was not converted into a non possessory lien. Rather, once the money was paid into court and the vehicle was released under s24(13), the lien was discharged against the vehicle and became a charge against the amount paid into court or the security posted with the court. By the time Castle gave up possession of the vehicle, it had already been given an alternative form of security. There was no non-possessory lien.

[56] Sections 7(5) and 7(6) do not apply.

Section 4(1)(b)

[57] Since s4(1)(a) did not apply, the trial judge did not err in moving on to the next stage of the analysis, determining a reasonable rate under s4(1)(b).

What are Reasonable Storage Rates?

[58] Deputy Judge Ashby considered six recent decisions on the fair value of storage for Toronto repair facilities, including two decisions against Castle Auto. He wrote: Deputy Judge Papageorgiou heard much evidence than I did about storage rates and she did an analysis of the evidence and cases which led her to conclude that $60 day plus HST was the fair rate. I agree.

[59] Counsel for Castle Auto submitted that the Deputy Judge erred in simply adopting the conclusions of Deputy Judge Papageorgiou in determining fair value.

[60] Counsel for Certas submitted that Deputy Judge Ashby's ruling on the daily storage rate was supported by evidence upon which he reasonably concluded that a reasonable daily storage rate was $60/day.

[61] Evidence proffered in the present case by Ms. Kathy Williamson included the following:

(i) A study prepared by the Insurance Bureau of Canada’s study in October 2011 showing storage/parking rates from $7.53 per day to $60.00 per day for outdoor storage;

(ii) By-laws of the City of Mississauga’s limiting storage fees charged by repair facilities and tow companies for motor vehicles towed from accident scenes at an all-inclusive rate of $60/day;

(iii) By-laws of the City of Vaughan limiting storage fees to a maximum of $55.00 per day for outside storage;

(iv) Storage rates charged by Toronto collision reporting centres [where Castle Auto is located] of $35.00 per day after the first 24 hour period;

(v) The York Regional Police limitation of outdoor storage rates at $50.00 per day for outdoor storage;

(vi) The Haltom Regional Police Services Board limitation of storage rates at $60.00 per 24 hour period.

Conclusion

[62] There was evidence upon which it was open to the trial judge to conclude that a reasonable storage rate was $60 per day. [Counsel for Certas did not cross appeal on this point]

The Number of Days Allowable

[63] Counsel for Castle Auto requested that the number of storage days for which Certas must pay should be increased from 40 to 64.

[64] The trial judge wrote: The only remaining issue is the number of days allowable. This Court must determine when the vehicle should have been released. The plaintiff claims 64 days from March 16 to May 18, the latter date being the day the car was finally removed. The defendant concedes 7 days. The certificate confirming payment into court was applied for and issued on April 26…the defendant is experienced enough to know it was possible to obtain the vehicle using the Act sooner than it did. The plaintiff was in almost constant correspondence with the defendant’s representatives to have the vehicle removed.

Conclusion on Reasonable Storage Rates

[65] On the evidence, it was open to the trial judge to reach the conclusion that he did.

Does the fact that Certas did not have an insurable interest in the Vehicle because it had denied coverage under the policy affect its right to bring the s24 Repair and Storage Lien Application and to defend the within action?

[66] Section 24(1) of the RSLA provides as follows:

24. (1) Where a claimant claims a lien against an article under Part I (Possessory Liens) and refuses to surrender possession of the article to its owner or any other person entitled to it and where one of the circumstances described in subsection (1.2) exists, the owner or other person lawfully entitled to the article may apply to the court in accordance with the procedure set out in this section to have the dispute resolved and the article returned

[67] Under s.24, it is clear that the application may be brought by the owner, or any another person lawfully entitled to the article.

[68] Counsel for Castle Auto submitted that between the date of loss and the date of Judgment Certas was neither the owner of the vehicle stored or "any other person entitled to it." Accordingly, it did not have standing either to issue the s.24 RSLA certificate or to challenge the daily storage rates.

[69] Counsel for Castle submitted that instead of bringing a s. 24 application, Certas should have brought an application for direction under s.23.

[70] Counsel for Certas submitted that Certas had issued an Ontario Automobile Policy for the 2000 Mercedes Benz to Kolesnikovs. At the time the s24 Application was brought, Certas had not yet decided whether to provide coverage for the property damage claim that Koleskinovs had submitted. There was an Ontario Automobile Policy in force insuring Kolesnikovs.

[71] Pursuant to section 278 of the Insurance Act, the right of subrogation arises whenever an insurer makes any payment under a contract of insurance:

Subrogation

278. (1) An insurer who makes any payment or assumes liability therefor under a contract is subrogated to all rights of recovery of the insured against any person and may bring action in the name of the insured to enforce those rights. R.S.O. 1990, c. 1.8, s. 278 (1).

Conclusion

[72] Certas brought a s24 Application and made a payment of its own funds to get the vehicle released. In so doing, Certas was protecting the interest of itself and of its insured [whether or not it ultimately decided to provide coverage.]

[73] An insured is entitled to subrogate in respect of any payment made.

[74] Furthermore, since Castle Auto issued this Claim against Certas, Certas was entitled to defend the claims brought against it.

Summary of Conclusions

[75] In my view, there was no amount agreed upon for the storage of the vehicle under s4(1)(a) of the RSLA.

[76] Upon learning that Castle was attempting to charge what Certas thought were excessive storage fees, it was reasonable for Certas to attempt to mitigate its insureds and/or its exposure to those claims. When Certas started proceedings under s24 of the RSLA, it was not acting contrary to the interest of its insured. It paid its own funds into court to obtain the release of the vehicle and reduced any continuing exposure of its insured to further storage costs.

[77] After Certas paid amounts into court under s24 of the RSLA, Castle’s possessory lien was not converted into a non possessory lien. Rather, once the money was paid into court and the vehicle was released, Castle’s lien was discharged against the vehicle and became a charge against the amount paid into court or the security posted with the court.

[78] There was no non-possessory lien and s7(5) and 7(6) does not apply.

[79] Neither section 4(4) nor s.4(6) applies. The vehicle came into storage with the knowledge and consent of the owner.

[80] Therefore, Deputy Judge Ashby did not err in finding that s4(1)(b) of the RSLA applied and attempting to determine the fair value of the storage.

[81] There was evidence before the trial judge upon which he could reasonably conclude that a fair storage rate was $60 per day.

[82] Therefore, the appeal is dismissed.

___________________________ M.A. Sanderson J.

Released: January 18, 2016

CITATION: 121897 Ontario Limited o/a Castle Auto Collision & Mechanical Service v. Certas Insurance, 2016 ONSC 354 DIVISIONAL COURT FILE NO.: 333/14 DATE: 20160118

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

1218897 ONTARIO LIMITED o/a CASTLE AUTO COLLISION & MECHANICAL SERVICE Appellant

– and –

CERTAS INSURANCE Respondent

REASONS FOR JUDGMENT

M.A. Sanderson J.

Released: January 18, 2016