Hamilton et al. v. 1262108 Ontario Inc. operating as Metrowide Auto Centre [Indexed as: Hamilton v. 1262108 Ontario Inc.]

55 O.R. (3d) 19

[2001] O.J. No. 2626

Docket No. C34197

Court of Appeal for Ontario

Morden, Goudge and Feldman JJ.A.

July 3, 2001

Personal property security--Repairer's Lien--Repair and Storage Liens Act providing mutually exclusive alternative procedures for determination of propriety and amount of lien claim and for release of goods--Repair and Storage Liens Act, R.S.O. 1990, c. R.25, ss. 23, 24.

The automobiles owned by the applicants were involved in accidents and the vehicles were towed to the premises of the respondent, which operated an automobile repair shop. Subsequently, the respondent refused to release the vehicles unless its charges, including an administrative fee and an estimate fee, were paid. After the applicants' insurance companies objected to the charges and refused to pay them, the applicants brought an application under s. 23 of the Repair and Storage Liens Act for a determination of the propriety and amount of the respondent's lien and for release of the vehicles. The application judge treated the application as one brought under s. 24 of the Act and dismissed the application because the procedure under s. 24 requires payment into court of the amount of the lien and this had not been done. The applicants appealed.

Held, the appeal should be allowed.

On its plain reading, s. 23 allows any person to apply for a determination of a list of issues and gives the court the authority to make such order as it considers necessary to give effect to those rights. There was no bar to the applicants applying under s. 23 of the Act for the relief sought in the notice of application. Section 24 provides an alternative procedure for an owner and allows an owner an expeditious method of obtaining release of the goods under lien upon payment into court of all or part of the amount claimed. The applicants were entitled to proceed under s. 23 and, accordingly, the appeal should be allowed.

APPEAL dismissing an application under s. 23 of the Repair and Storage Liens Act, R.S.O. 1990, c. R.25.

Statutes referred to Red Tape Reduction Act, 2000, S.O. 2000, c. 26, Sched. B, s. 18(2) Repair and Storage Liens Act, R.S.O. 1990, c. R.25, ss. 23, 24 [as am.], 25

Dena Oberman, for appellants. Diana M. Edmonds, for respondent.

[1] FELDMAN J.A.:-- The single issue in this case is the proper procedure to be used under the Repair and Storage Liens Act, R.S.O. 1990, c. R.25, as amended, by an owner of goods to obtain a determination by the court of the propriety and amount of a claimed lien and release of the goods. In particular, where a person holds goods and claims a lien, is the owner of the goods obliged to use the procedure set out in s. 24 of the Act, which requires payment into court of the claimed amount of the lien, or may the owner resort to s. 23(1)(d) of the Act, which does not require as a precondition any payment into court?

[2] Part IV of the Act, Dispute Resolution, contains three sections, ss. 23, 24 and 25, which provided: [See Note 1 at end of document]

23(1) Any person may apply to a court for a determination of the rights of the parties where a question arises with respect to,

(a) the seizure of an article under Part II (Non- possessory Liens) or any right of seizure in respect of an article;

(b) the sale of an article under Part III (Redemption, Sale or Other Disposition);

(c) the distribution of the proceeds of the sale of an article under Part III, including the right of any person to share in those proceeds, and the obligation of any lien claimant to account for those proceeds;

(d) the amount of a lien or the right of any person to a lien; and

(e) any other matter arising out of the application of this Act,

and the court may make such order as it considers necessary to give effect to those rights.

(2) An application shall not be made under clause (1)(d) where an application has been made under section 24.

24(1) Where a lien is claimed under Part I (Possessory Liens) and the lien claimant refuses to surrender possession of the article to its owner or any other person entitled to it, and there is,

(a) a dispute concerning the amount of the lien of the lien claimant including any question relating to the quality of the repair, storage or storage and repair;

(b) in the case of a repair, a dispute concerning the amount of work that was authorized to be made to the article; or

(c) a dispute concerning the right of the lien claimant to retain possession of the article,

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.

(2) The lien claimant shall be named as the respondent in the application.

(3) The application shall be in the required form and may include an offer of settlement. [as am. S.O. 1998, c. 18, Sched. E., s. 266(1)]

(4) The applicant shall pay into court, or deposit security with the court in the amount of, the full amount claimed by the respondent but where the applicant includes an offer of settlement in the application, the applicant shall pay into court the amount offered in settlement and shall pay into court, or deposit security with the court for, the balance of the full amount claimed by the respondent and payments and deposits under this subsection shall be made to the credit of the application.

(5) Where money is paid into court or a deposit is made with the court under subsection (4), the clerk or registrar of the court shall issue an initial certificate in the required form and under the seal of the court stating that the amount indicated therein, or security therefor, has been paid into or posted with the court to the credit of the application, and where applicable, indicating the portion of that amount that is offered in settlement of the dispute. [as am. S.O. 1998, c. 18, Sched. E., s. 266(2)]

(6) The applicant shall give the initial certificate to the respondent who, within three days of receiving the initial certificate, shall release the article described therein to the applicant unless, within the three day period, the respondent files with the court a notice of objection in the required form. [as am. S.O. 1998, c. 18, Sched. E., s. 266(3)]

(7) Where an objection has been filed with the court, the applicant may pay into court or post security with the court, to the credit of the application, the additional amount claimed as owing in the objection, and where the additional amount has been paid into court or the additional security has been posted, the clerk or registrar shall issue a final certificate in the required form and under the seal of the court. [as am. S.O. 1998, c. 18, Sched. E., s. 266(4)]

(8) The applicant shall give the final certificate to the respondent who, upon receiving the final certificate, shall release immediately the article described therein.

(9) Where the respondent does not release the article as required, the applicant may obtain from the clerk or registrar of the court, without notice to the respondent, a writ of seizure directing the sheriff or bailiff to seize the article and, upon receipt of the writ, the sheriff or bailiff shall seize the article and return it to the applicant.

(10) Before obtaining a writ of seizure, the applicant shall file an affidavit with the clerk or registrar of the court confirming that the respondent has not released the article as required.

(11) Where the respondent releases the article to the applicant in compliance with an initial or final certificate, or where the article is seized by a sheriff or bailiff under a writ of seizure, the respondent may demand a receipt in the required form to this effect, and upon presentation of the receipt to the clerk or registrar of the court and signing a waiver of further claim in the required form, the respondent shall be paid the portion of the amount paid into court that was offered in settlement of the dispute. [as am. S.O. 1998, c. 18, Sched. E., s. 266(5)]

(12) Where the respondent accepts the amount offered in settlement of the dispute, the clerk or registrar of the court shall notify the applicant and upon request shall return to the applicant the balance of the amount deposited into court and deliver up any security deposited by the applicant for cancellation.

(13) Where the article is released to the applicant by the respondent or is seized by the sheriff or bailiff under subsection (9), the lien is discharged as a right against the article and becomes instead a charge upon the amount paid into court or the security posted with the court, and where the respondent seeks to recover the full amount claimed by the respondent to be owing, the respondent may commence an action to recover that amount.

(14) The charge upon the money paid into court or the security posted with the court is discharged ninety days after the article was returned to the applicant or seized unless, before the end of the ninety days, the respondent has accepted the applicant's offer of settlement or has commenced an action to recover the amount claimed.

(15) Upon the expiry of the ninety days referred to in subsection (14), the clerk or registrar of the court may return to the applicant the money paid into court and deliver up for cancellation any security posted with the court if the applicant files with the clerk or registrar an affidavit confirming that the respondent has neither accepted an offer of settlement nor commenced an action to recover the money claimed.

(16) The respondent is liable for the costs of enforcing a writ of seizure and these costs shall be set off against the amount paid into court under this section.

25. An application under this Part may be brought in any court of appropriate monetary jurisdiction.

[3] The facts of this case were explored in some detail in the pre-hearing proceedings, but the details became superfluous when the application judge decided that the applicants had proceeded under the wrong section.

[4] This case arises out of a dispute between the respondent, Metrowide Auto Centre, an automobile repair shop, and Co- operators General Insurance Company or its affiliate, Echelon General Insurance Company, the insurers of the appellants, the applicant car owners, over certain charges, including an administration fee and an estimate fee, which the respondent routinely adds for cars brought in for estimate and repair after an accident, where the charges are being paid by an insurance company. The insurance companies objected to the charges and refused to pay them. The issue they want determined is the legitimacy of these charges.

[5] The automobile of each of the applicants was involved in an accident. With the exception of the Hamilton vehicle, a 2000 Mercedes Benz, each of the vehicles was deemed a total loss. Each vehicle was towed to the respondent's garage after the accidents. When the insurance companies requested release of the vehicles, the respondent refused unless certain payments were made for all of the cars insured by Co-operators (or its affiliate) of several thousand dollars, although the cars were all write-offs. No invoice was provided in respect of any of these charges.

[6] The appellants brought this application under s. 23 of the Repair and Storage Liens Act on January 7, 2000, returnable January 13, 2000, for determination of the propriety and amount of the liens claimed and for release of the vehicles. The respondent then prepared and forwarded invoices in respect of the vehicles after receipt of the notice of application. The invoices were calculated on January 11 to include daily storage charges up to that date.

[7] The application was heard on April 7, 2000. Although the notice of application states that the application was brought under s. 23 of the Act, the application judge stated that "the applicants claim under s. 24 of the Repair and Storage Liens Act." He noted that s. 24(4) requires an applicant who disputes the lien claim or its amount to pay the lien amount into court, but that the applicants had not done so. The applicants had argued that they were not in a position to pay the lien amounts into court before launching the application because they had no invoices at that time. The application judge found that by the time of the hearing, the applicants had had the information for three months and could and should have paid monies into court before the hearing date. He held that the court could not consider the legitimacy of the liens or their quantities "until the precondition of payment into court has been satisfied". Finally, he stated that the applicants could still proceed to make the payment into court and obtain possession of the vehicles "without prejudice to their right to move under s. 24 to challenge the liens or their amounts".

Analysis

[8] The effect of the application judge's disposition in this case was to treat the application as one brought under s. 24 rather than s. 23 of the Repair and Storage Liens Act. The respondent contends that the application judge was correct in treating the application in this way, because an owner cannot be allowed to avoid the procedure set out in s. 24 of the Act, which requires payment of the amount of the lien into court and obtaining release of the liened goods before an applicant is entitled to a determination of the rights to the lien and its amount. The respondent submits that this is the scheme of the Act and that an owner is not entitled to resort to s. 23 of the Act in order to obtain both that determination and then release of the goods, without first making the payment into court.

[9] With respect to the application judge, I do not agree with this submission.

[10] First, on a plain reading of the sections, s. 23 allows any person access to the court for a determination of a list of issues set out in subsections (a) through (e) respecting "the rights of the parties", and gives the court the authority to "make such order as it considers necessary to give effect to those rights". Such an order would include an order for release of the liened goods upon payment of the amount of the lien as determined by the court.

[11] The only restriction provided in s. 23 is in subsection (2), which prohibits an application under subsection (1)(d) "where an application has been made under s. 24". In this case, no application was made under s. 24.

[12] Therefore, on a plain reading, there is no bar to the applicants applying under s. 23 of the Act for the relief sought in the notice of application.

[13] Second, s. 24 provides an alternate procedure which is optional for an owner and allows an owner an expeditious and speedy method of obtaining release of the liened goods upon payment into court of all or part of the amount claimed without appearing in court for a hearing. Once the money has been paid into court and the goods have been obtained from the lien claimant, it is the lien claimant, and not the owner, who then must initiate an action under s. 24(13) in order to obtain payment out of court of the disputed portion (which may be all) of the amount of the lien.

[14] Under s. 24, an owner of an article "may apply to the court". The section is not mandatory. The owner may pay into court a settlement amount, which the lien claimant may accept in full satisfaction of the lien. If the lien claimant does not accept the settlement amount, then, in order to obtain release of the goods, the owner must pay into court the balance of the amount claimed for the lien, and is then entitled to release of the goods. The lien claimant may then obtain the settlement amount out of court. If the lien claimant wishes to pursue the balance, or, if there is no settlement amount, the entire amount paid into court, the lien becomes a charge on the amount in court, and the lien claimant has 90 days in which to commence an action to recover that amount.

[15] In my view, it is clear that the Act provides two exclusive procedures for access to the court to obtain a determination of the lien rights of affected parties. Section 23 may be used by "any person" including the owner of goods or the lien claimant. Section 24 is available initially only to the owner (or other person lawfully entitled to the article) if the owner wishes to obtain the article back quickly and is prepared to pay the claimed amount of the lien into court.

[16] By using s. 23(1)(d), the lien remains a charge on the goods and the owner will not be able to obtain the goods back until after the court has determined the issues. When s. 24 is used, the lien is transferred from the goods to the funds paid into court, the owner obtains the goods back quickly and the court determines the rights of the parties to the funds in court.

Conclusion

[17] The appellants were entitled to proceed under s. 23(1) (d) of the Act. I would allow the appeal with costs, set aside the order and remit the application to the Superior Court for the hearing of the application on the merits as required by that subsection.

Order accordingly.

Notes

Note 1: Section 24 of the Act was amended by the Red Tape Reduction Act, 2000, S.O. 2000, c. 26, Schedule B, s. 18(2) which came into force on December 6, 2000. Subsections 24(1), (1.1), (1.2) and (2) now read as follows:

24.(1) Where a claimant claims a lien against an article under Part 1 (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.

(1.1) Where a claimant claims a lien against an article under Part II (Non-possessory Liens), where the person who has possession of the article refuses to surrender it 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.

(1.2) Subsection (1) or (1.1) applies if there is,

(a) a dispute concerning the amount of the lien of the lien claimant including any question relating to the quality of the repair, storage or storage and repair;

(b) in the case of a repair, a dispute concerning the amount of work that was authorized to be made to the article; or

(c) a dispute concerning the right of the lien claimant to retain possession of the article.

(2) The application shall name, as the respondents, the lien claimant and, in the case of a non-possessory lien, the person who has possession of the article.