CITATION: Guru Eak Transport Ltd. v. Eagle Truck Sales Inc. et al. 2022 ONSC 0702

COURT FILE NO.: 61/19

DATE: 2022/01/31

ONTARIO SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Hackland, Kristjanson and Nishikawa JJ.

BETWEEN:

Guru Eak Transport Ltd.

Plaintiff (Respondent)

– and –

Eagle Truck Sales Inc., Balwant Sekhon, a.k.a, Bill Sekhon and Ronald Sekhon

Defendants (Appellants)

Michael Odumodu, for the Plaintiff (Respondent)

Pathik Baxi, for the Defendants (Appellants)

HEARD: November 25, 2021 at London (by Zoom videoconference)

Reasons for Decision

Hackland J.

Overview

[1] This is an appeal from a trial judgement awarding the respondent the sum of $48,510 consisting of damages in the amount of $23,510 and a further amount of $25,000 for indemnification in related Third Party proceedings.

[2] The dispute between the parties arose from the purchase by the respondent Guru Eak Transport (“the respondent”) of a commercial Freightliner Cascadia transport truck (the “Cascadia”) from the appellant Eagle Truck Sales Inc. (“Eagle Truck Sales”) for $51,000 plus H.S.T. The respondent provided a down payment of $11,300 and financed the balance of the purchase price through Bodkin Leasing Corporation (“Bodkin Leasing”), which took title to the vehicle and leased it to the respondent. Eagle Truck Sales was paid the full purchase price.

[3] The Cascadia experienced mechanical problems resulting in repair expenses, downtime, and lost income to the respondent. After both parties incurred ongoing expenses for repairs of the Cascadia over a period of 5 months, the respondent and Eagle Truck Sales agreed to allow the respondent to exchange the Cascadia for a different truck; a Freightliner Century (the “Century”). Despite the respondent returning the Cascadia to Eagle Truck Sales, Eagle Truck Sales failed to facilitate the exchange or to deliver the Century to the respondent.

[4] The Cascadia was eventually transferred to Bodkin Leasing who took possession of the vehicle and removed it from the premises of Eagle Truck Sales, after paying storage fees and subsequently resold the vehicle to a third party. Bodkin Leasing then sued the respondent for outstanding lease payments and related charges. Bodkin Leasing’s action was settled by the respondent paying $25,000. The trial judge, as noted above, allowed the respondent to recover that amount from Eagle Truck Sales, by way of indemnification, in a Third Party Claim heard together with the present action.

[5] The parties agree that the main issue before the trial judge was whether the appellant Eagle Truck sales could rely on a contractual document, being the “Used Vehicle Bill of Sale”, which was signed by the parties and provided that the truck was being purchased on an ‘as is” basis and which excluded any warranty on the vehicle.

The issues

[6] The appellants raise the following grounds of appeal.

(1) the trial judge erred in applying the exceptions to the parole evidence rule and by using “surrounding circumstances” to re-write the contract;

(2) the trial judge made a palpable and overriding error in finding legally binding general assurances were made as to the fitness of the vehicle;

(3) the trial judge made a palpable and overriding error in finding an enforceable oral agreement was made with respect to exchanging the Freightliner truck;

(4) in the alternative, in the event there was a separate oral agreement for the Freightliner, there was no breach of the agreement by the appellants;

(5) the trial judge failed to provide adequate reasons for finding the appellants liable on the Third Party Claim for indemnification;

(6) the trial judge made a palpable and overriding error in finding the individual appellants jointly and severally liable.

Standard of Review

[7] The issues raised by the appellants pertain to the trial judge’s findings of fact, based largely on his assessment of credibility of the appellant Bill Sekhon. Findings of fact are treated deferentially on appeal and are reviewed on a standard of palpable and overriding error, see Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. To the extent an issue of contractual interpretation arises, this is characterized as a question of mixed fact and law and is also reviewable on a standard of palpable and overriding error, see Sattva Capital Corp v.Creston Moly Corp., 2014 SCC 53.

[8] The Supreme Court explained the rationale for the deferential approach to trial rulings on issues of contractual interpretation in Heritage Capital Corporation v. Equitable Trust Co., 2016 SCC 19 at para 21:

“contractual interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix”. In this context, deference to fact finders furthers the goals of limiting the number, length and cost of appeals, and of promoting the autonomy and integrity of trial proceedings. These principles weigh in favour of showing deference to first-instance decision makers on points of contractual interpretation, and treating contractual interpretation as a question of mixed fact and law.

[9] The appellants submit the contract in this case is a standard form contract and should be reviewed on a correctness standard, citing the Supreme Court’s judgement in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, at para 24:

I would recognize an exception to this Court's holding in Sattva Capital Corp. that contractual interpretation is a question of mixed fact and law subject to deferential review on appeal. In my view, where an appeal involves the interpretation of a standard form contract, the interpretation at issue is of precedential value, and there is no meaningful factual matrix that is specific to the parties to assist the interpretation process, this interpretation is better characterized as a question of law subject to correctness review.

[10] The contract in this case is not a standard form contract as contemplated in Ledcor. Rather, it is an invoice of no precedential value, accompanied by other contractual documentation and there existed a fully adequate factual matrix to have enabled the trial judge to interpret the contractual arrangements agreed upon by the parties and assess its application to this transaction. The issue on this appeal is whether the trial judge made any overriding and palpable errors in doing so.

Analysis

The parole evidence issue

[11] The appellants’ first two issues are based on the proposition that the company should have been entitled to rely on the express terms of sale printed on the Used Vehicle Bill of Sale and to imply or impose other inconsistent obligations is a violation of the parole evidence rule. I do not accept this submission for the following reasons.

[12] The trial judge considered the evidence of the respondent’s principal, Mr. Dhaliwal and his friend Mr. Bhullar who was with him at the time and the evidence of Eagle Truck Sales’ principal Bill Sekhon about the discussions which took place at the time the truck was purchased. The trial judge observed that Bill Sekhon’s evidence was “not credible or reliable in many respects”. At the point of sale the vehicle was undergoing repairs and could not be driven. However, Bill Sekhon provided various assurances to Mr. Dhaliwal about what would be done to make the truck roadworthy. The trial judge said, “I interpret the seller’s assurances as similar in nature to the provision in s.15 of the Sale of Goods Act, that the vehicle would be reasonably fit for its intended purpose”

[13] The trial judge found that Mr. Sekhon specifically represented that particular equipment on the truck would be in good working order by the time of delivery. He told Mr. Dhaliwal that if there were any problems with the truck, he could bring it back for a refund or repair. These representations were made prior to the signing of any documentation.

[14] The trial judge held that the vendor could not rely on the “as is” provision in the Bill of Sale because, as he explained, (at para. 16):

One of the threshold questions is whether the defendants can rely on the “as is” provision in the Bill of Sale. I find that they cannot. This vehicle was not sold “as is” on December 17, 2012. It was sold as it would be upon completion of the repair to the turbo actuator and whatever else was needed to be done for the safety certification and emission test. The vehicle was clearly not being sold in its unrepaired condition and I have no hesitation in finding that both parties contemplated the satisfactory completion of certain repairs and of the test certifications needed to register an ownership transfer, notwithstanding the plaintiff’s initials on the Used Vehicle Bill of Sale.

[15] The trial judge explained why he found the written contract to be ambiguous i.e. because the “as is” provision must be interpreted to mean “as it will be” and because of the reference on the pre-printed form to terms and conditions on a “back page” which did not exist. The trial judge also noted that in fact the vehicle was not sold to the plaintiff under the original bill of sale, rather it was sold to the leasing company. The trial judge arrived at the following conclusion (at para.18):

Because of the ambiguities, it is open to the court to consider representations and conduct, even subsequent to the formation of the contract, to determine the true terms and the intended scope of their agreement. See Shewchuck v. Blackmont Inc., 2016 ONCA 912 paras. 1,2 and 38-56.

[16] In my view these are reasonable findings which do not reflect any palpable and overriding error which would justify the court’s intervention. The ambiguity in the contractual arrangements arose from the “as is” and the “no warranty” provisions in the Used Vehicle Bill of Sale when viewed in combination with the contemporaneous direct promises made by Mr. Sekhon to Mr. Dhaliwal, intended to induce the sale of the truck. Moreover, the Used Vehicle Bill of Sale was only one of the contractual documents in this transaction.

[17] Given the ambiguity on the issue of warranties of fitness when the contract was formed, it was appropriate for the trial judge to consider the subsequent conduct of the parties concerning the ongoing mechanical problems with the vehicle. The appellants, to their credit, did not take the position they had no responsibility for the mechanical problems with the vehicle, rather they assumed some of the repair costs. The trial judge stated (at para 24) “… I find that the assumption of responsibility for the repairs corroborates (Bill Sekhon’s) verbal representations about the reasonable fitness of the vehicle as a contractual obligation.”

[18] The appellants submit that, in any event, they performed the agreed repairs to the truck’s sensor light, turbo actuator, air conditioner and diesel particulate filter, which discharged any repair obligations they had undertaken. The trial judge took the view that such repairs did not cover all of the respondent’s costs and losses, which is a finding he made on the evidentiary record and the testimony of witnesses. I am not persuaded that there were any overriding and palpable errors made by the trial judge on these factual issues.

[19] The appellants further contend (their third ground of appeal), that there was no agreement reached with respect to exchanging the Cascadia truck for a Century truck. The trial judge concluded that such an agreement had been reached between Mr. Sekhon and Mr. Dhaliwahl. In coming to this finding he relied on admissions made by Mr. Sekhon at examinations for discovery and on correspondence from Mr. Dhaliwal to Eagle Truck Sales and on an interaction between Mr. Dhaliwahl and Ron Sekhon in which Mr. Dhaliwal received from the appellants a Used Vehicle Bill of Sale for the Century truck and on correspondence from a Mr. Singh, a leasing agent, explaining how the financing would be transferred to facilitate the vehicle exchange.

[20] The trial judge found that having agreed to the exchange of vehicles and having received back the Cascadia truck from Mr. Dhaliwal, which had been paid for in full at the time of the initial purchase, the appellants failed to deliver the Century truck in exchange and as such there was a breach of the agreement. The trial judge provided detailed reasons to justify his conclusion that an agreement had been reached to exchange the trucks and that Bill Sekhon and Eagle Truck Sales had unjustifiably walked away from their obligations. The appellants contend that the trial judge should have concluded that the vehicle exchange fell through due to Mr. Dhaliwal’s failure to pay the costs of transferring the financing from the Cascadia to the Century truck. However, that was not the view of the matter taken by the trial judge. It is not for an appeal court to re-try these factual issues, which is essentially what is being sought by the appellants.

Third Party Claim for indemnification

[21] When the truck exchange transaction fell through, Mr. Dhaliwal continued to make the monthly lease payments of $1,400 for the vehicle to Bodkin Leasing for 7 months and then stopped paying. Bodkin subsequently took possession of the vehicle from the premises of Eagle Truck Sales, after paying storage fees of $8,500, and then re-sold it to another buyer. Bodkin then sued the respondent for the unpaid balance of the lease payments and other amounts due under the lease. The respondent settled this action for $25,000 and then sought to recover this amount from the appellants in the present proceeding, by way of a Third Party Claim for indemnification. This claim was heard together with the respondent’s claims for breach of contract in the present trial. The trial judge allowed the indemnification claim in the full amount of $25,000.

[22] The appellants appeal the indemnification award on the basis that the trial judge provided no explanation for making the award. It is true that the trial judge made this award without any specific explanation. The appellants rely on Barbieri v. Mastronardi, 2014 ONCA 416 (at para. 22) for the principle that a court must “at a minimum, provide some insight into how the legal conclusion was reached and what facts were relied upon in relation to that conclusion.” The appellants argue that the trial judge’s reasons “do not allow for meaningful appellate review.”

[23] The respondent’s position is that it is clear and obvious that the Third Party indemnification claim flows from the same breaches that constituted the main action. I think that can indeed be readily inferred from the trial judge’s reasons. Unfortunately, his specific basis for the $25,000 amount is not explained. [However, there was evidence before the trial judge, including a Statement of Account and a Default Lease and Accrued Interest Event Calculation showing the amount of the claim by Bodkin Leasing against Guru Eak in the amount of $54,887.90 (see the invoice at B267 and B269) and the consent judgment in the amount of $25,000]

[24] Paragraph [38] of the trial judge’s reasons contains a detailed summary of the net recovery to Bodkin Leasing after re-selling the vehicle and crediting the respondent with all payments it had made on the lease and with the net recovery on the vehicle re-sale. I am prepared to accept that the trial judge was satisfied on the balance of probabilities that the $25,000 settlement of Bodkin’s claims based on the vehicle lease was a fair compromise of amounts properly due from the respondent to Bodkin and that this indebtedness resulted from the appellants’ failure to honour their contractual obligations to the respondent. Directing a rehearing in respect of this modest amount would not serve the interests of either party.

Personal liability of Bill Sekhon and Ron Sekhon

[25] Lastly, the appellants submit that the trial judge made an overriding and palpable error by finding the individual appellants Bill and Ronald Sekhon jointly and severally liable to the plaintiff in their personal capacity. They point out that the trial judge failed to provide any reasons for finding the appellants individually liable and, moreover, the record does not disclose any lawful basis for so doing.

[26] It is true that the trial judge did not provide any explanation for piercing the corporate veil to find the individual appellants personally liable. His reasons do disclose that Ron Sekhon was “the sole officer and director of Eagle Truck Sales” and further (at para. 2) “at all material times Bill and Ron were the controlling minds of Eagle Truck Sales, who admittedly all carry on business together as alter egos of one another.” The respondents say that the trial judge found the individual appellants to have committed conduct akin to fraud, such as the attempt to charge both the respondent and Bodkin for storage fees for the truck, to which they were not entitled and behavior which the trial judge considered to be, in essence, commercially dishonest.

[27] I agree that there is no basis for a finding of personal liability against either of the individual appellants. It may be that the trial judge’s finding was based on his observation about Ron and Bill Sekhon being the alter egos of each other and the controlling minds of the company. That is not sufficient for a finding of individual liability. There would need to have been a finding of tortious conduct or fraudulent conduct on the part of the individual appellants or that they were acting outside of their functions as officers of the company. The trial judge made no such findings.

[28] I adopt a recent helpful summary of the law on this point, by Nishikawa J. in Khursheed v. Venedig Capital SAS, 2019 ONSC 5190, at para. 26.

[26] The case law makes clear that unless there is an independent cause of action against them, officers, directors and employees are protected from personal liability for acts carried out under a corporate name. As the Court of Appeal stated in ScotiaMcLeod Inc. v. People’s Jewellers Ltd. (1995), 1995 1301 (ON CA), 26 O.R. (3d) 481 (C.A.), at pp. 490-491:

The decided cases in which employees and officers of companies have been found personally liable for actions ostensibly carried out under a corporate name are fact-specific. In the absence of findings of fraud, deceit, dishonesty or want of authority on the part of employees or officers, they are also rare. … In every case, however, the facts giving rise to personal liability were specifically pleaded. Absent allegations which fit within the categories described above, officers or employees of limited companies are protected from personal liability unless it can be shown that their actions are themselves tortious or exhibit a separate identity or interest from that of the company so as to make the act or conduct complained of their own.

[27] The Court of Appeal went on to say that a corporation’s directors or officers may cause it to sign a contract, since a corporation can only operate through human agents. However, this does not mean that “if the actions of the directing minds are found wanting, that personal liability will flow through the corporation to those who caused it to act as it did”: Scotia McLeod v. People’s Jewellers, at p. 491…

Directors and officers are responsible for their tortious conduct even though that conduct was directed in a bona fide manner to the best interests of the company, subject to the exception for liability for procuring a breach of contract (citations omitted)…the statement of claim must allege actions conducted by the individuals which are themselves tortious or exhibit a separate identity or interest from that of the corporation so as to make the act or conduct complained of their own…bald allegations that the individual defendants were the guiding minds or alter egos of the corporate defendants or that they dominated or controlled the corporation are not sufficient to pierce the corporate veil:(citations omitted).

[29] In the present case, paragraphs 32 and 33 of the trial judge’s reasons describe the entire involvement of the appellant Ron Sekhon in this matter, which was to meet with Mr. Dhaliwal on June 7 at Eagle Truck Sales and to sign certain documentation associated with the planned vehicle exchange between the parties. He was acting on his father’s behalf while his father was out of the country and thereafter had no further involvement in the matter. I do not read the trial judges reasons as being critical of Ron Sekhon for his brief involvement in the transaction. I see no basis on which he could be found to be personally liable for the breach of contract attributed to the corporate appellant.

[30] With respect to Bill Sekhon, it is apparent from the trial judge’s reasons that he found him to be lacking in credibility in some respects and perhaps acting in bad faith with respect to his conduct in walking away from the agreement to exchange the vehicles. However, all of Bill Sekhon’s conduct was in the context of his business and I detect no implied finding in the trial judge’s reasons that Bill Sekhon was acting fraudulently. If there was a basis for holding Bill Sekhon personally liable, the trial judge failed to explain in his reasons why that would be. In the circumstances, I am of the opinion that the trial judge erred in finding either of the individual appellants personally liable for the breaches of contract by Eagle Truck Sales.

Disposition

[31] In the result, the appeal is allowed in part and the action is dismissed against the individual appellants Bill and Ron Sekhon. The appeal is otherwise dismissed.

[32] As to the costs of this appeal, while the appellants were successful on one issue, the respondent was substantially successful and is entitled to its costs fixed in the sum of $7,000. inclusive of H.S.T.

The Honourable Justice Hackland

I agree “The Honourable Justice Kristjanson”

I agree “The Honourable Justice Nishikawa”

Released: January 31, 2022

CITATION: Guru Eak Transport Ltd. v. Eagle Truck Sales Inc. et al. 2022 ONSC 0702

COURT FILE NO.: 61/19

DATE: 2022/01/31

ONTARIO SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Hackland, Kristjanson and Nishikawa JJ.

RE: Guru Eak Transport Ltd., Plaintiff (Respondent)

AND

Eagle Truck Sales Inc., Balwant Sekhon, a.k.a, Bill Sekhon and Ronald Sekhon Defendants (Appellants)

COUNSEL: Michael Odumodu, for the Plaintiff (Respondent)

Pathik Baxi, for the Defendants (Appellants)

reasons for decision

Released: January 31, 2022