PENNY J.

Overview

[1] This is an appeal from the decision of Cavanagh J. following a summary trial. The dispute involved a priority dispute between a garage, Toronto Motorsport, which allegedly performed repairs to and stored a Ferrari automobile, and the owner of the vehicle, Landmark. The trial judge found that Toronto Motorsport was entitled to payment of a lien claim for repairs to the Ferrari, from monies paid into Court, in the amount of $30,358.06. The trial judge dismissed Toronto Motorsport’s claim for storage fees in the amount of $6,012.

[2] Landmark appeals from the findings of the trial judge on the repair claim. There is no appeal from the trial judge’s dismissal of the storage claim.

Background

[3] Landmark owned a 2006 Ferrari which was leased to Orion. Orion’s owner and principal, Mr. Mammoliti, was the driver of the vehicle. Mammoliti had the Ferrari towed to Toronto Motorsport’s shop on May 20, 2016. Toronto Motorsport claimed to have made repairs in the amount of $30,358.06 and incurred storage fees totalling $10, 881.90 (later reduced to $6,012). It retained possession of the Ferrari pending payment of these fees and charges.

[4] However, on August 29, 2016, the Commercial List, on the motion of the Royal Bank of Canada, a creditor of Orion, made an order appointing a Receiver over Orion’s affairs. Then, on October 11, 2016, the Commercial List heard a motion by the Receiver for, among other things, an order requiring Toronto Motorsport to deliver up the Ferrari to the Receiver. That motion was on notice to Toronto Motorsport. Mr. Bieri, the principal of Toronto Motorsport, attended before Hainey J. on that day. Hainey J. unconditionally ordered Toronto Motorsport and Bieri to deliver the Ferrari to the Receiver forthwith. That was done.

[5] Only after giving up possession of the Ferrari did Toronto Motorsport then registered lien claims under the RSLA in the amount of its repair and storage claims. Landmark obtained possession of the Ferrari from the Receiver after paying certain expenses the Receiver had incurred. Landmark then successfully applied to pay the amounts claimed under Toronto Motorsport’s liens into Court so that it could deal with the Ferrari free and clear. Toronto Motorsport then commenced this action to recover its claims for repairs and storage fees by way of an order for payment of the amounts deposited with the Court.

[6] The matter proceeded as a summary trial.

Decision Below

[7] The trial judge articulated the issues for resolution as follows:

(a) Did Toronto Motorsport have non-possessory liens under the RSLA against the Ferrari for amounts equal to the fair value of the repair and the fair value of the storage (determined in accordance with the applicable regulations) which became charges for such amounts upon payment of the amounts of $30,358.06 and $6,012 into court?

(b) Was Toronto Motorsport required to comply with sections 56 and 57, subsection 58(1) and section 59 of the Consumer Protection Act, 2002 and, if so, did it fail to comply with these provisions such that, under s. 3(2) and s. 4(3) of the RSLA no repairer’s or storer’s lien arose? and

(i) Has Toronto Motorsport discharged its onus of showing the fair value of the repair of the Ferrari, determined in accordance with the applicable regulations and, if so, what is the fair value? and

(ii) Has Toronto Motorsport discharged its onus of showing the fair value of the storage of the Ferrari, determined in accordance with the applicable regulations and, if so, what is the fair value?

Did Toronto Motorsport have non-possessory liens against the Ferrari which became charges upon the amounts paid into court as a result of Landmark’s applications under s. 24(1.1) of the RSLA?

[8] The trial judge held that Toronto Motorsport had valid possessory liens for repair and storage under ss. 3 and 4 of the RSLA while the Ferrari was in its possession. Upon surrender of the Ferrari to the Receiver, however, Toronto Motorsport’s possessory lien came to an end. Thereafter, Toronto Motorsport had a nonpossessory lien under s. 7 of the RSLA. However, under s. 7(5), a nonpossessory lien is enforceable only if the lien claimant obtains a signed acknowledgement of the indebtedness. The trial judge found as a fact that Toronto Motorsport obtained no such acknowledgement from Mammoliti, Orion, Landmark or the Receiver. As a result, he found that Toronto Motorsport’s nonpossessory lien was not enforceable against the parties or anyone else, including Landmark.

[9] Landmark, the trial judge also found, did not contract with Toronto Motorsport for repair or storage of the Ferrari. Landmark was a third party for purposes of s. 10(1) of the RSLA. Even if Toronto Motorsport had obtained a signed acknowledgment of the indebtedness, unless Toronto Motorsport registered claims for lien under the RSLA, its non-possessory liens were unenforceable against Landmark. Toronto Motorsport was not permitted to register claims for lien because of s. 10(2) of the RSLA, which provides that a claim for lien may be registered at any time after an acknowledgement of indebtedness has been signed. Because no acknowledgement of the indebtedness owed to Toronto Motorsport had been signed or was ever signed, Toronto Motorsport was not permitted to register claims for liens under the RSLA.

[10] Notwithstanding that it was not permitted to do so under the RSLA, on September 8, 2016, Toronto Motorsport registered a claim for lien under Part II of the RSLA in the amount of $30,000 in respect of its repair lien. On January 30, 2017, Toronto Motorsport registered a separate claim for lien in the amount of $4,500 in respect of its storage lien. The trial judge held that registrations of these lien claims were ineffective and did not make Toronto Motorsport’s non-possessory liens enforceable against Landmark or anyone else.

[11] What is crucial to the main issue on this appeal, however, is that, having made these findings, the trial judge went on. He observed that Toronto Motorsport’s registrations, although invalid, were “apparent obstacles” to Landmark’s ability to sell the Ferrari. The trial judge further observed that Landmark could have applied under s. 23(1) of the RSLA for an order discharging the impermissibly made registrations. Instead, however, Landmark applied under s. 24(1.1) of the RSLA. Section 24(1.1) applies where the person who has possession of an article refuses to surrender it to its owner. The trial judge noted that, by this stage, Landmark was already in possession of the Ferrari. Thus, the first precondition to the application of s. 24(1.1) was not met. Further, the direction in the initial certificates (issued under s. 24(6)) requiring Toronto Motorsport to release the Ferrari to Landmark) was unnecessary.

[12] Nevertheless, in order to “clear the title”, Landmark proceeded to pay into Court $30,358.06 in respect of Toronto Motorsport’s repair claim and $6,102 in respect of Toronto Motorsport’s storage claim. The trial judge reasoned that, until Landmark paid the amounts into court, Toronto Motorsport continued to have nonpossessory liens (albeit unenforceable) against the Ferrari because none of the circumstances identified in s. 12(1) of the RSLA, the occurrence of which results in the discharge of a non-possessory lien, had yet taken place. Section 12(1)(b) of the RSLA provides that a non-possessory lien is discharged and cannot be revived as an interest in the article upon payment into court, under Part IV, of the amount set out in the claim for lien.

[13] Section 24(13) of the RSLA provides that where the amounts claimed are paid into Court and the article is released to the applicant, the lien is discharged against the article and instead becomes a charge upon the amount paid into Court. Thus, the trial held that upon Landmark’s payments being made into Court (given that it already had possession), each non-possessory lien was discharged as of right against the Ferrari and these liens became charges upon the amounts paid into court. Under s. 24(13), Toronto Motorsport, the lien claimant, became entitled to commence an action to recover the amounts claimed to be owing from the amount paid into Court. In other words, the trial judge held that under s. 24 of the RSLA, upon the payments by Landmark into Court, Toronto Motorsport’s unenforceable non-possessory liens were discharged against the Ferrari and became enforceable charges upon the amounts paid into Court.

Did Toronto Motorsport have obligations under the Consumer Protection Act, 2002?

[14] The trial judge found on the evidence that: a) the Ferrari was leased to Orion; b) Mammoliti was the president of Orion; and c) Mammoliti did not personally own or lease the Ferrari. The trial judge inferred, therefore, that when Mammoliti approached Toronto Motorsports to undertake repairs to the Ferrari, he was acting as president of Orion, not in a personal capacity. The trial judge therefore concluded that the repair and storage of the Ferrari did not involve a consumer transaction. As such, the Consumer Protection Act, 2002 did not apply.

Did Toronto Motorsport charge fair value for the repairs and storage?

[15] There was conflicting evidence about what repairs were performed and the fair value of those repairs. The trial judge applied the relevant statutory (s. 3(1) of the RSLA) and regulatory (s. 1, O. Reg. 427/51) provisions in assessing this evidence. He accepted the evidence of Toronto Motorsport and concluded, on the basis of his assessment of the evidence, that the fair value of the repairs performed by Toronto Motorsport was $30,358.06. He therefore allowed the Toronto Motorsport claim for repairs in that amount.

[16] The trial judge was not satisfied, applying the relevant statutory and regulatory provisions, that the amount sought for storage fees represented fair value. He dismissed Toronto Motorsport’s claim for storage charges.

Analysis

Jurisdiction

[17] An appeal lies to the Divisional Court from a final order of a judge of the Superior Court of Justice, where the order involves a single payment of not more than $50,000, exclusive of costs: Courts of Justice Act, s. 19.

Standard of Review

[18] The standard of review on appeal is set out in Housen v. Nikolaisen, 2002 SCC 33. The standard of review on a question of law is correctness. The standard of review on a question of fact is palpable and overriding error. For questions of mixed fact and law, the standard of review is also palpable and overriding error unless there is an extricable question of law; in such a case the standard of review on that extricable question is correctness.

Issues on Appeal

[19] There are two basic issues raised on this appeal:

(1) Did the trial judge err in finding that Landmark’s payment of the amount of Toronto Motorsport’s claim into Court enabled Toronto Motorsport to effectively enforce what was otherwise an invalid, non-enforceable, nonpossessory lien; and

(2) Did the trial judge err in concluding that Toronto Motorsport had proved on a balance of probabilities that its repair charges constituted “fair value” in accordance with s. 3(1) of the RSLA and s. 1 of O. Reg. 427/51?

[20] During oral argument, the panel enquired about the effect of the Commercial List order in the receivership (requiring Toronto Motorsport to surrender possession of the property) on the repairer’s rights under the RSLA. We asked, in particular, for the motion record that was filed by the Receiver which gave rise to the October 11, 2016 order and for submissions on the use, if any, that might be made of this material.

[21] Following argument, counsel produced the requested motion record. Counsel for Landmark, however, strenuously objected to any use being made of this information, or any pursuit of arguments relating to how Toronto Motorsport could preserve its lien in the face of the unique event, in this case, of a Court order requiring surrender of the property to the Receiver.

[22] Having considered Landmark’s arguments, I agree that no use should be made of this material and no consideration should be given to any arguments that might be made about the effect of the order in the receivership on Toronto Motorsport’s rights under the RSLA. The Receiver’s motion was not placed in evidence at the trial and no submissions were ever made, at trial or on appeal, about this issue. In the circumstances, we shall not give any consideration to the “new” material filed at our request and make no findings or determinations in relation to that material or any arguments that might have arisen in relation to it.

[23] I shall now turn to the two central issues on appeal.

1. Whether Toronto Motorsport’s Non-enforceable, Nonpossessory Lien for Repairs Became a Charge on The Money Paid Into Court

[24] In my view, the trial judge erred in concluding that, even though Toronto Motorsport had improperly registered an unenforceable, nonpossessory lien, it nevertheless had a valid claim under s. 24 once Landmark paid the disputed claim into Court.

[25] The Trial Judge made the following findings which are not challenged by either party on appeal:

(a) Toronto Motorsport did not have a signed acknowledgement of the indebtedness which is an essential precondition to a nonpossessory lien;

(b) Toronto Motorsport did not comply with s. 7(5) of the RSLA;

(d) Toronto Motorsport’s lack of a signed acknowledgment of indebtedness meant that it was not permitted to register its non-possessory liens under s. 10(2) of the RSLA;

(e) Toronto Motorsport’s impermissible registration of the liens did not make its non-possessory liens enforceable against Landmark or any other party; and

(f) Toronto Motorsport’s impermissible registration of the liens nevertheless resulted in an apparent impediment to any potential sale of the Ferrari by Landmark.

[26] These findings and conclusions were consistent with the evidence and, in my view, correct. None are in issue on this appeal.

[27] The heart of the trial judge’s reasons for granting Toronto Motorsport’s claim, in the face of these conclusions, lies in s. 24(13) which provides, in relevant part:

Where the article is released to the applicant by the respondent .... the lien is discharged as a right against the article and becomes instead a charge upon the amount paid into court … and where the respondent seeks

to recover the full amount claimed by the respondent to be owing, the

respondent may commence an action to recover that amount.

[28] It was on this basis, and this basis alone, that the trial judge held that, upon payment by Landmark into Court of the amount of the disputed lien claims, Toronto Motorsport’s unenforceable, improperly registered, non-possessory liens were discharged against the Ferrari and became enforceable charges upon the amounts paid into Court.

[29] The error in the interpretation of s. 24(13), and in the trial judge’s logic on this essential point, is that s. 24(13) has no application to an invalid, improperly registered lien. The payment of money into Court in substitution for the article (in this case, the Ferrari) cannot turn an invalid lien claim into a valid one.

[30] Section 24(1.1) provides that:

Where a claimant claims a lien against an article under Part II (Non-

Possessory Liens), where the person who has possession of the article refuses

to surrender it to its owner or any other person entitled to it and where one of

the circumstances described in subsection (1.2) exists, the owner or other

person lawfully entitled to the article may apply to the court in accordance

with the procedure set out in this section to have the dispute resolved and the

article returned.

[31] Section 24(1.2) provides that subsection (1.1) applies if there is:

(a) a dispute concerning the amount of the lien of the lien claimant including any question relating to the quality of the repair, storage or storage and repair;

(b) in the case of a repair, a dispute concerning the amount of work that was authorized to be made to the article; or

[32] Section 24(1.1) does not apply to the circumstances of this case for two reasons. First, as noted by the trial judge, an essential precondition to its application was absent – Landmark was already in possession of the Ferrari. Second, none of the circumstances set out in subsection (1.2) applied, in the sense that the threshold issue for determination was not the amount of the lien claim, the amount of the work authorized or the right to possession but whether there were any valid and enforceable lien claims at all.

[33] This distinction is made clear by the language of s. 23, which provides, in contrast to the language of s. 24, that any person may apply to a court for determination of the rights of the parties where a question arises with respect to, among other things, the amount of a lien or the right of any person to a lien or any other matter arising out of the application of the RSLA.

[34] In determining that Toronto Motorsport’s unenforceable, non-possessory lien on the Ferrari was automatically converted to a charge on the money paid into Court, the trial judge granted legal force to a lien which was, based on his own findings and reasoning, otherwise invalid and unenforceable under the RSLA. The trial judge’s interpretation of subs. 24 (1.1) and (13) of the Act, giving rise to this result, creates an internal inconsistency or significant anomaly in which an unenforceable lien is enforced, via substitution, with a charge upon moneys paid into Court. The payment of monies into Court is a means to preserve whatever rights the parties have in the essential monetary issues in dispute; it cannot be used to enhance, detract, grow or shrink the rights of any party. Cases decided under the Construction Act, for example, have consistently found that although funds have been posted into Court in order to “bond off” a construction lien claim, the payment of the disputed amount into court does not entitle the lien claimant to the funds. Although the lien becomes a substitutional charge against the funds posted into court, the lien claimant must still show that its claim for a lien against the property or article has been proven and is valid: James Dick Construction Ltd. v. Durham Board of Education, 2000 CarswellOnt 3086 (Div Ct), at para.19; Reliance Electric Ltd. v. G.N.S. Contractors Inc. (1989), 1989 4110 (ON SC), 35 C.L.R. 310 (Ont. H.C.) at para. 25; and DIRM Inc. v. Dalton Engineering & Construction Ltd., 2004 21357 (ONSC), at para. 42.

[35] Here, Toronto Motorsport’s claim for a non-possessory lien was not validly registered as found by the trial judge. Toronto Motorsport was therefore unable to enforce its lien against third parties, because such enforcement was possible “only if a claim for lien has been registered”: General Electric Capital Equipment Finance Inc. v. Transland Tire Sales & Service Ltd., 1991 7072 (OCJ Gen. Div.). The entire scheme of the Act requires that this be interpreted to mean “validly registered”. I refer also to Royal Tire Service Ltd. v. Shelleby Transportation Ltd., 1999 2214 (ONCA), at para. 2, in which the Court of Appeal found that a non-possessory lien which would otherwise have had priority over a third party’s security interest fails if it was not “enforceable” within the meaning of the Act.

[36] Questions regarding statutory interpretation by the courts are questions of law and therefore attract the correctness standard of review. In my view, the trial judge erred in his interpretation of s. 24(1.1) and (13). This error of interpretation lead directly to his conclusion that the defective lien claims against the Ferrari were somehow “cured” when monies sufficient to cover the defective claims were paid into Court. This was an error of law and must therefore be reversed. Judgment shall issue dismissing Toronto Motorsport’s claim to $30,358.06. The funds paid into Court shall be paid out to Landmark.

2. Whether the Evidence Warranted the Conclusion That Fair Value of the Repairs Was Proved

[37] Had I come to a different conclusion on the essential legal issue raised on this appeal, I would have dismissed Landmark’s alternative argument, to the effect that the evidence did not support the trial judge’s finding that the fair value on the repair claim was proved. Findings of fact, including credibility and reliability, represent the classic case where deference is owed. Landmark has not shown that the trial judge’s factual findings on fair value were the product of any palpable and overriding error.

Costs

[38] The parties agreed on costs. The costs awarded below shall simply be reversed - what was awarded to the defendant shall be awarded to the plaintiff. Costs to the plaintiff of the leave motion and of the appeal are fixed in the combined amount of $15,000, inclusive of fees, disbursements and taxes.

Penny J.

I agree _______________________________

McWatt A.C.J.S.C.J.

I agree _______________________________

Sachs J.

Released: September 21, 2021

CITATION: 2021 ONSC 5657

DIVISIONAL COURT FILE NO.: 047-20

DATE: 20210921

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Penny J., McWatt A.C.J.S.C.J., and Sachs J.

BETWEEN:

2200334 ONTARIO INC. c.o.b. TORONTO MOTORSPORTS PARK

Plaintiff/Respondent

– and –

LANDMARK VEHICLE LEASING CORPORATION

Defendant/Appellant

REASONS FOR JUDGMENT

Released: September 21, 2021

2200334 Ontario Inc. c.o.b. Toronto Motorsports Park v. Landmark Vehicle Leasing Corporation, 2021 ONSC 5657

Case Summary

PENNY J.

Overview

Background

Decision Below

Did Toronto Motorsport have non-possessory liens against the Ferrari which became charges upon the amounts paid into court as a result of Landmark’s applications under s. 24(1.1) of the RSLA?

Did Toronto Motorsport have obligations under the Consumer Protection Act, 2002?

Did Toronto Motorsport charge fair value for the repairs and storage?

Analysis

Jurisdiction

Standard of Review

Issues on Appeal

1. Whether Toronto Motorsport’s Non-enforceable, Nonpossessory Lien for Repairs Became a Charge on The Money Paid Into Court

2. Whether the Evidence Warranted the Conclusion That Fair Value of the Repairs Was Proved

Costs

Judges

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 3

Legal Tests 1