Vincent Rosita v. Supreme Towing & Recovery, Prozone Auto Collision, 2025 ONSC 2734

CITATION.: Rosita v. Supreme Towing & Recovery, Prozone Auto Collision, 2025 ONSC 2734

DIVISIONAL COURT FILE NO.: DC-24-64

DATE.: 2025-05-05

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Mirza J.

BETWEEN:

Vincent Rosita

Apellant

– and –

Supreme Towing & Recovery, Prozone Auto Collision

Respondent

C.Lui, for the Appellant

M D’Mello, for the Respondent

HEARD: February 11, 2025

APPEAL RULING

OVERVIEW

[1] This appeal of a Small Claims Court decision deals with the interpretation of sections 15, 17, 23 and 24 of the Repair and Storage Liens Act, R.S.O. 1990, c. R.25 (RSLA).

[2] The Appellant appeals from the Order of Deputy Judge Richards-Thompson, wherein it was held that the Respondents were entitled to retain and sell the subject vehicle pursuant to section 23 of the RSLA.

[3] The Appellant was involved in a motor vehicle accident on May 3, 2021. At the roadside, the Appellant signed a two-page double-sided contract for the Respondents to tow and store their vehicle at their business premises. The legal dispute concerns the interpretation of clauses in that contract and the RSLA.

[4] The Appellant, assisted by his insurer, sought return and transfer of their vehicle from the Respondent’s storage about a week after the accident. The Respondent invoiced for storage fees plus a $2500 cancellation of contract fee. The Appellant disputed the cancellation fee as unreasonable. The Respondents placed a possessory lien on the vehicle and then took enforcement action relying on their interpretation of the RSLA.

[5] Before the case was litigated and the legal disputes determined, the Respondents sold the Appellants vehicle and retained the proceeds. They did not advise the Appellant when they intended to sell the vehicle or that they had sold the vehicle or for how much. They did not return any excess funds from the proceeds of the sale. The Appellant submitted that the value of the vehicle far exceeded the amount in dispute.

[6] The Small Claims court case was heard June 18, 2024. In reasons dated July 3, 2024, the Deputy Judge granted the Respondent’s section 23(1)(e) application under the RSLA and found that the Respondents sale of the Appellant’s vehicle was authorized by the Respondent’s compliance with sections 15 and 17 of the RSLA. The Respondents were entitled to retain and then dispose of the Appellant’s vehicle pursuant to the contract.

[7] The Appellant submits that the Deputy Judge engaged in several legal errors that can be distilled down to the misinterpretation of sections 15, 17, 23 and 24 of the RSLA.

[8] For the reasons that follow, I grant the Appeal.

BACKGROUND

[9] On May 3, 2021, the Appellant was operating a motor vehicle, a 2020 RAM 1500 truck, that was involved in an accident in Brampton. A driver from Supreme Towing (the Respondent) showed up on scene shortly after the accident and offered to tow the Appellant’s Vehicle. The Appellant signed a tow authorization.

[10] The Appellant disputes that he was told about the rates or cancellation fee should he later choose to have the vehicle moved to another storage facility.

[11] On May 10, 2021, the Appellant e-mailed Supreme Towing and requested that the vehicle be released and moved to his preferred shop. Supreme Towing responded with a copy of the contract and invoice for a total of $3,826.18, which included a $2,500 cancellation fee. The Respondents’ email said, “please take the time to read your copy both front and back to better understand the process thank you.”

[12] On May 11, 2021, on behalf of the Appellant, Aviva Insurance Company of Canada (Aviva) e-mailed the Respondents, at their contact representative, with an offer to resolve payment for the charges claimed in the invoice for towing, storage to date and admin and environmental fees. Supreme Towing’s representative replied in an email that demanded payment of the entire invoice for the return of the vehicle, stating: “you are not my customer I have a contract and will enforce it under the law. You want your insureds car then pay the Bill that was given to your insured if not you know what to do I’m already started.”

[13] On May 14, 2021, pursuant to section 24 of the RSLA, the Appellant, through its insurer, contested the $3826.18 amount of the lien. The Appellant was prepared to pay the towing, storage and related fees but formally disputed the cancellation fee. An application for an initial certificate pursuant to section 24 of the RSLA, bearing court file no. SC-21-2347-0000, was issued after Aviva paid $4165.18 into court, which included the $1068.98 settlement amount. The same day, the initial certificate was served on the Respondents by email.

[14] On May 16, 2021, the Respondents emailed the Appellant a draft notice of objection under section 24 of the RSLA to the Appellant’s initial certificate. The Respondents were now seeking $35,000 and payment into court of $30,834.82. The Respondents advised that their formal notice of objection would be filed by mail to the Court on May 17. In the draft notice of objection, the Respondents said that they were seeking the additional amount because the Appellant:

Was notified pursuant to O. Reg427/15 of the RLSA that Prozone pursuant to section 17, in lieu of section 15, would exercise legal right to title. Prozone also notified that an Application pursuant to section 23 of the RLSA would be filed. The Application pursuant to section 24 is to circumvent the remedies of section 17. Prozone submits that it is legally entitled to retain possession; alternatively, the additional amount is now required.

[15] On May 25, 2021, counsel for the Appellant followed up with the Respondents about the notice of objection indicating that they had not heard anything further from the Respondents or the court. The representative for the Respondents replied that there was death in his family, and he was not able to do anything further until after the funeral.

[16] While I am mindful of the Respondents’ extenuating personal circumstances communicated to the Appellant on May 25, 2021, the Respondents did not provide proof of the notice of objection having been filed with the court in the record before me. There is no proof of a copy filed with the court in the trial record or appeal books of the parties. They also did not provide proof that they sent the same to the Appellant so that the amount sought could be paid into court.

[17] On June 1, 2021, the Appellant obtained a writ of seizure that was issued to seize the vehicle.

[18] On June 6, 2021, the Respondents’ representative e-mailed counsel for the Appellant and advised that the notice of objection had been filed with the court by mail on May 17 and that its section 23 application would be filed the following day. Again, no proof of filing of the notice of objection was provided by the Respondent to the Appellant. The Respondent said that since a “draft notice of objection” was sent on May 16, they are expecting the Appellant’s final certificate.

[19] On June 7, 2021, the Respondents section 23 application was issued.

[20] On June 10, 2021, Assistenza International e-mailed Aviva to advise that they, along with a sheriff, had attended at Supreme Towing’s location at 8 Cadetta Road to seize the vehicle per the issued writ of seizure. However, they were advised that the vehicle was not there and so the vehicle was not secured.

[21] On some undisclosed date prior to the section 23 and Small Claims Court hearing of June 18, 2024, the Respondents sold the Appellant’s vehicle without notice. The Respondents have not provided this information to the Appellant or the court to date. The VIN search history report for the Appellant’s vehicle shows that the vehicle was registered to the Respondents on September 30, 2021, while the litigation was pending and well before the Small Claims Court decision was rendered.

SMALL CLAIMS COURT DECISION OF JULY 3, 2024

[22] The Deputy Judge heard the Respondents section 23 application on June 18, 2024, and in reasons dated July 3, 2024, held that the Respondents were entitled to retain and sell the Appellant’s vehicle pursuant to the provisions of the contract and section 23 of the RSLA for refusal to pay the cancellation fee.

[23] The Deputy Judge found that the notice requirements in sections 15 and 17 of the RSLA were met based on the language on the back page of the Respondents’ standard contract and its reference to 15 days notice.

[24] The Deputy Judge also held that because the Respondent proceeded under section 23(1)(e) to challenge the Appellant’s section 24 application, that the Respondent’s claim could proceed.

[25] Further, the Deputy Judge found that Appellant’s insurers were not a party to the contract.

POSITIONS

[26] The Appellant submits that the Deputy Judge erred in law by misinterpreting and misapplying sections 15 to 17 of the RSLA, and by failing to identify the Respondent’s deficiencies of their purported “notice” to sell the vehicle.

[27] Also, the Appellants submit that the Deputy Judge erred by deciding the Respondent’s s. 23(1)(e) application, which in substance was an issue covered by s. 23(1)(d), and therefore pursuant to section 23(2) was statutorily barred by the Appellants’ outstanding section 24 application.

[28] Further, that the Respondents did not come to court with clean hands having failed to disclose that they sold the vehicle and complied with reporting of the distribution of the proceeds.

[29] The Respondents submit that the Deputy Judge did not err in finding that the contract provided notice and was enforceable against the Appellant, personally. The Appellant should be held to the terms of the contract and the Small Claims Court order should be upheld. The insurer should not be permitted to act on their client’s behalf in this breach of contract dispute.

[30] I pause here to note that the Respondent’s factum was confusing as it argued issues unrelated to the RSLA sections and spent considerable time arguing the cancellation fee in the contract was enforceable.

[31] Overall, without engaging sections 15 to 17 and 23 to 24 of the RSLA, the Respondents submitted that their actions were lawful and there is no reason why they should not be compensated for services that were authorized by the vehicle owner prior to their interest being subrogated.

[32] In oral argument it was clarified that the Respondents submitted that based on the language in their standard contract, notice was given and they could retain and sell the vehicle pursuant to RSLA sections 15 and 17 for non-payment of fees owing.

THE LAW

[33] The relevant sections of the RSLA are reproduced below since they are central to the appeal.

Sale of article

15 (1) A lien claimant who has a right, under this Act, to sell an article shall not exercise that right unless the lien claimant has given notice of intention to sell the article.

Idem

(2) A notice of intention to sell an article shall be in writing and shall be given at least fifteen days before the sale to,

(a) The person from whom the article was received for repair, storage or storage and repair;

(b) Where the article was received for repair, storage or storage and repair from a person other than the owner,

(i) The person who is the registered owner of the article, if the article is a motor vehicle, or

(ii) The person the lien claimant knows or has reason to believe is the owner, if the article is not a motor vehicle;

(c) Every person who has a security interest in the article under the Personal Property Security Act that is perfected by registration against,

(i) The name of the owner, if the owner is a person entitled to notice under clause (a) or (b),

(ii) The vehicle identification number, if the article is a motor vehicle; and

(d) Every person who has registered a claim for lien under Part II (Non-possessory Liens) against,

(i) The name of the owner, if the owner is a person entitled to notice under clause (a) or (b),

(ii) The vehicle identification number, if the article is a motor vehicle.

Contents of notice

(3) The notice required by subsection (2) shall contain,

(a) A description of the article sufficient to enable it to be identified;

(b) A statement of the amount required to satisfy the lien, as of the time when the notice is given, and any costs of seizure;

(c) A statement of the method of calculating, on a daily basis, any further costs for storage or preservation of the article that may be incurred between the time when the notice is given and the time when the sale is to take place;

(d) A statement that the article may be redeemed by any person entitled to receive notice by payment of the amount determined under clauses (b) and (c) plus any other reasonable costs incurred in preparing the article for sale;

(e) A statement of,

(i) The name of the person to whom payment may be made,

(ii) The address where the article may be redeemed,

(iii) The times during which redemption may be made,

(iv) The telephone number, if any, of the person giving notice;

(f) A statement of the date, time and place of any public sale at which the article is to be sold, or the date after which any private sale of the article is to be made; and

(g) A statement that the article may be sold unless it is redeemed on or before the day required to be specified in the notice by clause (f).

Method of sale

(4) The article may be sold in whole or in part, by public or private sale, at any time and place, on any terms, so long as every aspect of the sale is commercially reasonable.

Purchase by lien claimant

(5) The lien claimant may purchase the article only at a public sale.

Retention of article

17 (1) A lien claimant who has a right to sell an article may propose, in lieu of selling it, to retain the article in satisfaction of the amount of the lien claimed by giving written notice of the proposal to the persons entitled to notice under subsection 15 (2).

Objection

(2) Where a person entitled to notice under subsection (1) gives the lien claimant a written objection to the proposal within thirty days of the receipt of the proposal, the lien claimant, subject to subsections (3) and (4), shall sell the article in accordance with section 15.

Application to court

(3) Upon application to the Superior Court of Justice and upon notice to every person who has given a written objection to the proposal, the court may order that the objection is ineffective because,

(a) The objection was made for a purpose other than the protection of the interest in the article of the person who made the objection; or

(b) The fair market value of the article is less than the amount of the lien of the lien claimant and the estimated expenses to which the lien claimant is entitled under this Act.

Foreclosure

(4) If no effective objection is made, the lien claimant, at the expiration of the thirty-day period mentioned in subsection (2), shall be deemed to have irrevocably elected to retain the article and thereafter is entitled to hold or dispose of the article free from the rights and interests of every person to whom the written notice of the proposal was given.

Determination of rights by court

23 (1) Any person may apply to a court for a determination of the rights of the parties where a question arises with respect to,

(a) The seizure of an article under Part II (Non-possessory Liens), any right of seizure in respect of the article, whether the costs of seizure are recoverable or whether they exceed the amount permitted under subsection 14 (3.1);

(b) The sale of an article under Part III (Redemption, Sale or Other Disposition);

(c) The distribution of the proceeds of the sale of an article under Part III, including the right of any person to share in those proceeds, and the obligation of any lien claimant to account for those proceeds;

(d) The amount of a lien or the right of any person to a lien; and

(e) Any other matter arising out of the application of this Act, and the court may make such order as it considers necessary to give effect to those rights.

Limitation

(2) An application shall not be made under clause (1) (d) where an application has been made under section 24.

Form of application

(3) An application under subsection (1) to the Small Claims Court shall be in the prescribed form. 2

Return of article when dispute

24 (1) Where a claimant claims a lien against an article under Part I (Possessory Liens) and refuses to surrender possession of the article 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.

Same, non-possessory lien

(1.1) 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.

Dispute

(1.2) Subsection (1) or (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

(c) A dispute concerning the right of the lien claimant to retain possession of the article.

Respondents

(2) The application shall name, as the respondents, the lien claimant and, in the case of a non-possessory lien, the person who has possession of the article.

Form

(3) The application shall be in the prescribed form and may include an offer of settlement.

Payment into court

(4) The applicant shall pay into court, or deposit security with the court in the amount of, the full amount claimed by the respondent but where the applicant includes an offer of settlement in the application, the applicant shall pay into court the amount offered in settlement and shall pay into court, or deposit security with the court for, the balance of the full amount claimed by the respondent and payments and deposits under this subsection shall be made to the credit of the application.

Initial certificate

(5) Where money is paid into court or a deposit is made with the court under subsection (4), the clerk or registrar of the court shall issue an initial certificate in the prescribed form and under the seal of the court stating that the amount indicated in the initial certificate, or security for that amount, has been paid into or deposited with the court to the credit of the application and, where applicable, indicating the portion of that amount that is offered in settlement of the dispute.

Release on interim certificate

(6) The applicant shall give the initial certificate to the respondent who, within three days of receiving the initial certificate, shall release the article described therein to the applicant unless, within the three day period, the respondent files with the court a notice of objection in the prescribed form.

Final certificate

(7) Where an objection has been filed with the court, the applicant may pay the additional amount claimed as owing in the objection into court to the credit of the application or deposit security for that amount with the court to the credit of the application and, where the additional amount has been paid into court or the additional security has been deposited with the court, the clerk or registrar shall issue a final certificate in the prescribed form and under the seal of the court.

Release on final certificate

(8) The applicant shall give the final certificate to the respondent who, upon receiving the final certificate, shall release immediately the article described therein.

Writ of seizure

(9) Where the respondent does not release the article as required, the applicant may obtain from the clerk or registrar of the court, without notice to the respondent, a writ of seizure in the prescribed form directing the sheriff or bailiff to seize the article and, upon receipt of the writ, the sheriff or bailiff shall seize the article and return it to the applicant.

Idem

(10) Before obtaining a writ of seizure, the applicant shall file an affidavit with the clerk or registrar of the court confirming that the respondent has not released the article as required.

Payment out of court of settlement

(11) Where the respondent releases the article to the applicant in compliance with an initial or final certificate, or where the article is seized by a sheriff or bailiff under a writ of seizure, the respondent may demand a receipt in the prescribed form to this effect, and upon presentation of the receipt to the clerk or registrar of the court and signing a waiver of further claim in the prescribed form, the respondent shall be paid the portion of the amount paid into court that was offered in settlement of the dispute.

Notice to applicant

(12) Where the respondent accepts the amount offered in settlement of the dispute, the clerk or registrar of the court shall notify the applicant and upon request shall return to the applicant the balance of the amount deposited into court and deliver up any security deposited by the applicant for cancellation.

Substitution of security

(13) Where the article is released to the applicant by the respondent or is seized by the sheriff or bailiff under subsection (9), the lien is discharged as a right against the article and becomes instead a charge upon the amount paid into court or the security deposited with the 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.

Discharge

(14) The charge upon the money paid into court or the security deposited with the court is discharged ninety days after the article was returned to the applicant or seized unless, before the end of the ninety days, the respondent has accepted the applicant’s offer of settlement or has commenced an action to recover the amount claimed.

Return of money or security

(15) Upon the expiry of the ninety days referred to in subsection (14), the clerk or registrar of the court may return to the applicant the money paid into court and deliver up for cancellation any security deposited with the court if the applicant files with the clerk or registrar an affidavit confirming that the respondent has neither accepted an offer of settlement nor commenced an action to recover the money claimed.

Costs of enforcing writ seizure

(16) The respondent is liable for the costs of enforcing a writ of seizure and these costs shall be set off against the amount paid into court under this section.

GENERAL PRINCIPLES

[34] The RSLA provides for procedures to determine disputes between owners of vehicles that are towed and stored by tow truck companies, concerning the amounts invoiced for those services.

STANDARD OF REVIEW

[35] A deputy judge’s decision that deals with questions of fact will be reviewed on a standard of palpable and overriding error. The standard of palpable and overriding error applies where the legal principle is not readily extricable.

[36] Questions of pure law will be subject to a standard of correctness. Questions of mixed fact and law are subject to the nature of the error and to jurisprudence on appellate standards of review: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653, at para. 37.

[37] Where an error can be attributed to the application of an incorrect legal standard, such as a failure to consider a required element of a legal test, or similar error in principle, the standard of correctness applies.

[38] Where the legal principle is not readily extricable, then the matter is one of “mixed law and fact” and is subject to a more stringent standard. The general rule is that where the issue on appeal involves the trial judge’s interpretation of the evidence as a whole, it should not be overturned absent palpable and overriding error: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 36.

ANALYSIS

[39] The vehicle owner signed a contract for towing and storage with the Respondents.

[40] It is common that a vehicle owner’s insurance company will deal with the storage facilities concerning amounts invoiced.

RSLA Sections 15 and 17 Requirements Not Met

[41] The Deputy Judge legally erred in finding sections 15 and 17 of the RSLA were complied with by the Respondents.

[42] The Deputy Judge erred in finding that the contract and draft notice of objection complied with the RSLA because “the wording is taken from the RSLA. I do not know what further notice would be required.” Nowhere in the Deputy Judge’s decision is there reference to compliance with the detailed mandatory contents of the notice to the owner as required by section 15. Had the Deputy Judge’s decision factored the mandatory notice requirements under sections 15(2) and 15(3) of the RSLA, it would have become clear that the Respondents failed to provide the notice required by statute. Unfortunately, none of the notice requirements detailed in these sections of the RSLA are analyzed in the decision under review.

[43] I accept the Appellant’s argument that the Respondents failed to deliver proper notices pursuant to sections 15 and 17 of the RSLA to retain and then sell the Appellant’s vehicle after May 3rd.

[44] The Respondent’s conduct is an egregious violation of the purpose and content of the RSLA section 15 notice provisions. The language in section 15(1) is that a lien claimant shall not exercise that right unless the lien claimant has given notice of intention to sell the article.

[45] I do not accept the Respondents’ position that their email re-sending the contract and invoice to the Appellant on May 10, 2021, telling them to read the back and front, served as a clear notice of an intention to (subsequently and at an unknown date) sell the vehicle pursuant to section 15(2). The Respondents’ emails to the Appellant and the contract or invoice makes no mention that the vehicle will be sold.

[46] Respectfully, the Deputy Judge legally erred in finding that the Respondents’ contract and notice of objection constitutes the obligatory notice of an intention to sell the vehicle under the RSLA pursuant to section 15(2). The Deputy Judge’s finding that the contract (or any other correspondence or document tendered by the Respondent for that matter) included the necessary language was an error of law. The Small Claims decision fails to consider the obligatory wording of s. 15(2) of the statute.

[47] In addition, the Deputy Judge erred by finding that the Respondents complied with the RSLA even though the Respondents clearly failed to abide by every requirement of the contents of the notice required in ss.15(3) from (b) through (g):

(b) A statement of the amount required to satisfy the lien, as of the time when the notice is given, and any costs of seizure;

(c) A statement of the method of calculating, on a daily basis, any further costs for storage or preservation of the article that may be incurred between the time when the notice is given and the time when the sale is to take place;

(d) A statement that the article may be redeemed by any person entitled to receive notice by payment of the amount determined under clauses (b) and (c) plus any other reasonable costs incurred in preparing the article for sale;

(e) A statement of,

(i) The name of the person to whom payment may be made,

(ii) The address where the article may be redeemed,

(iii) The times during which redemption may be made,

(iv) The telephone number, if any, of the person giving notice;

(f) A statement of the date, time and place of any public sale at which the article is to be sold, or the date after which any private sale of the article is to be made; and

(g) A statement that the article may be sold unless it is redeemed on or before the day required to be specified in the notice by clause (f).

[48] The Respondent’s contract, signed at the time of the accident, clearly does not comply with the RSLA requirements that shall be included in the contents of the notice to sell pursuant to section 15(3), subsections (b) through (g). Kew v. Konarski, 2020 ONSC 4677, at para. 37.

[49] During submissions, counsel for the Respondents was asked but unable to point this court to anywhere in the relevant back-page of the Respondent’s contract (or elsewhere in their record) that complied with the statutory requirements in RLSA section 15(3).

[50] The RSLA states that notice must identify in a statement: the article, set out the amount required to satisfy the lien when notice is given and the time when the sale is to take place, explain how to redeem the article by payment, include contact particulars, and provide the deadline by which the article must be redeemed before it is sold by public auction or private sale.

[51] Further, the Respondents’ contract wrongly states, in a pre-emptive manner, “We acknowledge that all requirements of Part III of the Act (RSLA) have been met.”

[52] To the contrary, the mandatory notice requirements of the RSLA are clearly not met by the Respondents contract and the clauses that are relied upon by the Respondents are non-enforceable. The Respondents did not provide clear notice otherwise.

[53] The Respondents’ conduct of deliberately relying on their contract language despite its failure to comply with the RSLA while maintaining they are authorized by that statute to retain and dispose of the Appellant’s assets is misleading and contrary to public policy. When the parties entered the contract for towing and storage, the owner of the vehicle clearly did not authorize the Respondents to sell the vehicle without clear notice as required by the RSLA. It would be illogical and unfair if, by contract, the Respondents could negate the notice provisions of section 15 of the RSLA while also using their contract to argue compliance with those same provisions. To permit contracting out of the provision in this problematic manner would defeat the whole purpose of RSLA legislation enacted in the public interest to resolve disputes over fees and amounts owing in a fair and efficient manner: Royal Trust Co. v. Potash, at para. 37, 40, [1986] 2 S.C.R. 351, at pp. 372-373.

[54] Contractual interpretation requires courts to consider the principle of commercial reasonableness and efficacy. Contracts ought therefore to be interpreted “in accordance with sound commercial principles and good business sense.” Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60 at para. 79 citing Scanlon v. Castlepoint Development Corp. (1992), 11 O.R. (3d) 744, at p. 770.

[55] This contract’s non-compliance with mandatory notice provisions was illegal. On balance, where the waiver of statutory notice requirements was not made clear in the contract and not intentionally agreed to by the parties, (who are also not on equal footing at the time the contract is entered) the general principle applies that a contract that conflicts with, or is expressly or impliedly prohibited by statute is void: Re Northwestern Trust Co., [1926] S.C.R. 412; see also Machtinger v. HOJ Industries, [1992] 1 S.C.R. 986, at p. 1001; Jordan v CIBC Mortgages Inc., 2019 ONSC 1178 at para. 95.

[56] I do not accept counsel for the Respondents’ argument that their contract serves as pre-emptive or continuing notice to the owner that the lien claimant will retain and sell the vehicle pursuant to sections 15 and 17 of the RSLA. The contract does not comply with the RSLA.

[57] The Respondents also did not comply with section 17 (1) of the RSLA. The obligations that arise from this section are not addressed by the Deputy Judge also constituting legal error. Section 17 requires written notice of a proposal by the lien claimant to retain the item, (instead of selling it), to the persons entitled to notice under subsection 15(2). No proposal was put forward by the Respondents during the time it was retained.

[58] Overall, the Respondents failed to comply with the obligatory and statutory requirements in sections 15 and 17 of the RSLA. This is determinative of my decision to grant the appeal.

[59] In addition, the Deputy Judge erred by failing to address that the Respondents did not account for the amount and proceeds of the sale, nor advise if there was any residual amount of the proceeds remaining to be paid as required by section 16. For example, where a lien claimant has sold an article and the proceeds thereof exceed the aggregate of the expenses associated with its sale and seizure (if applicable), the amount of the relevant lien, and the amount of any other liens or security interests in the article, the owner has a right to be paid such excess moneys. See Section 16(1)(g).

Sections 23 and 24

[60] Since the appeal is granted for the reasons above, the Appellant’s position about the Deputy Judge’s misinterpretation of sections 23 and 24 of the RSLA are not necessary to determine the outcome of the appeal.

[61] However, I will address this issue out of concern that a similar case may arise in the future and that courts should be aware of the potential misuse of the RSLA provisions that defeats the purpose of the statute to expeditiously and fairly deal with disputes over the asset in issue pursuant to section 24, before it is disposed of.

[62] I accept the Appellant’s position that the Deputy Judge erred in finding that the Respondents were entitled to proceed with their application under section 23(1)(e) of the RSLA. In the circumstances of this case, the Deputy Judge failed to recognize that the Respondents brought a section 23(1)(e) application to circumvent the statutory restriction under section 23(2) and abrogate the Appellant’s rights under section 24.

[63] The Respondents improperly used s. 23(1)(e) to get a ruling from the Small Claims Court that they had complied with sections 15 and 17 of the RSLA, long after they sold the Appellant’s vehicle without mandatory notice before and required reporting after disposing of the asset. This is not a proper reliance of section 23(1)(e) by the Respondents. Although a section 23 application could be brought by “any person” to address “any other matter arising out of the application of this Act,” read in the context of these facts, the Respondent’s resort to section 23 was improper.

[64] First, the actual basis for the dispute between the parties concerns the amount of the lien, specifically the $2,500 contract cancellation fee imposed on the Appellant, and the Respondents’ entitlement to that amount. This means that the application falls squarely under section 23(1)(d), not 23(1)(e) as relied upon and pled by the Respondents.

(d) The amount of a lien or the right of any person to a lien; and

(e) Any other matter arising out of the application of this Act, and the court may make such order as it considers necessary to give effect to those rights.

[65] However, section 23(2) places a restriction on the eligibility of section 23(1)(d) by stating: “An application shall not be made under clause (1)(d) where an application has been made under section 24.”

[66] Counsel for the Respondents’ factum at para. 3 acknowledges the true purpose of the proceedings at the outset: “The total funds in dispute are $3,826.18 for towing and storage fees. The Appellant refused to pay this modest sum yet requested the return of the vehicle without a vehicle valuation.” Further, the Respondent’s factum is largely devoted to the enforceability of the cancellation fee.

[67] Second, the Respondents knew by the time they issued their section 23(1)(e) application on June 7, 2021, that the Appellant had already commenced a section 24 application as of May 14, 2021.

[68] The Respondents sought to argue that the Appellant was seeking to circumvent sections 15 and 17 of the RSLA, while the Respondent knew that they had improperly sold the subject vehicle without notice and failed to report the proceeds as required by the RSLA.

[69] If the Respondents disputed with the amount paid into court by the Appellant and wanted to argue that it was insufficient based on the Respondents’ draft notice of objection (filing of which with the court remains unproven), they could have conceivably litigated that specific issue and any other dispute about their rights under section 23(1)(e), before selling the subject vehicle without notice. Hamilton v. 1262108 Ontario Inc. (2001), 55 O.R. (3d) 19 (Ont. C.A.) at para. 10; see also Kuzian v. Downtown Auto Collision Centre Inc., 2007 CarswellOnt 9206 at para. 4.

[70] The Appellant was proceeding in good faith under section 24 which stipulates that 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. The Appellant proceeded on this basis to obtain the return of the vehicle, before the subject vehicle was likely transferred by the Respondents to themselves and sold without the Appellant’s knowledge.

[71] Despite section 24 being the proper section for this matter to be resolved before the vehicle was disposed of, the Respondents brought a motion under s. 23(1)(e) to get an order that they were entitled to retain and sell the vehicle, despite having already sold and retained the proceeds without complying with the RSLA.

[72] On these facts where the subject vehicle was already sold without notice or reporting, the Respondent’s application under section 23(1)(e) likely circumvented the legislative purpose and contributed to the unjust outcome.

[73] Since the Appellants were proceeding under section 24, had the Respondents’ proceeded under section 23(1)(d) they would have been prohibited from doing so pursuant to section 23(2).

[74] The purpose of section 24 of the RSLA is to allow the owner of the article to recover their property in the interim while the amount is disputed before the court, transferring the possessory lien to the funds paid as security into court.

[75] In Hamilton v. 1262108 Ontario Inc. (2001), 55 O.R. (3d) 19 (Ont. C.A.), at paras. 13-16, the Court of Appeal explained the way that section 24 operates to resolve similar disputes fairly:

[13] Second, s. 24 provides an alternate procedure which is optional for an owner and allows an owner an expeditious and speedy method of obtaining release of the liened goods upon payment into court of all or part of the amount claimed without appearing in court for a hearing. Once the money has been paid into court and the goods have been obtained from the lien claimant, it is the lien claimant, and not the owner, who then must initiate an action under s. 24(13) in order to obtain payment out of court of the disputed portion (which may be all) of the amount of the lien.

[14] Under s. 24, an owner of an article "may apply to the court". The section is not mandatory. The owner may pay into court a settlement amount, which the lien claimant may accept in full satisfaction of the lien. If the lien claimant does not accept the settlement amount, then in order to obtain release of the goods, the owner must pay into court the balance of the amount claimed for the lien, and is then entitled to release of the goods. The lien claimant may then obtain the settlement amount out of court. If the lien claimant wishes to pursue the balance, or, if there is no settlement amount, the entire amount paid into court, the lien becomes a charge on the amount in court, and the lien claimant has 90 days in which to commence an action to recover that amount.

[15] In my view, it is clear that the Act provides two exclusive procedures for access to the court to obtain a determination of the lien rights of affected parties. Section 23 may be used by "any person" including the owner of goods or the lien claimant. Section 24 is available initially only to the owner (or other person lawfully entitled to the article) if the owner wishes to obtain the article back quickly and is prepared to pay the claimed amount of the lien into court.

[16] By using s. 23(1)(d), the lien remains a charge on the goods and the owner will not be able to obtain the goods back until after the court has determined the issues. When s. 24 is used, the lien is transferred from the goods to the funds paid into court, the owner obtains the goods back quickly and the court determines the rights of the parties to the funds in court. [Emphasis in original].

[76] Overall, the Deputy Judge erred by failing to recognize that the Respondent brought a section 23(1)(e) application to circumvent the notice provisions of the statute under sections 15 to 17, and the statutory restrictions under section 23(2), all in order to abrogate the Appellant’s rights under section 24 so that they could obtain retroactive authorization for their misconduct.

[77] The Respondents’ cumulative conduct was contrary to the purpose of the RSLA.

[78] A final comment. To the extent that the Respondents are engaged in similar use of their standard contract with people shortly after being involved in accidents as a basis to retain and sell their vehicles without notice, under the pre-text of the RSLA, this must not continue.

CONCLUSION

[79] The appeal is granted.

[80] I order that the Deputy Judge’s order granting the Respondents RSLA section 23(1)(e) application be set aside.

[81] I find that the Respondent’s sale of the Appellant’s vehicle was not authorized by law.

COSTS

[82] The parties agreed to costs in the event of an outcome favourable to either side.

[83] The Appellant is the successful party and shall receive costs from the Respondents, jointly and severally, in the amount of $11,665.34.

Mirza J.

Released: May 5, 2025