Date: 2022-03-28

Appeal from a decision of the Board of Trustees, Ontario Motor Vehicle Dealers Compensation Fund to disallow a claim for compensation under s. 85 of O. Reg 333/08 made under the Motor Vehicle Dealers Act, 2002

Between:

Siamak Sagheb

Appellant

and

Board of Trustees, Ontario Motor Vehicle Dealers Compensation Fund

Respondent

DECISION AND ORDER

Adjudicator: Colin Osterberg, Member

Appearances:

For the Appellant: Ali Hesami, Counsel

For the Respondent: Diana Mojica, Counsel

Heard by Videoconference: March 1 & 2, 2022

REASONS FOR DECISION AND ORDER

A. Overview

1This is a hearing requested by Siamak Sagheb (the “appellant”) from a decision of the Board of Trustees of the Ontario Motor Vehicle Industry Compensation Fund (the “Board”) denying his claim for compensation under s. 42(4) of the Motor Vehicle Dealers Act (the “Act”) and s. 79 of Ontario Regulation 333/88 (the “Regulation”).

2On January 25, 2018, the appellant applied for compensation from the Motor Vehicle Industry Compensation Fund (the “Fund”) with respect to the purchase of a 2014 Mercedes Benz motor vehicle (the “2014 Mercedes”). He alleges that he purchased the 2014 Mercedes from a registered dealer with financing from Desjardins, a financing company, and that he never received delivery of the vehicle. He claims $44,813.40, being the total amount that he paid including financing costs.

3The Board denies that the appellant is entitled to compensation from the Fund on the basis that he has failed to establish that he is a consumer with respect to the transaction under s. 79(1) of the Regulation. The Board also takes the position that the appellant made misrepresentations in the application process and is therefore disentitled to compensation according to s. 79(4) of the Regulation.

4The appellant appeals the Board’s decision to deny his claim for compensation to the Tribunal.

5Based on all the evidence, I am not satisfied that the appellant was acting as a consumer with respect to the purchase of the 2014 Mercedes and I find that he is not entitled to compensation from the Fund.

B. ISSUES

6The issue to be decided is whether the appellant has demonstrated that, when he purchased the 2014 Mercedes, he did so as a consumer. If he did not, then the appellant is not entitled to compensation from the Fund according to s. 79(1) of the Regulation.

7Given my finding that the appellant was not acting as a consumer, I need not determine whether he is disentitled to compensation according to s. 79(4) of the Regulation.

C. LAW

8The Fund is a consumer protection program which allows consumers to apply for compensation for financial losses arising from certain transactions with a registered motor vehicle dealer.

9Subsection 42(5) of the Act provides that a claimant’s entitlement to compensation shall be determined in accordance with the criteria and procedures prescribed in the Regulation.

10Subsection 79(1) of the Regulation provides that a customer of a registered motor vehicle dealer is entitled to compensation from the Fund in certain circumstances. In the present appeal, in order for the appellant to claim compensation, he must show:

(i) the claim arose from a trade in a motor vehicle between the customer and the dealer – s. 79(1)(a);

(ii) at the time of the trade the dealer was a registrant – s. 79(1)(c); and

(iii) the customer was acting in the trade as a consumer within the meaning of the Consumer Protection Act, 2002 – s. 79(1)(d).

11The Board does not dispute the first two criteria but argues that the appellant was not acting as a consumer and so is not entitled to compensation.

12Section 79(4)(e) of the Regulation provides that, even if the appellant meets the criteria under s. 79(1), he will be disqualified if he misrepresents the nature of the claim or provides false or misleading evidence in support of the claim.

13Pursuant to s. 85(7) of the Regulation, after a hearing the Tribunal may allow the claim, in whole or in part, or refuse to allow the claim.

14The onus is on the appellant to demonstrate that he meets the criteria and is entitled to compensation.

D. EVIDENCE AND ANALYSIS

15There are two grounds upon which the Board bases its allegation that the appellant has failed to prove he was acting as a consumer with respect to the purchase of the 2014 Mercedes. First, the circumstances surrounding the purchase itself demonstrate that it was not a consumer transaction. Second, the Board says that the appellant was engaged in the ongoing purchase and sale of motor vehicles for business purposes and the transaction respecting the 2014 Mercedes was part of that business activity.

The 2014 Mercedes

16On January 19, 2017, the appellant and 1737223 Ontario Limited o/a Orangeville Fine Cars (“Orangeville”) entered into a Vehicle Purchase Agreement (“VPA”) whereby the appellant agreed to purchase the 2014 Mercedes from Orangeville. The purchase price was $33,131.28 plus taxes and other charges which brought the total owing to $37,623.35. The full amount of the purchase price was paid by Desjardins pursuant to its Conditional Sales Agreement (“CSA”) with the appellant. The VPA and the CSA state that the vehicle was delivered January 19, 2017, the same day the VPA and CSA were executed. However, the evidence shows that the 2014 Mercedes has never been in Canada, has never been owned by Orangeville or the appellant, and was not delivered to the appellant January 19, 2017.

17The appellant commenced making monthly payments under the CSA in the amount of $746.89 starting February 20, 2017, and continued making those payments until October 6, 2020, when he paid Desjardins $11,399.48 which was the outstanding balance at that time. He did this despite never having received delivery of the 2014 Mercedes. Moreover, the evidence is that the appellant did not advise Desjardins that the 2014 Mercedes was never delivered.

18The evidence is that Orangeville was conducting a fraudulent scheme whereby it had some of its customers enter into finance agreements relating to the sale of vehicles and where the vehicles either did not exist or were never in Canada and never owned by Orangeville. The banks and finance companies which were parties to the finance agreements then paid Orangeville the full sale price of the vehicles and, depending on the volume of transactions, would pay Orangeville additional monies in the nature of incentives/bonuses. The monies paid by the institutions would be passed on to the “customers”, less a commission kept by Orangeville, and the customers would make the monthly payments on the fraudulent loans.

19The Orangeville scheme was discovered by the Bank of Nova Scotia at the end of 2016. Desjardins became aware of it in 2017. Orangeville has not been in operation since July 2017 and voluntarily terminated its dealer’s licence on August 22, 2017.

20The evidence is that Orangeville arranged at least 195 similar fraudulent transactions and, although it is not certain whether all the involved customers were complicit in this scheme, the Board argues that, given that the customers were making payments for vehicles which were never delivered, it is reasonable to infer that most of them were involved.

21In the case of the appellant, as noted above, the VPA states that the vehicle was delivered January 19, 2017, as does the CSA. This is information that Desjardins would have been relying on since the vehicle was to act as security for the repayment of the loan. If the vehicle was not in Canada or did not exist at all, or if it was not actually owned by Orangeville or the purchaser, then the bank would have no security for the loan.

22On January 25, 2018, more than a year after the VPA was entered, the appellant applied to the Fund for compensation on the basis that he had paid for a vehicle which was never delivered. He says that he had been regularly calling Orangeville, asking about the delivery status, starting in the spring or summer of 2017 and was told that the vehicle was coming but that it would take some time. He says he continued to call Orangeville regularly but in November or December 2017 Orangeville stopped returning his calls. The appellant then went to the dealership and saw that they were no longer in business. He says he consulted a lawyer and was told it would be difficult to recover anything from the dealer and that his best option was to make a claim to the Fund.

23The Board points out that the appellant has not produced any evidence of communications he had with the dealership, his lawyer, or Desjardins with respect to his efforts to determine the whereabouts of his vehicle, or the impact of the circumstances on his financing agreement. The Board argues that this shows that the appellant is not being truthful and that he was complicit in the fraud. The Board argues that it does not make sense that the appellant would continue paying for a vehicle that was not delivered for almost a year without trying to find out what was going on. It also argues that a reasonable person would have contacted Desjardins to let them know what was happening rather than continuing to make payments for a vehicle which would never be delivered.

24The appellant says he did not go to the dealership before November or December 2017 because it was located three hours from his home, and he did not have the time. He says he had to keep making payments to Desjardins even after he found out about the fraud because, otherwise, he risked damaging his credit rating. He says that he is a victim of the fraud perpetrated by Orangeville.

25I did not find the appellant’s explanation to be credible for the following reasons.

26First, the VPA and the Conditional Sales Agreement to which the appellant was a party, misrepresents to Desjardins that the vehicle had been delivered on January 19, 2017. It is not reasonable to believe that the appellant was not aware of this misrepresentation. He says he only read the parts of the documents that the dealer pointed out to him, and this did not include the delivery date. I find it improbable, self-serving, and not credible, that the appellant would only read the parts of the contract the dealer, who he purportedly never dealt with before, told him he should read.

27Second, the appellant says that he had the cash to pay for the vehicle himself when he entered into the CSA but intended to wait until the vehicle was delivered to him before paying the full amount of the purchase price. It makes no sense to say that he did not want to pay cash until delivery, but at the same time was prepared to agree to a debt obligation to Desjardins for the same amount plus interest without delivery. The appellant’s explanation for financing the purchase is inconsistent and not credible.

28Third, the appellant’s allegations that he communicated with the dealership many times in 2017, and with a lawyer later in 2017, are not supported by evidence. The appellant produced no texts, emails, or phone records which support his claims to have had those communications. If these efforts did in fact take place, supporting documentary evidence would have been readily available to the appellant, and I would have expected him to produce these for the hearing. His failure to do so undermines his credibility.

29Fourth, the appellant never advised Desjardins about what was happening. He simply continued to make payments on the loan and paid the full amount in 2020. A reasonable person would have contacted the bank to see what could be done or at least warn the bank that this fraud had occurred and inquire whether some relief might be available to him with respect to the loan.

30Fifth, the appellant says that he was calling Orangeville throughout the fall of 2017 and was told that the delivery of the vehicle was delayed but that it was on its way. However, this cannot be true since Orangeville was not operating after July 2017 and had surrendered its dealer’s licence in August 2017. I decline to find as such, particularly where the appellant has offered little in the way of supporting evidence.

31Finally, the appellant’s wife entered into an almost identical agreement with Orangeville on July 25, 2016. Like the appellant’s agreement with Orangeville, this was for the purchase of a vehicle for about $38,000, with a delivery date of July 25, 2016, for a vehicle purchase funded entirely with financing from a financial institution, and for which the vehicle which was either not in Canada or never existed and which was never delivered.

32The monthly payments for the 2016 purchase were made from the joint bank account of the appellant and his wife. The appellant alleges that he did not know anything about his wife’s purchase. However, when the Board requested the appellant’s bank statement showing the payments made for the 2014 Mercedes, he specifically redacted the parts of the statement showing the payments in respect of the 2016 purchase from Orangeville. He told the Board that the redacted part was with respect to personal medical expenses of his wife. That this was not true, only became apparent to the Board in February 2022 when it received documentation from the Bank of Nova Scotia who had provided the financing for the fraudulent 2016 purchase.

33I do not accept the appellant’s evidence. I find that he was likely complicit in the fraudulent scheme with respect to both the 2014 Mercedes and the vehicle his wife purchased in 2016. Although the proceeds of the financing do not appear in the joint account that has been produced, the appellant acknowledged that he has other bank accounts as does his wife.

34I find that the transaction with respect to the 2014 Mercedes was a scheme to secure bank financing for a vehicle that was not actually being sold or purchased. This does not satisfy the criteria in the Regulation that requires the transaction to be one in which the appellant is acting as a consumer. This finding alone is sufficient to find that the appellant has not proven entitlement to compensation from the Fund.

Other motor vehicle trading

35The evidence was that on March 20, 2017, while allegedly waiting for delivery of the 2014 Mercedes, the appellant purchased a new 2017 Mercedes for a total purchase price of $120,837.62, for which he paid cash. The appellant says that he kept that vehicle for a couple of days and then sold it to a rental car company for the same amount of money that he bought it for. He says that he wanted to drive that vehicle and then decide whether he wanted to keep it. He says he knew that he could sell it to the rental car company if he did not like it without suffering a financial loss. He says that rental car companies will pay full price for high-end vehicles that have been used because high-end car companies do not like to sell vehicles that they know are going to be rented.

36The appellant did not produce any documentation to show that he sold the 2017 Mercedes to a rental company or how much he received for the sale of that vehicle. The Ministry of Transportation records in evidence show that this vehicle is still registered in the name of the appellant. At the hearing, the appellant says that the 2017 Mercedes was sold to either Graphics & Transport Inc. or CC Ocean Automotive Ltd. There was no supporting evidence entered suggesting that either of these companies are rental car businesses or that the vehicle was sold to either of them.

37The Board alleges that the circumstances indicate that the 2017 Mercedes was sold for export.

38Whether the 2017 Mercedes was sold to a rental car company or to another company for export or some other purpose, the evidence satisfies me that it was purchased by the appellant with the expectation that he would sell it shortly thereafter, most likely at a profit. I find that the plaintiff did not purchase the 2017 Mercedes as a consumer but that the transaction was done for business purposes.

39On August 3, 2017, the appellant registered the purchase of a 2017 Land Rover which he purchased for $82,801.14. The appellant says that he drove the Land Rover for a couple of days and then sold it to a rental company. He says that he sold it to either Graphics & Transport Inc. or CC Ocean Automotive Ltd. The appellant did not produce any documentation with respect to his sale of the Land Rover, but he says he sold it for the same price that he purchased it for. The Ministry of Transportation records in evidence show that it is still registered in the name of the appellant.

40The Board alleges that the circumstances indicate that the 2017 Land Rover was likely sold for export.

41Whether the 2017 Land Rover was sold to a rental car company or to another company for export or some other purpose, the evidence satisfies me that it was purchased by the appellant with the expectation that he would sell it shortly thereafter, most likely at a profit. I find that the appellant did not purchase the 2017 Land Rover as a consumer but that the transaction was done for business purposes.

42The appellant’s explanation for these two transactions is that he likes cars and that he likes to buy them and sell them and to only keep them a short time. He does not buy them as a business but for himself and his family for personal purposes. He says he gets bored of his cars easily and only keeps his personal vehicles for a year or two before he sells them. Be that as it may, the 2017 Mercedes and the 2017 Land Rover were not kept for longer than a couple of days before the appellant sold them again. This is not consistent with a consumer purchase, and I do not accept the appellant’s explanation.

43On January 9, 2018, the appellant purchased a 2005 Mazda which he sold on January 23, 2018. The appellant did not produce any documents with respect to the sale of that vehicle. The appellant says that he bought the Mazda for his wife. He says that she suffered psychological or emotional injuries in an accident and that he wanted a cheap vehicle for her to drive so she would not be concerned about damaging it. The appellant says he purchased that vehicle for $1,054 and sold it for $1,200. He says he spent some money repairing it and does not know whether he made money on the transaction. No documents were produced showing the purchase price, the repair costs, or the sale price of the 2005 Mazda.

44On January 10, 2018, the appellant purchased a 2007 Volvo which he sold on March 2, 2018. Notably, the Volvo was reported to have 305,500 km on the odometer when he registered it with the Ministry of Transportation and only 103,580 kms when the person who purchased it from him registered it. The appellant did not produce any documents with respect to the sale of that vehicle. Like the Mazda, he says the Volvo was purchased for his wife. The bill for the purchase of the Volvo indicates he paid $1,095 and the appellant says he sold it for $1,450. Again, he says he spent money on repairs and says he lost money on the overall transaction, but no documents were produced showing the repair costs or the sale price.

45On April 6, 2018, the appellant purchased a 2007 Nissan Altima. The appellant produced a hand-written bill of sale dated April 10, 2018, which indicates that he sold this vehicle for $2,000. The appellant produced no documents showing the price for which he purchased this vehicle or the costs of repairs, if any.

46The Board argues that the transactions respecting the Mazda, Volvo, and Nissan vehicles are evidence that the appellant was buying and selling vehicles as part of a business and not as a consumer. The appellant says that he was trying to buy his wife a cheap vehicle she could drive because of her psychological and emotional issues resulting from an accident.

47In the context of the appellant’s other activities, I find it is likely that these purchases and sales were done for business purposes and were not consumer transactions. They are, at the least, evidence that the appellant was carrying on the business of buying and selling motor vehicles.

Discussion and conclusion

48Under the Consumer Protection Act, 2002, a “consumer” is defined as an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.

49I find on a balance of probabilities that the appellant was not acting as a consumer with respect to the trade involving the 2014 Mercedes: he was involved in the trade of several other vehicles for business purposes around the same time; his evidence with respect to his intended use of the vehicle was not credible; he acknowledged that he was in the habit of purchasing vehicles and then selling them a short time later; while allegedly waiting for the delivery of the 2014 Mercedes, the appellant purchased another Mercedes that he says was intended for personal use; while continuing to wait for delivery of the 2014 Mercedes, the appellant purchased a 2017 Land Rover that he says was intended for personal use. Moreover, I have found that the appellant knew that the 2014 Mercedes was never going to be delivered when he entered into the agreement to purchase it.

50Looking at the evidence in its totality, I find that the appellant has not met his onus of establishing that the purchase of the 2014 Mercedes was a consumer purchase. Therefore, the appellant is not entitled to claim compensation from the Fund pursuant to s. 79(1) of the Regulation.

51Given my finding that the appellant is not entitled to claim compensation pursuant to s. 79(1) of the Regulation, I need not make a determination with respect to the Board’s allegation that the appellant is disentitled under s. 79(4).

E. ORDER

52Pursuant to s. 85(7) of the Regulation, the appellant’s claim for compensation from the Ontario Motor Vehicle Dealers Compensation Fund is refused.