Court File and Parties

Court File No.: CV 13-74

Date: 2013/10/17

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Action Auto Leasing & Gallery Inc., Plaintiff (Appellant)

AND:

Jennifer K. Cantlon (aka Jennifer Fizor), Defendant (Respondent)

Before: The Honourable Mr. Robert J. Nightingale

Counsel:
Lindsay Kirk, Counsel, for the Plaintiff (Appellant)

No one appearing for the Defendant (Respondent)

Heard: September 19, 2013

ENDORSEMENT

[1] The Appellant Action Auto Leasing & Gallery Inc. appeals from the Judgment of Deputy Judge R. Campbell dated January 18, 2013 wherein he awarded damages in favour of the Appellant against the Respondent in the amount of $5493.40 plus prejudgment interest and costs.

[2] The Appellant’s position is that the Deputy Judge erred in his assessment of the damages payable to it and improperly applied provisions of the Consumer Protection Act (“CPA”) to reducing its claims for damages against the Respondent when she defaulted in payment under an automobile lease with the Appellant.

Trial Decision

[3] The undisputed evidence accepted by the Deputy Judge was that in May 2010, the Respondent approached the Appellant for financing to acquire a replacement vehicle after hers broke down. She signed an offer to lease form provided by the Appellant on June 3, 2010 after she disclosed that she needed a minivan to drive approximately 1350 km per month for her personal use.

[4] The Appellant’s finance department approved the high risk lease and prepared the lease form in accordance with the offer to lease which was signed on June 8, 2010. The Respondent made a down payment on the lease and the used vehicle was provided to the Respondent who then drove it more than 34,000 km over approximately six months which was well in excess of the mileage permitted under the lease.

[5] The Respondent then defaulted in lease payments totalling approximately $540 in January 2011 and the Appellant learned the vehicle had been involved in an accident on December 31, 2010. The vehicle was repaired by the insurer of the vehicle and the Appellant took possession of it after providing the appropriate notice of termination of the lease to the Respondent on January 28, 2010.

[6] The Respondent failed to exercise her option under the lease to purchase the vehicle or pay up the arrears owing under the lease. The Appellant then sold the vehicle at a wholesale auction as allowed under the lease and provided the appropriate credit to the Respondent of the net proceeds received of $5041.

[7] The Appellant’s lease attached as Schedule A to these reasons specifically allowed it to claim as its damages the total amount of the lease payments owing under the lease and for the 182 weeks balance of the lease term. After providing credit for all payments made by the Respondent including the $5041 in net sale proceeds received and the appropriate interest discount for the value of the accelerated future lease payments, the damages calculation came to $13,973.63.

[8] There was no suggestion at trial that this amount was excessive or unreasonable or that it did not reflect the parties’ reasonable estimate, at the time the lease was signed, of the probable damages that would arise if the Respondent breached the lease. This amount is accordingly properly claimable by the Appellant as liquidated damages under the lease. Keneric Tractor Sales Limited v. Langille 1987 29 (SCC), [1987] 2 S.C.R. 440; Hav-A-Kar Leasing Ltd. v. Vekselshtein 2012 ONCA 826; Action Auto Leasing & Gallery Inc. v. Boulding 201 ONSC 7253.

[9] The Respondent, who was not present at the trial, called no evidence and through her Litigation Guardian representative, did not challenge the Plaintiff’s evidence and that calculation of the damages of the Appellant under the lease.

[10] The only position advanced by the Respondent at trial and acknowledged by the Deputy Judge in his reasons was that the Respondent was prevented from reclaiming the vehicle in January 18, 2011 because of the alleged significant default charges of the Appellant. In particular, the Respondent at no time in her pleadings or at trial claimed that she was misled about or did not fully understand the terms of the lease or disclosure provided, that the Appellant had engaged in an unfair practise or that she was entitled to claim rescission of the lease or to pay lesser damages than what were properly owing to the Appellant because of any alleged violation by it of the provisions of the CPA.

[11] Nevertheless, the Deputy Judge concluded that proper disclosure was not made under the CPA by the Appellant on various items and that it breached its obligations under the CPA by engaging in unfair practices and misrepresenting terms of the lease. He found, however, that it would be not be equitable to find that the Respondent was not bound by any of the lease obligations because of the Appellant’s errors.

[12] He held that pursuant to section 93 of the CPA, the equitable result required was to deny the Appellant its “profits” on the lease and not simply reduce its damages by the amount of the “hidden charges”. Otherwise, in his view, that would amount to nothing more than imposing a licensing fee for the Appellant’s noncompliance with and unfair practises under the CPA.

[13] The Deputy Judge instead then calculated the damages by using the original retail cash value of the leased vehicle, warranty costs and taxes totaling $17,709.93 and deducting the net proceeds of sale of the leased vehicle of $5041.42 and the total payments including the security deposit made by the Respondent under the lease of $7175.11. This resulted in a figure of $5493.40 which he awarded to the Plaintiff plus costs of $175.

Analysis

[14] Section 25 of the Courts of Justice Act requires the Deputy Judge to hear and determine in a summary way all questions of law and fact and allows him to make his decision as he considers just and agreeable in good conscience.

[15] The Deputy Judge should take a liberal approach to the pleadings in order to determine the legal issues in the case before him. 936464 Ontario Ltd. v. Mungo Bear Ltd. 2003 72356 (ON SCDC), 74 O. R. (3d) 45. However in my view he must do so based on the evidence and facts before him at the trial. In particular, although he was at liberty to consider the potential applicability of the CPA or any violation thereof, he could only do so if the evidence and facts warranted it.

[16] The Deputy Judge’s findings of fact, inferences of fact and of mixed fact and law are entitled to great deference from this court and will not be interfered with unless it is satisfied that the finding was the result of a palpable and overriding error. The Deputy Judge’s findings or inferences of fact may be set aside on appeal if they are clearly wrong or where they are unreasonable or unsupported by the evidence and are likely to have affected the result at trial. An unreasonable finding of fact can result from a failure to consider relevant evidence, misapprehension of relevant evidence, where there is no basis in the evidence for it or where it is based on an inference that is speculation rather than legitimate inferences. General Motors of Canada Ltd. V. Johnson 2013 ONCA 502, 2013 ONCA502; Peart et al v. Peel Regional Police Services Board 2006 37566 [ONCA].

[17] On a pure question of law, an appellate court is free to replace the opinion of the Deputy Judge with its own as the applicable standard is that of correctness. The Deputy Judge’s decision is incorrect if it is based on an erroneous interpretation of a statute or an erroneous application of a legal principle. Housen v. Nikolaisen 2002 SCC 33.

[18] I accept the submissions of the Appellant and am satisfied that the Deputy Judge made the following significant errors in his decision:

a) He determined that there were no advances made by the Appellant under the lease as defined under s. 72 of the CPA Regulation 17/05. In fact, the Appellant did cover the fees for PPSA searches, license and OMVIC fees and applicable taxes owing by the Respondent which in my view constitute “advances” under that section.

b) He determined that the capitalized amount under the lease was $14,171.35 which was $370.65 less than the capitalized amount stated by the Appellant. However, he failed to include the payment by the Appellant of the regulatory fees it paid on behalf of the Respondent as reflected in the plaintiff’s evidence at trial.

c) He found that the Appellant had understated the lease implicit finance charge by $930.49 in the lease. However, in error, he deducted a termination fee when it was not included in the first place, failed to exclude certain advances made by the Respondent which should have been deducted from both the capitalized amount and lease finance charge calculations and deducted the wrong capitalized amount (not including the gas card amount referred to below).

d) He found that the total lease cost was $25,860.31 not $26,082.33 as disclosed in the lease. However, he did not deduct the tax payable on the pro rata payment already included twice and failed to include the termination fee including taxes.

e) He found that the inclusion by the Appellant of a set-up administration fee of $269 which increased because of interest accumulating thereon over the term of the lease to $475 as it was included in the capitalized amount was not properly disclosed separately and was an unfair practice under the CPA.

However, given that this was a high risk lease, a reasonable person including the Respondent would expect a lessor’s administration charge regarding the establishment of a credit arrangement that was not paid for at the outset. One would also reasonably expect that that charge would also be capitalized and bear interest at the stated rate in the lease and be paid for with the payments over the lease term if not paid for at the outset. In fact, the Appellant properly disclosed the implicit finance charges and total lease costs in the lease itself to the Respondent and the requirement to pay interest on the total capitalized amount under the lease which included this fee. There was no need to separate out each item.

Moreover, there was no evidence or submissions ever made by the Respondent or issues raised that the setup fee and the associated financing charges thereon were misrepresented or not properly disclosed to her. There accordingly was no basis for the Deputy Judge’s finding that these costs were concealed or intentionally withheld from the Respondent.

[19] The Deputy Judge found that the lease was not clear and comprehensible and did not comply with the disclosure obligations required by the CPA.

[20] However, the Appellant did provide a written lease disclosure form that formed part of the lease as required by the CPA Regulation section 74 (2). That lease disclosure was signed and initialed by the Respondent. The calculations of the amounts owing and the capitalized payments under the lease were clear and the Deputy Judge himself found that these calculations were easy enough working from the disclosure statement provided by the Appellant. In my view, the Appellant, subject to the gas card issue, complied with its disclosure requirements under section 89 of the CPA.

Gas Card

[21] The Deputy Judge found that a $250 charge for an optional gas card for the Respondent was both an unsolicited service and an unfair practice by the Appellant, both contrary to the CPA.

[22] The Deputy Judge found that there was no evidence that the Respondent requested the gas card even though the gas card or credit in lieu of it was included in the lease offer signed by her and discussed with her at the time. In addition, the Respondent did not plead or lead any evidence to suggest that she did not request or agree to pay for the gas card. The Deputy Judge accepted the validity of the lease which was binding on the Respondent as she signed it. Accordingly, the Deputy Judge erred in finding that the gas card was an unsolicited service and that the Appellant violated the CPA.

[23] The Deputy Judge found that as the gas card cost of $250 was included in the capitalized amount of the lease and which increased given the annual percentage rate of the lease, the actual cost to the Respondent was approximately $440. (In fact, the total cost was closer to $400 applying the correct calculation of the annual percentage interest rate).

[24] The Appellant’s witness explained at trial that the Respondent did not choose to or in fact receive a gas card but received a credit in lieu of that by way of a deduction of that total $250 cost. Unfortunately, the Appellant’s lease form included the $250 gas card deduction being made after, not before that fee was included in the capitalized value which bore significant interest.

[25] The Appellant’s witness thought that it was a “wash” but simply could not explain the discrepancy of the Respondent in fact being charged interest on that $250 amount that was capitalized.

[26] Even though there was no other evidence, the Deputy Judge found that the Appellant had structured the gas card to hide its true charges and make a concealed profit on it which was an unfair practice under section 14 of the CPA.

[27] Although the Respondent in this case should have had the appropriate credit and deduction for that gas card provided to her under the lease cost disclosure section similar to other credits she received (eg. for her down payment and other payments for PPSA filing, license and OMVIC fees) to ensure that that $250 charge wasn’t capitalized first, the evidence did not establish that the Appellant was being deliberately deceptive and that it intentionally structured the gas card charge and rebate so as to make itself a concealed profit. The Respondent is entitled to a credit of the capitalized interest on the gas card of $150.27 because of the Appellant’s mistake in its lease forms which forms should obviously now be corrected by the Appellant.

Conclusion

[28] The Deputy Judge, with all due respect, erred in his findings of fact and inferences that the Appellant engaged in deliberately deceptive and unfair practices including concealing interest charges from the Respondent because of a misapprehension of the relevant evidence in some parts and with no basis in the evidence and on speculative inferences in others.

[29] In addition, in the circumstances, his failure to award the Plaintiff its damages based on the agreement of the parties as reflected in the lease for the arrears and balance of the lease payments owing until the termination date is an error in law.

[30] Accordingly, the Deputy Judge’s decision to deny the Appellant’s actual damages sustained under its lease cannot be sustained and must be set aside.

[31] The Appellant is accordingly entitled to its damages representing the total arrears of lease payments and balance of lease payments owing under the lease (less an interest discount regarding the future payments) less credit for the amounts paid by the Respondent, the net sale proceeds of the leased vehicle, and the $150.27 interest payment on the gas card as indicated above which net damages total $13,823.26. .

[32] The Appellant is entitled to prejudgment interest thereon at the lease stipulated rate of 18% per year from February 18, 2013 plus post judgement interest from today’s date at the rate prescribed by the Rules of Civil Procedure.

[33] The Appellant is entitled to its costs of the trial in the amount of $175 as determined by the Deputy Judge.

[34] The Appellant is also entitled to its costs of this appeal which, given the principles outlined in Boucher v. Public Accountants Council for the Province of Ontario (2004) 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) including the amount in issue, I fix in the amount of $3500 inclusive of HST and disbursements.

The Honourable Mr Justice Robert J. Nightingale

Date: October 17, 2013