Tobey v. Loranger, 2020 ONSC 4669

CITATION: Tobey v. Loranger, 2020 ONSC 4669

BARRIE DIVISIONAL COURT FILE NO.: DC-19-724

DATE: 20200731

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

Barbara Ann Tobey and Patrick Forget

Plaintiffs

– and –

Daniel Loranger, cob Dan’s Auto Sales, Pierre Labelle, cob Signature Repairs

Defendants

Adam H. Kanji, for the Plaintiffs/Respondents

Matthew Giesinger, for the Defendant/Appellant, Daniel Loranger, cob Dan’s Auto Sales

HEARD: July 9, 2020

REASONS FOR DECISION

MCKELVEY J.:

Introduction

[1] In early January 2018, the plaintiff, Barbara Tobey, entered into an agreement for the purchase of a 2006 GMC Sierra truck with a used car dealer in Port McNicoll. The vehicle was delivered to the plaintiff on March 2, 2018. Subsequently the plaintiff claimed that the vehicle was defective and alleged that there were three cracks in the frame. When the vendor of the vehicle refused to refund the purchase price or repair the vehicle, she commenced a Small Claims Court action.

[2] The Small Claims Court action was tried on March 8, 2019. The trial judge ordered judgment in Ms. Tobey’s favour in the amount of $3,000 plus costs against both defendants. The defendant Loranger has appealed the judgment against him.

[3] The issues raised on this appeal are as follows:

1. Did the trial judge misapprehend the law regarding the admissibility of hearsay evidence?
2. Did the trial judge misapprehend the evidence regarding defects in the vehicle, specifically by accepting hearsay evidence of cracks in the frame without expert evidence?
3. Did the trial judge err by failing to apply the doctrine of caveat emptor?
4. Did the trial judge inappropriately pierce the corporate veil by holding the defendant Daniel Loranger personally responsible for the plaintiff’s damages?

[4] During the course of argument on this appeal, the appellants’ counsel raised issues with respect to the adequacy of the Reasons of the trial judge. These were not specifically raised as an issue in the Notice of Appeal. I offered an adjournment to the appellant if he wished to pursue this ground of appeal. Counsel however declined the offer for an adjournment and advised that he did not intend to rely on this issue for purposes of this appeal.

[5] For the reasons that follow I have concluded that the appeal should be dismissed.

Appellate Standard of Review

[6] The scope of appellate review is set out in the Supreme Court of Canada decision Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. In that case, the court held that the standard of review on a question of law is that of correctness. However, the standard of review for a finding of fact is much more limited. Findings of fact are not to be reversed unless it can be established that the judge made a “palpable and overriding error”.

[7] In addition, when assessing the reasons of a lower court, the Court of Appeal held in Gholami v. Hospital for Sick Children, [2018] O.J. No. 4973, that even if the reasons of the trial judge do not on their face review what was decided and why, an appellate court is obliged to consider the trial record to determine if the reasons are more comprehensible when read in that context.

[8] Further, as noted by the Court of Appeal in Massoudinia v. Volfson, 2013 ONCA 29, appellate courts recognize that oral reasons cannot ordinarily be as thorough and detailed as written reasons and decisions from Small Claims Court may not always be as thorough and detailed as in Superior Court. Context matters (see Maple Ridge Community Management Ltd. v. Peel Condominium Corporation No. 231, 2015 ONCA 520).

Did the trial judge misapprehend the law regarding the admissibility of hearsay evidence?

[9] The appellant asserts that the trial judge made a palpable and overriding error in finding that there were cracks in the truck frame at the time it was delivered to Ms. Tobey. At trial Ms. Tobey testified that she took the truck to a Midas dealer in Midland on April 13, 2018. She asserted that Midas found a crack in the frame of the truck. However, this was not supported by the documentary evidence that she provided from Midas.

[10] Ms. Tobey also testified that on June 8, 2018, she took the vehicle to a General Motors dealership and reported that this dealership found three cracks in the frame. Photographs of the cracks were introduced as evidence at trial.

[11] The lack of documentary evidence from the Midas inspection was not overlooked by the trial judge in his decision. He states in his decision,

At some point it became a matter of concern for Ms. Tobey that the engine light came on, and she took it to Midas to have them look at the situation. And they had a look at the vehicle on the hoist and made some findings, and the most critical finding that Ms. Tobey says they made was not noted in their reports. They showed her a crack apparently in the frame. And I’m puzzled why that was not noted in their report. If it was so serious and if they let her drive the vehicle away, why – you know – why not note it?

[12] The trial judge was also alive to the dangers of hearsay evidence. In his decision he states,

I have a lot of hearsay, a lot of what Ms. Tobey says they told her, which is very dangerous.

[13] Later he states,

I have some discretion about how much hearsay I am going to take as gospel, and how much hearsay I am going to ignore if that person isn’t here.

[14] Ultimately the trial judge accepts that the cracks were present when the vehicle was bought from Dan’s Auto Sales. In his Judgment he states,

Was there one crack or three cracks when the vehicle was bought from Dan’s Auto Sales? I don’t know. I have no idea. Chances are they were there. Chances are that was just a fact of the vehicle having been used for - I guess from 2006 to 2017 – which is eleven years. That’s common sense. That dictates that.

[15] The wording of the trial judge is not ideal but in context I conclude that he is finding on a balance of probabilities that the cracks in the frame were present at the time the vehicle was delivered to the plaintiff.

[16] Section 27(2) of the Courts of Justice Act specifically provides that the Small Claims Court, “may admit as evidence at a hearing and act upon any oral testimony and any document or other things so long as the evidence is relevant to the subject matter of the proceeding, but the court may exclude anything unduly repetitious.” This supports the conclusion that hearsay evidence is admissible in the Small Claims Court. (See the Divisional Court decision in Central Burner Service Inc. v. Texaco Canada Inc., [1989] O.J. No. 1612). In that case, the court held that the weight to be given to any kind of evidence is for the trial judge to decide. Normally hearsay evidence would be given less weight than direct evidence. However, the evidence is properly admissible and may be relied upon by a trial judge, even on a critical issue.

[17] In the present case, the trial judge was clearly alive to the dangers of hearsay evidence and considered this in determining what weight the evidence should be given. It is not the role of the appellate court to make an independent decision based on a review of a paper transcript. Considerable deference needs to be given to the trial judge. The question is not whether this court would have made the same finding that the trial judge did but rather whether such a finding was one which could reasonably be made by the trial judge in the circumstances. This court must recognize that it was the trial judge who had the benefit of listening to all of the evidence and observing the witnesses prior to make findings of fact.

[18] I would therefore not be prepared to disturb the trial judge’s reliance on the hearsay evidence of the plaintiff in reaching a conclusion that there were serious cracks in the vehicle’s frame at the time of sale. This finding was based on inferences he drew from admissible evidence introduced at trial.

Did the trial judge misapprehend the evidence regarding defects in the vehicle, specifically by accepting hearsay evidence of cracks in the frame without expert evidence?

[19] As noted above I have concluded that the trial judge did not misapprehend the evidence about potential defects in the vehicle nor did he misapprehend the significance of those defects.

[20] In this case, Ms. Tobey testified that when she went to Dan’s Auto Sales on January 4, 2018, Mr. Loranger offered to sell the vehicle to her for $6,500 “as is” or $7,000 certified. She agreed to pay the $7,000 and put a $500 deposit down on the vehicle. It is apparent that the trial judge accepted Ms. Tobey’s evidence that the vehicle was to be certified and he also accepted that the presence of cracks in the frame was a serious safety issue which constituted a breach of the agreement of purchase and sale. The trial judge stated,

And how it got certified is not Ms. Tobey’s problem. It could have been certified by anybody, she didn’t care. She had to rely on Dan’s Auto Sales to do that. If there’s an issue somehow that Dan’s – or that Labelle or his people screwed up, then that’s something between Dan’s Auto Sales and Labelle. It’s got nothing to do with Ms. Tobey. It’s not her problem. It’s Dan’s Auto Sales’ problem.

[21] The trial judge also refers to the evidence of Mr. Loranger who acknowledged in his evidence that with three cracks in the frame the vehicle was not safe to drive.

[22] I therefore conclude that the trial judge did not misapprehend the evidence with respect to the defects in the vehicle and it is apparent that he proceeded on the basis that the three cracks in the frame constituted a serious safety issue which would in turn constitute a breach of the purchase and sale agreement. This latter conclusion was confirmed by the evidence of Mr. Loranger at trial.

Did the trial judge err by failing to apply the doctrine of caveat emptor?

[23] The appellant argues that the doctrine of caveat emptor applies and that if the defects were readily apparent (based on the evidence that they were easily seen by the staff at Midas and the GM dealership), the plaintiff’s failure to inspect the vehicle prior to delivery disentitles her to make a claim. The defence relies upon a decision from the Saskatchewan Small Claims Court in Kinzie v. Manson, [2004] SJ. No. 148. In that decision, the plaintiff had brought an action arising out of the purchase of a motor vehicle in a situation where it was alleged that the odometer had been rolled back by over 150,000 kilometres. At para. 13 of the decision the court states,

Absent the presence of fraud, there is an obligation in common law upon the purchaser of a product to inspect the product before purchasing and so he or she can not be heard to complain about the consequences if defects are not uncovered…. As Frey points out, this principle is commonly referred to as the maxim of caveat emptor or “let the buyer beware”. The principle, however, has no application if the vendor has actively concealed a latent defect because such concealment can amount to fraud, see McGrath v. MacLean (1979), 1979 1691 (ON CA), 95 D.L.R. (3d) 144 (Ont. C.A.) at 150. However, if a latent defect as to quality is not known to the vendor or the vendor has not concealed the defect or if the vendor has not displayed an intent to prevent the defect from being discovered then the purchaser does not have a remedy. Essentially, then, for the purchaser to obtain relief he or she must show, not only that the seller knew of the defect, but that the seller proactively did something that could be seen as an intent on the part of the seller to prevent the defect from being discovered.

[24] The trial judge does not specifically address the issue of caveat emptor in his Reasons. It is not clear to what extent this issue was raised at trial. In any event I have concluded that the maxim of caveat emptor would not have provided a viable defence to the plaintiff’s claim. In the Supreme Court of Canada decision Fraser-Reid v. Droumtsekas, 1979 55 (SCC), [1980] 1 S.C.R. 720, Justice Dickson notes that,

Although the common law doctrine of caveat emptor has long since ceased to play any significant part in the sale of goods, it has lost little of its pristine force in the sale of land.

[25] The reason why the rule of caveat emptor rarely raises a defence in the sale of goods is because of the implied conditions which are usually associated with the sale of goods. As noted by Don J. Manderscheid, Q.C. in his article Caveat Emptor and the Sale of Land: The Erosion of a Doctrine, 2001 Docs 142,

Unlike the sale of goods, in the ordinary course of the buying and selling of land, without an express warranty or contractual provision in the sale agreement, the law will not imply a warranty as to the merchantability of the land for purposes of habitation.

[26] In any event, the doctrine of caveat emptor will not be invoked in the presence of a contractual condition. See for example Matz v. Copley, 2010 ONSC 5565; affirmed by the Court of Appeal at 2011 ONCA 485. As previously noted, the trial judge found a breach of the purchase agreement. This is reflected in his comments that Dan’s Auto Sales had agreed to sell a truck that was “certified” and which turned out to be unroadworthy. He correctly concluded that this was not the plaintiff’s problem, “its Dan’s Auto Sales’ problem”.

[27] The trial judge’s finding in this regard was well supported by the evidence. Ms. Tobey testified that she was offered the vehicle for $6,500 “as is” or $7,000 certified. She elected to pay the additional amount in order to have the vehicle certified. Her evidence in this regard was supported by the bill of sale which was introduced as an exhibit at trial. The bill of sale has a box which will be initialed if the vehicle is sold “as is”. This box was not initialed.

[28] Finally, although not specifically dealt with by the trial judge in his decision it would appear that the plaintiff was entitled to the benefit of implied warranties under section 15 of the Sale of Goods Act, RSO 1990, c. S.1 as referenced by the Supreme Court in the Fraser-Reid decision, supra.

[29] Section 15(1) provides as follows:

15. Subject to this Act and any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:

16. Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description that it is in the course of the seller’s business to supply (whether the seller is the manufacturer or not), there is an implied condition that the goods will be reasonably fit for such purpose, but in the case of a contract for the sale of a specified article under its patent or other trade name there is no implied condition as to its fitness for any particular purpose.

[30] The evidence in this case clearly supports a conclusion that the sale of a second-hand vehicle came within the course of Mr. Loranger’s business, that Ms. Tobey intended to use the car for driving purposes and that Ms. Tobey relied upon Mr. Loranger’s skill and judgment to provide a roadworthy vehicle. This is reflected in her decision not to purchase the vehicle “as is”, but rather “certified”. The findings of the trial judge therefore support a conclusion that section 15(1) of the Sale of Goods Act applied to the sale. There is no issue about the fact that the cracks in the frame made the vehicle unsafe to drive.

[31] For the above reasons, I conclude that there is no basis to set aside the judge’s decision based on the doctrine of caveat emptor.

Did the trial judge err by holding the defendant Daniel Loranger personally responsible for the plaintiff’s damages?

[32] The appellant argues that the trial judge “pierced” the corporate veil without adequate grounds in light of the fact that Dan’s Auto Sales was operated by a corporation. This is reflected in the bill of sale dated March 3, 2018 which identified the name of the dealer as 2195127 ON Ltd. o/a Dan’s Auto Sales. The issue of Mr. Loranger’s personal liability was recognized early on by the trial judge where he addressed Ms. Tobey as follows,

Ms. Tobey, Mr. Loranger in his defence says that the contract that you signed, the bill of sale, is with a numbered company that operates as Dan’s Auto Sales, and that he shouldn’t be personally liable, that its his company that you signed the contract with. Do you have anything to say about that?

[33] Ms. Tobey then responds,

Ms. Tobey: I didn’t know that.

The Court: What didn’t you know?

Ms. Tobey: I thought I was purchasing the truck off him.

The Court: You mean off him personally?

Ms. Tobey: Yes. Its his business. Its his – its his name on the business.

The Court: Well it says a numbered company, 2195127 Ontario, operating as Dan’s Auto Sales.

Ms. Tobey: Well – I don’t understand that.

The Court: Well, what do the signs in the shop say? What do they say?

Ms. Tobey: I didn’t see any – I wasn’t looking for that. I just went to an honest…

The Court: Just a minute. When you drive by, does it say Dan’s Auto Sales or does it say a numbered company operating as Dan’s Auto Sales. What do the signs say?

Ms. Tobey: I don’t look for things like that. I was brought there by my daughter. I only go to a dealership. I have never been to a side of the road dealership. So my daughter introduced me to this company.

[34] The evidence of the daughter was that there was no sign on the building identifying that the business was run through a corporation. Mr. Loranger in his evidence relied on the bill of sale where the corporate identity was identified as well as a sign that he hangs in his office. He agreed, however, that not everyone reads what is hanging in his office.

[35] In holding Mr. Loranger personally liable the trial judge stated,

The next problem is, whatever amount I fix as Dan’s Auto Sales liability, is Mr. Loranger personally liable, because he says that he operates as a limited company, carrying on business as Dan’s Auto Sales? In my opinion, I am not satisfied that he has done everything possible to make it known to the public that he is carrying on business via a corporation. It’s rarely the case in these situations where people know “Oh I know, its numbered 12345678, carrying on business as Dan’s Auto Sales”. That’s not the way it works. It may work that way for tax purposes, when you are dealing with your accountant and all of that, but unless its really made clear that you are a corporation, most people in this kind of a situation would not know it. So I have every reason to believe that Ms. Tobey assumed she was dealing with an individual. So I do not find that defence to be helpful.

[36] In the Ontario Court of Appeal decision in Total Crane Erectors Ltd. v. Fontana, 2007 ONCA 121, the trial judge found a contractor personally liable. In upholding that decision, the Court of Appeal stated,

In our view there is no basis to interfere. The law is clear. If a party is contracting for another and does not make it clear to the person with whom he is contracting that he is contracting in the capacity of an agent, he will be personally liable. There is no conflict in the legal authorities.

[37] In my view, the Reasons of the trial judge make it clear that he correctly understood the legal principles to be applied. If a party expects to benefit from the protection of limited corporate liability then others must be informed in a reasonable manner that they are dealing with a corporation and not an individual (see also Dhillon v. Stewart, 2018 ONSC 4004 at para. 14). Having correctly understood the applicable law, the trial judge’s application of the facts to the law is entitled to deference (See para. 37 of the Housen decision, supra).

[38] In the present case, the agreement to purchase the vehicle occurred in January and the bill of sale was not delivered to the plaintiff until March when the vehicle was delivered and after two payments totaling $4,500 were made by the plaintiffs. The plaintiff testified that she did not know that she was dealing with a corporation and the trial judge found that Ms. Tobey reasonably believed that she was dealing with an individual. The trial judge also found that Mr. Loranger did not take all reasonable steps to advise his customers that he was acting as agent for a corporation. There was evidence to support his finding in this regard.

[39] It is apparent that the trial judge considered the totality of the evidence including the bill of sale which identified the incorporation of the defendant’s business. His finding that the defendant did not make it clear to the plaintiff that he was acting as agent for a corporation and that Ms. Tobey thought she was dealing with an individual are entitled to deference. I therefore conclude that there is no basis to interfere with his conclusion that Mr. Loranger is personally liable to the plaintiffs.

Conclusion

[40] For the above reasons, the appellant’s appeal is dismissed. At the commencement of the appeal the parties agreed that the costs of the appeal should properly be assessed at the sum of $1,000. I therefore order that the costs of the appeal be paid by the appellant to the respondent within 30 days.

Justice M. McKelvey

Released: July 31, 2020

CITATION: Tobey v. Loranger, 2020 ONSC 4669

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Barbara Ann Tobey and Patrick Forget

Plaintiffs/Respondents

– and –

Daniel Loranger, cob Dan’s Auto Sales, Pierre Labelle, cob Signature Repairs

Defendants/Appellants

REASONS FOR DECISION

Justice M. McKelvey

Released: July 31, 2020