Court of Appeal for Ontario

Citation: Resin Systems Inc. v. Global Composite Manufacturing Inc., 2009 ONCA 417 Date: 2009-05-20 Docket: C49819

Between:

Resin Systems Inc. Applicant (Respondent on Appeal)

and

Global Composite Manufacturing Inc. Respondent (Appellant on Appeal)

Before: Weiler, Gillese and Epstein JJ.A.

Counsel: Heath P.L. Whiteley, for the appellant Ian C. Wallace, for the respondent

Heard and released orally: May 8, 2009

On appeal from the judgment of Justice C. Campbell of the Superior Court of Justice dated December 12, 2008.

ENDORSEMENT

[1] Global Vehicle Systems (“GVS”) appeals from the Order of C. Campbell J. in which the motion judge declared that a lien GVS had registered against equipment owned by Resin Systems Inc. is invalid and of no force or effect.

[2] Resin had entered into a manufacturing and licensing agreement (the “MLA”) with Global Composite Manufacturing Inc. (“GCM”) under which Resin leased certain equipment to GCM. The agreement provided that GCM would carry out certain improvements to the equipment and that Resin would continue to own it. Article 11.5 of an amended version of the MLA expressly stated that GCM would not incur or permit to exist any lien, levy, seizure, attachment, encumbrance or judicial process on or with respect to the equipment, except with Resin’s prior written consent.

[3] Subsequently, GCM entered into an agreement with GVS, without notice to Resin, regarding certain improvements to the equipment and purportedly conferring lien rights in the equipment in favour of GVS. GVS then asserted lien rights against the equipment and registered those rights under the Repair and Storage Liens Act. GCM then went into receivership.

[4] It was the receiver’s motion for an order declaring the GVS lien to be of no force or effect that was before the motion judge.

[5] The motion proceeded on the basis of certain concessions. GVS conceded that it was related to GCM and that the two companies had, to some extent, the same directing minds. As such, GVS knew that:

(1) the further amended and restated MLA prohibited the GVS lien except with the prior written consent of Resin; and

(2) the prior written consent of Resin to the GVS lien had not been sought, let alone obtained.

[6] The essence of the motion judge’s reasoning in declaring the lien to be invalid was that GVS was attempting to assert a lien against Resin’s equipment, when GCM, a party related to GVS, engaged by Resin to improve the equipment, expressly agreed in writing that no such lien would be created absent Resin’s written consent. In effect, GVS was attempting to obtain indirectly that which was specifically prohibited pursuant to the MLA.

[7] GVS’s arguments in this appeal, in essence, are as follows:

(1) The motion judge erred in finding that GVS’s know-ledge of article 11.5 of the MLA was relevant to the validity of the lien;

(2) Resin consented to the existence of a lien; and

(3) Article 11.5 of the MLA was not intended to apply to liens under the RSLA.

[8] With respect to argument number one, on the record before him and GVS’s concessions as noted above, it was open to the motion judge to find that GVS knew and approved of the MLA improvement prohibition against permitting a lien to arise absent Resin’s prior written consent. We note that s. 3(1) of the RSLA expressly recognizes that a written agreement can preclude the existence of a lien.

[9] With respect to argument number two, in our view, the provisions upon which GVS relies in support of its argument that Resin gave written consent do not bear that construction. For example, the fact that Resin accepted that GVS would perform work on the equipment is not tantamount to consenting to GVS’s having a lien over the equipment.

[10] With respect to argument number three, we note that the plain wording of article 11.5 clearly includes liens of all types. Put another way, there is nothing in the wording of that article to suggest that the parties to the MLA intended that liens under the RSLA would be precluded.

[11] For these reasons, the appeal will be dismissed. As agreed by counsel, costs of the appeal are awarded to Resin in the amount of $4,500, inclusive of disbursements and GST.

“K.M. Weiler J.A.”

“E.E. Gillese J.A.”

“G.J. Epstein J.A.”