Court of Appeal for Ontario

CITATION: Faithshire Leasing Corporation v. 1589630 Ontario Inc., 2010 ONCA 352

DATE: 20100513

DOCKET: C51152

Before: Cronk, MacFarland and Karakatsanis JJ.A.

BETWEEN

Faithshire Leasing Corporation

Plaintiff (Respondent)

and

1589630 Ontario Inc., Alimuddeen Samad also known as Alimudeen Samad, Michael D. Maragh and VP Tool & Mold Company Limited

Defendants (Appellants)

and

Chumpower Machinery Corp., Pet All Manufacturing Inc. and Harvey Gentles

Third Parties

Counsel:

Roman Baber, for the appellants, 1589630 Ontario Inc. and Alimuddeen Samad

Alistair Riswick, for the respondent

Paul Dollak, for the third parties, Pet All Manufacturing Inc. and Harvey Gentles

Heard and released orally: May 10, 2010

On appeal from the judgment of Justice Thomas A. Bielby of the Superior Court of Justice, dated September 17, 2009.

ENDORSEMENT

[1] The appellants claim that the lease entered into by them with the respondent lessor, Faithshire Leasing Corporation (“Faithshire”), dated April 3, 2007, is illegal and ought not to be enforced because it contravenes s. 2-022 of the Electrical Safety Code (the “Code”), adopted under the version of O. Reg. 164/99 to the Electricity Act, 1998 in force as at the date of the lease. The appellants say that this claim involves an unsettled question of law, namely, whether s. 2-022 of the Code applies to a lease of the type at issue here, thereby giving rise to a genuine issue for trial. Accordingly, the appellants submit, the motion judge erred in law by granting summary judgment in favour of Faithshire. We reject this argument.

[2] The motion judge observed, correctly, that the lease in question is an equipment financing lease. Under its express terms, Faithshire made no representation and gave no warranty in respect of the machine in question, including, in particular, with respect to its operation or fitness for purpose of use. Moreover, under the lease, the appellant lessee accepted a non-recourse provision whereby it agreed that it was precluded from advancing any claim against Faithshire regarding the functioning or performance of the machine. Under the lease, the lessee’s remedies, if any, for defects in the machine lie against the vendor and the manufacturer of the machine.

[3] The appellants do not challenge the motion judge’s interpretation of these terms of the lease. Rather, they contend that, arguably, the lease is void for non-compliance with the Code.

[4] But even assuming that the Code applies to this lease – a proposition about which we make no determination – not every breach of a statute or regulation invalidates a contract for illegality: see CIT Financial Ltd. v. Weber Construction Ltd. (2003), Carswell Sask. 107 (Sask. C.A.). Nothing in O. Reg. 164/99 or the Code purports to invalidate transactions or commercial documents entered into in contravention of s. 2-022 of the Code.

[5] In these circumstances and given the specific provisions of this lease, we agree with Faithshire that no genuine issue for trial arises concerning the enforceability of the lease.

[6] We note that the third parties have raised certain concerns before this court regarding the motion judge’s comments, at para. 55 of his reasons, about the legality of the sale of the machine. These comments were obiter. Moreover, to the extent that the motion judge’s comments may be read as constituting findings by him, the motion judge clarified in his subsequent reasons on the stay motion, dated October 14, 2009, that his comments were not binding “on the third party action”. We agree.

[7] The appeal is therefore dismissed. Faithshire is entitled to its costs of the appeal and of the earlier motions before this court, fixed in the total amount of $7,500, inclusive of disbursements and GST.

[8] The third party respondents also seek their costs of this appeal and of the earlier motions in this court. In our view, their participation in this appeal was of assistance to the court, particularly with respect to the applicable regulatory regime, which was not fully or accurately set out by the appellants or by the main respondent in their materials. The third party respondents are entitled to their costs of the appeal and of the earlier motions in this court, fixed in the total amount of $7,500, inclusive of disbursements and GST.

[9] We further direct, on consent, that the monies held in court at present as security for Faithshire’s costs of the appeal, in the amount of $4,000, be paid out to counsel for Faithshire.

“E.A. Cronk J.A.”

“J. MacFarland J.A.”

“A. Karakatsanis J.A.”