COURT OF APPEAL FOR ONTARIO

CITATION: Correia v. Smith, 2015 ONCA 743

DATE: 20151105

DOCKET: C60185

Feldman, Lauwers and Benotto JJ.A.

BETWEEN

Jose A. Correia a.k.a. Joe E. Correia and 1664478 Ontario Inc.

Applicants (Respondents)

and

Bradly Capen Smith c.o.b.a. Smith Trucking and 6395287 Canada Incorporated c.o.b.a. Canadian Diesel Services

Respondents (Appellant)

Matthew R. Todd, for the appellant 6395287 Canada Incorporated c.o.b.a. Canadian Diesel Services

Kowlasar Misir, for the respondents

Heard: October 26, 2015

On appeal from the order of Justice K. W. Whitaker of the Superior Court of Justice, dated February 10, 2015, noted as 2015 ONSC 915.

ENDORSEMENT

[1] In this application under the Repair and Storage Liens Act, the application judge awarded the respondent damages for breach of a lease agreement and the improper sale of the respondent’s vehicle by the appellant, Canadian Diesel. For the reasons that follow, the appeal is allowed and the application dismissed.

[2] Section 15 of the Act, sets out the obligatory contents of the notice of intention to sell an article that must be given by the lienholder. The Act does not prescribe the form of the notice. The application judge found that Canadian Diesel’s notice was deficient for three reasons: it lacked a statement about redemption; it did not mention to whom payment was to be made required by s. 15(3)(e); and it provided no particulars of the private or public sale required by s. 15(3)(f).

[3] However, in our view, the notice did contain a statement about redemption in the sentence: “Smith Trucking may regain possession of the vehicle upon payment, in certified funds, of the amount of $18,318.77, plus any additional storage charges.” The Act requires that the notice contain a statement of “the name of the person to whom payment may be paid.” The notice was on the letterhead of Canadian Diesel Services, which was the “person to whom payment may be made.” The notice was sent by a named representative of Canadian Diesel. The notice complied with s. 15(3)(e) of the Act.

[4] Section 15(3)(f) of the Act provides that the notice must contain “a statement of the date, time and place of any public sale at which the article is to be sold, or the date after which any private sale of the article is being made.” Canadian Diesel’s notice contained the following:

Should payment of the applicable sum not be received by Canadian Diesel Services within twenty-five (25) days of the date of this letter, we will have no alternative but to offer the vehicle for sale in order to recover the amount owing to us.

[5] The application judge found that the notice was deficient in failing to provide particulars of the private or public sale, but this finding misapprehended the evidence. The notice advised that there would be a private sale after 25 days. This constituted full compliance with the statutory requirement.

[6] The application judge also found that the notice had not been properly served on the respondents: “the applicant never received any notice of the pending sale.” However, the clear evidence is that notice was properly served on the respondent by registered mail, as required by s. 27 of the Act. Although it was returned by Canada Post, the Act deemed notice to have been effective, and counsel for the respondent conceded in argument that the deeming provision of the Act was not rebuttable.

[7] In any event, a representative of Canadian Diesel attended at Mr. Correia’s house, at the very address to which the notice had been sent, and fully informed him of the situation in January 2014, well before the truck was sold in March.

[8] The application judge found, alternatively, that Canadian Diesel had waived the served notice: “after the notices were mailed, the parties entered into a compromise agreement ... by entering into another agreement, CD had waived its right to rely on the notice and taking further action to sell the truck.” In our view, the compromise was not completed, and did not amount to a waiver of the original notice that would compel Canadian Diesel to start the process over again. The evidence is that Mr. Smith (the lessee of the truck) came to Canadian Diesel with cash to pay for the repairs at the compromised value, but the truck would not start and he left with the money. This is not a case like McKenna’s Warehouse and Distribution Centre Inc. v. General Exhibition Corp. (1998) 84 A.C.W.S. (3d) 577, [1998] O.J. No. 5106 (Gen. Div.), where the lienholder entered into an agreement to compromise the amount of the lien, was fully paid, and then attempted to execute on the lien in any event.

[9] The truck sat in the yard from September 2013 to late January 2014 while Canadian Diesel awaited payment. The evidence shows that by that time the truck’s “ECM unit” was no longer operational. The respondents argue that Canadian Diesel had an obligation to keep the truck in good repair and not permit it to deteriorate while in storage, consistent with Canadian Diesel’s duty under s. 28(1) of the Act to “use reasonable care, custody and preservation of the article.” However, there is no authority for the proposition that Canadian Diesel had an obligation to keep the truck operative over the many months that it sat in the yard because the repairs remained unpaid.

[10] The respondent argues that the sale price was too low, since the truck was sold “as is”, when it was no longer operational. The application judge stated only: “I find that the sale of the truck was not commercially reasonable contrary to the Act.” He gave no reasons for this finding.

[11] The evidence is that Canadian Diesel sold the truck for $30,000 on March 10, 2014. The evidence establishes that the sale price was not improvident. The appellant filed two appraisal reports in evidence before the application judge. One set the truck’s estimated value for the unit “as is” in the $30,000 range, and “the retail value with the safety inspection and an E test should be in the $40,000 range.” The second report stated that the value of the unit “in its current non-running condition is at $32,000 plus applicable taxes, and, with bid range values on a running condition Unit with Annual Safety Certificate at $35,000 to $36,000 range, depending on Market Conditions at the time of sale.” The respondents’ evidence was that the truck was eventually offered for sale by Canadian Diesel’s purchaser for $48,000, but there is no evidence regarding the actual sale price or what repairs the purchaser might have made to the truck to ready it for resale.

[12] The respondent argues that the appellant had an obligation to repair the truck before offering it for sale, and relies on an expansive understanding of the “commercially reasonable” standard, citing Melrose v. Halloway Holdings Ltd.(c.o.b. Valiant Mini Storage)(2005), 30 C.C.L.T. (3d) 245, [2005] O.J. No. 102 (S.C.), at para. 37. However, Melrose does not go so far as to oblige a lienholder to effect repairs, and the respondent’s counsel was unable to point to any other authority that stood for that proposition.

[13] In view of the several errors identified above that were made by the application judge, and the fact that this case was argued on an entirely documentary record, this court is in as good a position as the application judge to resolve the issue, and ought to do so under s. 134 of the Courts of Justice Act: Katsigiannis v. Kottick-Katsigiannis(2001), 2001 CanLII 24075 (ON CA), 55 O.R. (3d) 456,[2001] O.J. No. 1598 (C.A.) at paras. 30-31. On this basis, we allow the appeal and dismiss the application with costs. It is unnecessary to address the appellant’s arguments about changes in the draft judgment that went beyond the application judge’s endorsement.

[14] The appellant is entitled to costs in the agreed amount of $6,000, and is also entitled to costs of the original application in the amount of $7,000.

“K. Feldman J.A.”

“P. Lauwers J.A.”

“M.L. Benotto J.A.”