COURT OF APPEAL FOR ONTARIO

DATE: 20011126 DOCKET: C35780

RE:

ROYAL TIRE SERVICE LTD. (Applicant/Appellant in Appeal) –and– SHELLEBY TRANSPORTATION LIMITED, LITTLE BROS. LEASING LIMITED and THRU-WAY TRAILER CENTRE LIMITED (Respondents/Respondent in Appeal)

BEFORE:

WEILER, FELDMAN and SHARPE JJ.A.

COUNSEL:

Frederick J. Skeggs, for the appellant

Daniel F. Chitiz, for the respondent Thru-Way Trailer Centre Limited

HEARD:

November 14, 2001

RELEASED ORALLY:

November 14, 2001

On appeal from the judgment of Justice C. Bruce Noble dated January 26, 2001.

E N D O R S E M E N T

[1] The appellant appeals the decision of Justice Noble which held that Royal Tire’s non-possessory lien did not attach to the interest of Thru-Way in the trailers and which therefore denied its application for a declaration. In our view, Justice Noble correctly analyzed and determined this application.

[2] The appellant raised two arguments on appeal. The first is that s. 10 of the Repair and Storage Liens Act, R.S.O. 1990, c.R.25, does not assist Thru-Way because Thru-Way acquired rights in the trailers from the date of the repurchase agreement with Little Bros. in July 1996, before the non‑possessory lien of Royal Tire arose. There is no merit in that argument. The repurchase agreement placed a contingent obligation or liability on Thru-Way to repurchase, but gave it no rights in the trailers which had been sold by Thru-Way to Little Bros. for financing purposes.

[3] Thru-Way only acquired rights in the trailers in October 1997 when it repurchased the trailers from Little Bros. The lien was not registered by Royal Tire until November 1997. Section 10(1) of the Repair and Storage Liens Act provides as follows:

s. 10. (1) A non-possessory lien is enforceable against third parties only if a claim for lien has been registered, and, where a person acquires a right against an article after a non‑ possessory lien arises, the right of the person has priority over the non-possessory lien of the lien claimant if a claim for lien was not registered before the person acquired the right.

Since Thru-Way acquired no rights in the trailers until after Royal’s non-possessory lien arose and before registration, s. 10(1) applies to give Thru Way priority over Royal’s non-possessory lien..

[4] The second argument is that by virtue of s. 63(11) of the Personal Property Security Act, R.S.O. 1990, c.P.10, Thru-Way stepped into the shoes of Little Brothers which had rights in the trailers before Royal Tire’s lien arose. Because Thru-Way still owned the trailers when the lien was registered in November and became enforceable, Royal Tire could therefore enforce the lien against Thru-Way’s interest in the trailers.

[5] Section 4(1)(a) of the PPSA provides that that Act does not apply to a statutory lien. Furthermore, in the previous case of Royal Tire Service Ltd. v. Shelleby Transportation (1999), 1999 2214 (ON CA), 14 C.B.R. (4th) 149 (Ont. C.A.), this court held at paragraph 9 that:

… Assuming without deciding that s. 63(11) [of the PPSA] applies in this case, the effect of the transfer from Little Bros. to Thru-Way under the repurchase agreement is to transfer to Thru-Way, Little Bros.’ rights and duties under the PPSA. It is only for that purpose that the security interest of Little Bros. is not discharged.

As a result, s. 63(11) does not assist the appellant.

[6] The appeal is therefore dismissed with costs.

Signed: “K. Feldman J.A.”

“K.M. Weiler J.A.”

“Robert J. Sharpe J.A.”