Superior Court of Justice – Ontario Divisional Court

CITATION: Platinum Cars Inc. v. Registrar, Motor Vehicle Dealers Act, 2002 2024 ONSC 2077

DIVISIONAL COURT FILE NO.:117/24

DATE: 20240409

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

BETWEEN: PLATINUM CARS INC., AND SHAUN JALILI, Appellant/Moving Parties

AND

REGISTRAR, MOTOR VEHICLE DEALERS ACT, 2002, Respondent

BEFORE: Leiper J.

HEARD: April 3, 2024 by videoconference

Counsel for the Appellants: S. Zucker and L. Paddock

Counsel for the Respondent: J. Siskind

Date of Decision: April 9, 2024

ENDORSEMENT

Introduction

[1] The Appellants move for a stay of an order of the Licence Appeal Tribunal, dated February 16, 2024 directing the Respondent Registrar to carry out a Notice of Proposal to:

a) Revoke the registration of Platinum Cars Inc. As a motor vehicle dealer, and

b) Revoke the registration of Shaun Jalilli as a motor vehicle salesperson uner the Motor Vehicle Dealers Act, 2022.

[2] For the reasons provided below, I dismiss the motion for a stay. The Appellants have failed to establish that they meet the three-part test for a stay pending appeal.

Background

[3] The Appellant Shaun Jalili was a motor vehicle salesperson registered under the MVDA, 2002 or the “Act”. He is also the sole officer and director of the Appellant, Platinum Cars Inc.

[4] On September 14, 2022, the Registrar issued a Notice of Proposal (“NOP”) to revoke Mr. Jalili’s registration and to revoke Platinum Cars Inc.’s registration as a dealer. To summarize, the grounds for revocation were failure to comply with conditions of registration, failure to meet disclosure obligations and the alleged dishonest conduct of Mr. Jalili.

[5] The Appellants appealed the NOP to the Licence Appeal Tribunal. The Tribunal held an eleven-day hearing, beginning with a motion to stay for abuse of process brought by the Appellants. The Tribunal dismissed the stay motion, adjourned the hearing and resumed the hearing on the merits several months later. During the appeal proceedings below, the Appellants continued to carry on business pursuant to their registrations.

[6] The background to the 2023 appeal arises from a prior consent order made by the Registrar concerning the Appellants’ registrations. On January 7, 2020, the Registrar issued a NOP to revoke the registrations of Platinum and Mr. Jalili. The Appellants appealed that NOP. Prior to the scheduled hearing before the Tribunal, the parties resolved the issues. On consent the Registrar placed conditions on the Appellants’ registrations. The Tribunal issued the order on May 12, 2021.

[7] The relevant provisions of the 2020 consent order are found in the Tribunal’s reasons of February 16, 2024:

21. Jalili agreed to, among others, the following conditions:

a) Not trade in motor vehicles until he had provided proof to the Registrar that he had successfully completed the “Ontario Motor Vehicle Industry Council (OMVIC) Certification Course” with a mark of at least 80%,

b) Successfully complete the “Automotive Laws and Ethics” (Laws1009) offered by Georgian College, and to achieve a mark of at least 80%,

c) Successfully complete within 6 months both an anger-management course and a

dispute-resolution skills course approved by the Registrar,

d) Be responsible for ensuring Platinum Cars’ compliance with the conditions of registration.

22. Platinum Cars agreed to, among others, the following conditions:

a) Provide a specific set of headlight parts to a former customer for a 2015 Mercedes-Benz (VIN: WDDHF6HB0FB162434) purchased from Platinum Cars,

b) Inform the Registrar in writing of any complaints it receives from its customers related to a trade of a motor vehicle and which have not been resolved to the customer’s satisfaction within 30 days,

c) Disclose in writing on its bills of sale all material facts about the vehicles it sells or leases to its customers, including any facts which would reasonably affect a customer’s decision to purchase or lease the vehicle,

d) Research the history of all of the vehicles that it sells or leases in order to ensure that all material facts are disclosed, and

e) Resolve complaints in such a way as to bring it into compliance with the requirements of the Act, the Consumer Protection Act, 2002, the Sale of Goods Act and its conditions of registration

The Findings of the Tribunal

The Failure to Provide Headlights within 30 Days of the Consent Order

[8] Condition 25 of the consent order required Platinum to provide a specific set of headlights to a consumer within thirty (30) days of the order. Mr. Jalili testified that he left this task with his father. He did not follow up. The consumer filed a claim in Small Claims Court against Mr. Jalili. Mr. Jalili later discovered that the consumer had passed away in August 2021, and the vehicle had been sold. Thus, he testified that it was impossible for him to comply with the order.

[9] The Tribunal found that the Appellants took no steps to comply with this condition, and breached the consent order, writing:

I find that Platinum is in breach of this condition. No evidence was presented as to the steps taken to provide the parts to Mr. Leuthner during the 30 days in which the parts were to be delivered or at any time before Mr. Leuthner died.

The Failure to Disclose a Pre-existing Condition: 2016 BMW X6

[10] Condition 15 required the Appellants to disclose significant material facts on bills of sale. The evidence before the Tribunal described a sale made on August 29, 2021, involving a 2016 BMW X6 that Platinum sold to a consumer for $85,000. The car had with a significant problem, that being defects in the engine coolant system, that Platinum did not disclose on the bill of sale.

[11] The Tribunal found that coolant issue existed when Platinum purchased the vehicle from its previous owner. Thus, it ought to have been disclosed. The Tribunal further found that the consumer’s complaint was met with resistance, denial, and dismissiveness by Platinum, even though the vehicle was not fit for its purpose.

[12] Platinum did not report the issue to the Ontario Motor Vehicle Industry Council (“OMVIC”), although this was required by Condition 19 of the consent order. The consumer reported the issue to OMVIC. The consumer testified at the hearing, as did Mr. Jalili and the salesman at Platinum who sold the vehicle. The Tribunal did not accept the evidence from Mr. Jalili, finding:

In summary, I find that Platinum sold the BMW to Ms. Edgington when it knew there were defects in the engine’s coolant system. I find that Platinum did not advise Ms. Edgington of the defects. I find that Jalili was not truthful with Ms. Edgington when he told her that Eurocharge advised him that they found nothing wrong with the vehicle and that Platinum and Jalili failed to accept responsibility for making repairs to the vehicle when it was clear that they ought to have done so.

I find Jalili and Platinum unreasonably refused to properly investigate the cause of the coolant loss after Ms. Edgington brought it to their attention, failed to acknowledge that they had some responsibility to rectify the problem or even to acknowledge that a problem existed at the time of sale when it was clear that was probably the case. I find Jalili and Platinum unreasonably failed or refused to make repairs to the vehicle when it was clearly their responsibility to do so once the problem was diagnosed by Eurocharge.

[13] The Tribunal concluded that the sale of this vehicle with knowledge of a pre-existing engine defect and the Appellants’ subsequent refusal to accept responsibility for repairs and to properly investigate and repair the defect was evidence that Platinum and Mr. Jalili will not carry on business in accordance with the law, and with integrity and honesty.

[14] The Tribunal also found that Mr. Jalili failed to ensure compliance with Platinum’s conditions of registration while handling the consumer issues, and failed to take reasonable care to ensure that Platinum complied with its disclosure obligations with respect to the BMW.

The Requirement to Refrain from Trading Pending Completion of the OMVIC Course

[15] The Tribunal found that Mr. Jalili failed to comply with Condition 2 of the consent order which required him to refrain from trading motor vehicles until he completed the OMVIC Certification Course. Mr. Jalili testified and gave an explanation. The Tribunal found that his explanation was not credible, writing:

The parties agree, and the evidence shows, that Jalili received a letter from Georgian College confirming he completed the OMVIC Certification Course with a mark of 85% on October 15, 2021. Mr. Jalili agreed that he continued to purchase vehicles for the purpose of selling them through Platinum between May 12, 2021 and October 15, 2021.

The Registrar says that by purchasing vehicles for Platinum, Jalili was engaging in trade in motor vehicles in breach of condition number 2. Jalili says he thought that condition 2 only prohibited him from selling motor vehicles to consumers and that purchasing vehicles for the purpose of resale did not qualify as trading in motor vehicles.

The Act defines “trade” in s. 1(1) as including buying or attempting to buy motor vehicles. Mr. Jalili concedes that he now understands that buying motor vehicles was considered a trade for the purposes of condition 2.

I do not accept that Jalili did not understand that he was trading in motor vehicles when he continued to buy vehicles for Platinum. He was a motor vehicle dealer for at least 10 years before 2021 and testified Platinum is probably the biggest used car dealer in Canada. Jalili is required to take continuing education courses regularly. What constitutes trading in motor vehicles is so basic to the regulation of the motor vehicle sales industry that it is not credible for Jalili to suggest he was unaware that it includes buying motor vehicles for the purpose of selling them.

I find that Jalili was in breach of this condition of registration.

Failure to Complete An Anger Management Course an a Dispute-Resolution Course Approved by the Registrar within Six Months

[16] The Tribunal found that the Appellants failed to comply with Condition 6 which required Mr. Jalili to successfully complete, within six (6) months of the Order, both an anger-management course and a dispute-resolution skills course approved by the Registrar. This condition remains unfulfilled. There was no evidence presented on the stay motion that the Mr. Jalili had taken any steps to bring himself into compliance with these conditions.

[17] The Tribunal considered Mr. Jalili’s explanation that he had taken counselling, and cited portions of a letter from Mr. Jalili’s doctor concerning cognitive behavioural therapy. However, none of these steps were approved by the Registrar, nor were they taken within six months of the order. The Tribunal found that the condition was clear and that Mr. Jalili had not fulfilled either of the requirements to take anger management and dispute resolution courses within six months.

[18] Finally, the Tribunal found that the Appellants breached Condition 19, by failing to report consumer complaints which remained unresolved after thirty (30) days to OMVIC as required.

Penalty Findings

[19] The Tribunal took into account the nature of the breaches, the Appellants’ history of prior misconduct and found serious issues with the Applicants’ governability and integrity. These portions of the reasons read:

[138] In my view, the breaches of conditions and the conduct of Platinum and Jalili

affords grounds for belief that they will not act in accordance with the law, integrity

and honesty are serious. They are even more serious in the context of the registration history of Platinum and Jalili.

[129] The conditions breached by the appellants were imposed in the course of a Tribunal proceeding in respect of a Registrar’s Notice of Proposal to revoke the appellants’ registrations. Previously, the appellants were fined a combined total of $24,500 by the Discipline Committee for breaches of advertising requirements under the Act. In 2018 there was Notice of Proposal to suspend registrations of Platinum and Jalili.

[130] Jalili has consistently failed to recognize the authority of the Registrar as a regulator. He failed to bring himself into compliance with the educational requirements of his conditions of registration even when he knew he was in default of those conditions. He continued to trade in motor vehicles despite the clear condition that he does not do so until he brought himself into compliance with the conditions.

[131] Platinum failed to disclose on a bill of sale an engine defect which resulted in a repair estimate of almost $12,000 within two months of the sale in breach of a condition of registration. It also failed to notify the Registrar in writing of unresolved

complaints and did not comply with a condition for the provision of certain parts to

a consumer without making any determination as to whether the Registrar found its excuse to be satisfactory.

[132] In my view, registration along with the imposition of conditions would not be

sufficient in the circumstances. The appellants have demonstrated that they cannot be relied on to comply with conditions and that they are likely to simply decide themselves which conditions to comply with and which ones need not be complied with.

[133] Further, the conduct upon which my finding that there are reasonable grounds for belief that Platinum and Jalili will not carry on business in accordance with law,

integrity and honesty arises largely out of their failure to comply with their obligations under the Act. The requirement that defects be disclosed to consumers is an important requirement under the Act and plays a central part in the protection of consumers. The failure of Platinum and Jalili to comply with this basic obligation under the Act makes it even more unlikely that conditions imposed by this Tribunal

would be honored.

[134] I find that the appellants have presented no basis in evidence for the Tribunal to conclude that registration with conditions would be appropriate or would adequately protect the public.

The Appeal Proceedings and the Motion to Stay

[20] On February 19, 2024, the Appellants filed an Appeal in the Divisional Court alleging numerous errors of law and palpable and overriding errors of fact relative to the Tribunal’s findings. The ground allege errors of law in its treatment of the motion to stay the proceedings, and errors of law and fact in its consideration of mitigating factors. These grounds are stated generally. In oral submissions, counsel cited as strong grounds, the alleged errors in the stay decision and the Tribunal’s failure to consider alternative penalties in light of the mitigating explanations provided by the Appellants. The Appellants’ factum on the motion for stay does not provide any further detail on the basis for the alleged errors in fact or in law.

[21] On February 27, 2024, the Appellants moved for a stay of the order revoking their registration before the Tribunal. For reasons given on March 11, 2024, the Tribunal declined to order a stay of revocation.

[22] In brief, the Tribunal found that while the Appellants had established that there was a “serious issue to be tried” on appeal, they had not established irreparable harm, nor had they met the “balance of convenience” part of the test. The Tribunal found that the evidence of the financial impact of a stay was insufficiently supported by the record. While accepting the submission that the Appellants would suffer financial harm if the stay was denied it concluded that the evidence fell short of supporting a finding that the financial harm was “irreparable.”

[23] In determining the balance of convenience, the Tribunal considered the findings below, the history of misconduct and recent evidence that pending the motion to stay, the Appellants had continued to advertise luxury vehicles on-line. The Tribunal wrote:

Given the serious findings in the Decision regarding the appellants’ conduct, the appellants’ lack of co-operation with the Registrar, and their lack of willingness to abide by conditions on their registrations, I find that the Registrar’s interest in protecting the public outweighs the appellants’ private interests. The findings in the Decision engage the honesty and integrity of the appellants. In the Decision, the Tribunal declined to grant registration with conditions, on the basis that the appellants had demonstrated they could not be relied on to comply with conditions, and that conditions would not be appropriate to adequately protect the public. The fact that the appellants appear to be continuing in business after the release of the Decision and before the decision on this stay motion as set out in the affidavit of Ms. Harquail seems to offer further support for the conclusion that the appellants have no compunction about preferring their own business interests over protection of the public interest as set out in the Act. Advertising of vehicles appears to continue.

[24] The Tribunal denied the stay. The Appellants did not seek reconsideration by the Tribunal, instead they brought an urgent motion to stay before the Divisional Court.

[25] Their application has been updated, and includes a proposal for terms and conditions that would include maintaining a fund at $50,000 to respond to customer complaints, and supervision by a prior motor vehicle official who assists registrants with their obligations. The motion material includes a forebearance agreement from the security holder of the Appellants’ credit facility, which permits the dealership to continue its financial arrangements if a stay is granted.

Analysis of the Issues on the Motion to Stay

Issue Estoppel/Res Judicata

[26] The Respondent argued that the court should decline to hear the motion for a stay on the merits, but should apply the doctrine of issue estoppel/res judicata. In the Respondent’s submission, the test in Danyluk v. Ainsworth Technologies Inc. 2001 SCC 44, [2001] 2 S.C.R. 460 at para. 20, is met in this case because:

i. The same issue has been decided;

ii. The previous judicial decision was final; and

iii. The parties to the judicial decisions or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.

[27] Further, the Respondent submits that there is no reason for this court to exercise its residual discretion to allow the stay motion to be re-litigated. There has been no change of circumstances that have altered the nature of the issue to be determined, there are no special circumstances warranting a refusal, and the application of the doctrine would not work an injustice.

[28] I decline to dismiss the motion for a stay based on issue estoppel. While the same issue has come before this court as was addressed by the Tribunal below, this court has the discretion to hear motions to stay pending appeals. The Appellants have brought a modified proposal forward on this motion to stay in the form of monitoring and a complaints fund. Accordingly, I permitted the Appellants to proceed on the motion to stay.

Applying the Test for a Stay Pending Appeal

[29] The parties agree that the test on a motion to stay an order under r. 63.02(1)(b) is that in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 at p. 334 as follows:

1. Is there a serious issue to be tried?

2. Will the moving party suffer irreparable harm if the stay is not granted?

3. Does the balance of convenience favour granting the stay?

[30] The factors are interrelated and the strength of one factor may counterweigh a weaker factor: Louis v. Poitras 2020 ONCA 815 at para. 16.

[31] The overarching question is whether the moving party has demonstrated it is in the “interests of justice” to grant a stay: BTR Global Opportunity Trading Limited v. RBC Dexia Investor Services Trust, 2011 ONCA 620, 283 O.A.C. 321, at para. 16.

[32] The Appellants submit that they have demonstrated a serious issue to be tried. In oral submissions, counsel highlighted the Tribunal’s ruling on the stay of proceedings motion for abuse of process, and its alleged failure to adequately consider the mitigating evidence called on the breaches of the consent order, and the penalty of revocation.

[33] I disagree. There is nothing in the Notice of Appeal, the Appellants’ factum or in the Tribunal’s detailed reasons for decision that reveal a serious issue to be tried. The grounds of appeal are numerous, but general. They allege a raft of unspecified errors which are not apparent from a preliminary review of the Tribunal’s reasons. The Appellants provide no detail of any alleged palpable and overriding errors of fact. The Tribunal made findings of credibility which on their face do not appear to be based on any incorrect principle or misunderstandings of the evidence.

[34] The motion to stay the proceedings was brought at the outset of the hearing. The Tribunal found that the procedural fairness issues could be resolved by providing an adjournment. It considered the applicable law and made an order to remedy the unfairness. This was available in its discretion. Aside from disagreeing with that order, the Appellants have not pointed to any specific legal error or significant misapprehension of a critical fact relevant in the Tribunal’s ruling on the stay motion.

[35] At this stage I am not required to extensively review the merits of the appeal (Ontario v. Shehrazad Non-Profit Housing Inc. 2007 ONCA 267 at para 19). However, there must be some preliminary assessment of the merits to consider the first stage of the test: Longley v. Canada (Attorney General) [2007] O.J. No. 929, 2007 ONCA 149 at para. 14.

[36] Having made that preliminary assessment, I find that the Appellants have failed to establish the first part of the test, that there is a serious question to be tried.

[37] Moving to the question of irreparable harm, the Appellants allege significant financial harm if the stay is not granted. As the Divisional Court wrote in Yazdanfar v. College of Physicians and Surgeons of Ontario, 2012 ONSC 2422 at para 64. “evidence of irreparable harm must be clear, not speculative, and supported by evidence.” The Appellants are required to show a risk that is real, that there will be disastrous consequences beyond financial loss or inconvenience: Yazdanfar at para. 32.

[38] The evidence before me is that the Appellants will not be able to earn the income they are accustomed to earning pending their appeal. This includes the ability to service their $30M loan facility to their bank, an amount which is apparently secured by their inventory of luxury vehicles. They will not be able to conduct sales, meet payroll and can be expected to lose members of their 40-person sales staff if they cannot operate for several months pending the appeal.

[39] However, the record does not provide a complete financial picture of available corporate and/or personal assets, savings, or any attempts to create a contingency plan. There is evidence in Mr. Jalili’s affidavit that he pays the mortgage for his parents, and of his personal living expenses, but not much else about his financial status.

[40] I agree with the Respondent that the Appellants’ have asserted that a denial of a stay will mean a “catastrophic” outcome, but the material does not support that conclusion. I conclude that the Appellants have not satisfied the test for irreparable harm.

[41] Finally, the balance of convenience test. I find that the public interest outweighs the financial harm that the Appellants will experience if a stay is not granted. I say that for three reasons.

[42] First, the findings of the Tribunal below call into question issues of governability of the Appellants, who are experienced registrants, with a history of breaching their regulatory obligations. The findings of credibility as to what Mr. Jalili believed and his failure to abide by conditions placed on his registration reveal a casual attitude towards his obligations which is contrary to the public interest and raises issues of whether he will comply with his regulatory obligations.

[44] Second, there was evidence before the Tribunal on the first stay motion, and before me on this stay motion, that the Appellants failed to remove on-line advertising for their luxury vehicles after their registrations were revoked. In response, Mr. Jalili provided a single email from an employee detailing how difficult this task was given that search engines copy advertising and replicate it elsewhere. That may be true, however this reflects a pattern from Mr. Jalili where he delegates his obligations under the Act or orders from the Registrar. Facing possible ongoing revocation, I would have thought he would have personally carefully overseen the process of removing all web advertising as he was required to do under the Act.

[45] Third, there is his ongoing failure to seek approval and take the courses ordered: dispute resolution and anger management. This is another aspect of the consent order that was in his power to address. The consent order remains outstanding. This is another example of what appears to be a resistance to abiding by the regulatory framework within which he makes his living.

[46] The Appellants have proposed additional conditions including monitoring. Given my conclusions on the first two factors, the demonstrable risk to the public in permitting them to continue operating and the other issues discussed above, I am not satisfied that those conditions will adequately protect the public in a manner that tips the balance of convenience in favour of granting a stay.

Conclusion

[47] I find it is not in the interests of justice to grant a stay. The motion to stay the order of revocation is dismissed. By agreement of the parties, costs are ordered in favour of the Respondent in the amount of $3,000.

_______________________________ Leiper J.

Released: April 9, 2024