Court of Appeal for Ontario

CITATION: Kamster Enterprises Ltd. v. Capo's Hardware Inc., 2008 ONCA 348

DATE: 20080505

DOCKET: C46243

COURT OF APPEAL FOR ONTARIO

O’CONNOR A.C.J.O., WATT J.A. and HACKLAND J. (ad hoc)

BETWEEN:

KAMSTER ENTERPRISES LTD.

Plaintiff (Respondent)

and

CAPO’S HARDWARE INC. and DOMENIC CAPOBIANCO

Defendants (Appellants)

Stephen R. Dyment for the appellants

James N. Aitchison for the respondent

Heard and orally released: May 1, 2008

On appeal from the judgment of Justice McLean of Superior Court of Justice dated October 17, 2006.

ENDORSEMENT

[1] We agree with the trial judge that the breach of the term in the contract “goods must be free of liens” should be treated as a breach of a warranty and, as such, would permit the appellants to recover damages rather than repudiate the contract.

[2] Section 12(3) of the Sale of Goods Act, R.S.O. 1990, c. 81 states:

Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, or where the contract is for specific goods the property in which has passed to the buyer, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect.

[3] In this case, the appellants accepted the goods and made the original payment for them with the result that property passed to them. In our view, the language of the term in the contract set out in para. 1 above does not indicate an intention to displace the effect of s. 12(3).

[4] Moreover, the actions of the appellants were consistent with an intention to treat the term in the contract as a warranty rather than a condition that would lead to a right of repudiation. The appellants did not search for liens before accepting the goods and making payment. On being notified that there was an outstanding lien, the appellants did not seek to repudiate for a period of two months.

[5] We see no basis to interfere with the trial judge’s conclusion that the appellants were not entitled to repudiate the contract.

[6] At trial, the appellants did not prove any damages arising from the breach of the warranty. As a result, the trial judge ordered the appellants to pay the balance owing for the purchase of the goods.

[7] On appeal, the appellants have filed, without objection from the respondent, a Third Party Notice from the Ministry of Revenue for the Province of Ontario dated 22 November 2007 directed to the appellant, Capo Hardware Inc. The Notice indicates that Seconda Enterprises Ltd. (the vendor’s operating company) is indebted to Her Majesty in the amount of $25,443.73. The Notice directs Capo to deduct any monies payable to Seconda (arguably which would include the monies payable under the judgment below) to Her Majesty.

[8] On argument of this appeal, both counsel agreed that the claim of the Ministry should be resolved before the appellants are required to pay at least a portion of the judgment below. It is agreed that the appellants should not be required to pay in total more than the amount of the judgment.

[9] In order to accomplish the above, we direct that the execution of the judgment below be stayed to the extent of $40,000 until such time as the respondent either obtains a discharge of the claim of the Ministry of Revenue or the Ministry releases or abandons that claim.

[10] Accordingly, the appeal is dismissed subject only to the direction in the preceding paragraph. There will be no order as to costs of the appeal.

“D. O’Connor A.C.J.O.”

“David Watt J.A.”

“Charles T. Hackland J. (ad hoc)”