Court File and Parties

DIVISIONAL COURT FILE NOS.: 096/21

DATE: 20211223

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: doyle manufacturing inc. v. 2531574 ontario inc. o/a SCC autosport

BEFORE: D.L. Corbett J.

COUNSEL: Jens O. Drees, for the Respondent/Appellant

Justin M. Jakubiak, for the Applicant/Respondent

HEARD at Toronto by Zoom: April 21, 2021

ENDORSEMENT

[1] This is an appeal from the final order of Associate Justice Graham striking a Notice of Objection made by the appellant under the Repair and Storage Liens Act, RSO 1990, c. R.25 (the “RSLA” or the “Act”), directing the Sheriff to seize the subject vehicle and return it to the Respondent, SCC Autosport, and directing SCC Autosport not to permit the vehicle to be operated on a highway until it has been registered with the appropriate authorities and certified roadworthy. (2021 ONSC 400).

[2] The appellant, Doyle, raises the following grounds of appeal:

(a) the Associate Justice erred in finding that the appellant’s services constitute “repair” and “storage” within the meaning of the Act;

(b) the Associate Justice erred in finding that the Act applies to the subject vehicle;

(c) the Associate Justice misapprehended or disregarded evidence, including a “Position Statement” that a ‘glider kit’ is a “part” and not a “vehicle”;

(d) the Associate Justice erred in failing to find that the regulatory regime in Canada prohibits the appellant from releasing the subject vehicle from its possession;

(e) the Associate Justice exceeded his jurisdiction by ordering release of the subject vehicle; and

(f) the Associate Justice erred by finding that the appellant acknowledged that it is subject the Act.

[3] I do not accept these arguments; for the reasons that follow, the appeal is dismissed.

[4] SCC Autosport contracted with Doyle for a customized mobile lounge for use for corporate entertainment. SCC Autosport provided Doyle with a 2014 Freightliner Argosy, which is or was a transport truck, which it purchased January 3, 2017. The idea was that Doyle would customize the Argosy for use as a mobile lounge.

[5] SCC Autosport says that it provided a transport truck to Doyle for customization. Work done on the truck by Doyle constituted “repairs and modifications” to the truck. Doyle says that it was not provided a truck for customization, but rather that it received “parts” to be used in the “manufacture” of a completely different item, a recreational vehicle. The “parts”, it says, are known in the industry as a “glider kit” and they do not qualify as a “vehicle”. The services provided by Doyle were in the nature of “manufacturing” and not “repair” and therefore the Act does not apply.

[6] SCC Autosport acknowledges that the Argosy consisted of a cab, chassis and engine, but did not include a transmission or axles, and was not capable of being driven. Nonetheless, it argues, the Argosy was an article owned by SCC Autosport, brought to Doyle to have work done on it, and the Act applies to it.

[7] The Associate Justice characterized the dispute as follows:

Doyle submits that, rather than being provided with a truck to be modified or customized, they were provided with components to manufacture a different product, being a motor home/recreational vehicle, such that the [Act]… would not apply to the transaction. This is a central issue on the motion. (Decision, para. 4)

[8] The underlying dispute arose more than a year after the Argosy was provided to Doyle. SCC Autosport lost confidence in Doyle’s ability to complete the work. Doyle wanted to be paid for the work it had done before releasing the to someone else:

Doyle started the customization work in February, 2017. In or about May, 2018, SCC Autosport began to lose confidence in Doyle’s ability to complete the powertrain components of the customization. The relationship between the parties subsequently deteriorated to the point that SCC Autosport requested the return of the Argosy so that the work could be completed by a third party. On January 4, 2019, Doyle’s office manager informed SCC Autosport that “there will be no issue releasing the truck after payment has been received for the outstanding invoice”. On January 6, 2019, SCC Autosport requested that Doyle stop working on the Argosy.

On May 30, 2019, after some further discussions, Doyle wrote to SCC Autosport advising that they had “no choice in charging storage fees and interest” until SCC Autosport paid the “outstanding invoice including the HST ($126,920.36) or sign the Ownership over.” Doyle’s invoice dated July 2, 2019 reflects total charges of $273,005.90, payments of $143,034.54, and a balance owing of $129,971.36. (Decisions, paras. 5-6)

[9] SCC Autosport disputed the amount claimed as owing by Doyle and paid it into court pursuant to the Act. Doyle disputed the quantum of the payment into court, asserting that additional customs duties would be owing upon release of the vehicle back to SCC Autosport. None of these had been included in Doyle’s prior invoice that had been the basis of its position for release of the vehicle. These additional expenses were said to be estimated at $150,000. The Associate Justice found as follows in respect to these additional claimed expenses:

It should be noted that all of the categories of expenses listed by Doyle’s counsel as comprising the additional $150,000.00 are in respect of the export of the Argosy, none of those expenses relate to the actual repair of the vehicle within the definition in s.3 of the RSLA (see below), and none of those expenses were contained in the Doyle invoice that was the basis for SCC Autosport’s payment into court. (Decision, para. 15)

[10] Doyle filed an objection to SCC Autosport’s application to recover the Argosy pursuant to the Act. SCC Autosport moved to strike the Notice of Objection pursuant to R.25.11, which provides:

The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,

(a) may prejudice or delay the fair trial of the action;

(b) is scandalous, frivolous or vexatious; or

(c) is an abuse of the process of the court.

[11] After reviewing the decision of Master Muir in Belair Insurance Company v. Associates Auto Group, 2018 ONSC 1883, the Associate Judge found that following principle to apply:

… the court may strike a Notice of Objection under the RSLA where it includes claims that constitute an abuse of process. An attempt by a lien claimant to use a Notice of Objection to recover claims other than “the amount owing for the repair, storage or storage and repair” (see Belair, supra paragraph 11) of the article in question can constitute an abuse of process. (Decision, para. 26)

In my view, this statement of the law is correct.

[12] The Associate Justice then turned to the question of whether Doyle’s work on the Argosy was a “repair” within the meaning of the RSLA. The Associate Justice found that repair means “an expenditure of money on, or the application of labour, skill or materials to, an article for the purpose of altering, improving or restoring its properties or maintaining its condition….” This statement is correct: it is a direct quotation from the definition of “repair” in the Act (Decision, para. 26). The Associate Justice then stated the following question for determination:

The first issue with respect to the application of the RSLA is whether Doyle was altering or improving an existing article, or whether it was using the glider kit as a component in the manufacture of a new product. (Decision, para. 31)

[13] After reviewing the evidence, the Associate Justice made the following finding:

The article provided to Doyle to work on began as a truck; a non-operational truck but a truck nonetheless. On a reasonably broad reading of the RSLA, Doyle’s work consisted of alterations and improvements to the Argosy truck by adding a lounge area, but ultimately, the Argosy would still fundamentally be a truck. The substance of Doyle’s work to add a lounge area to the Argosy was therefore within the scope of “repair” under the RSLA. (Decision, para. 34)

These findings are questions of fact and are entitled to deference in this court. The application of the law (the definition of “repair” in the RSLA) to the facts discloses no extricable error of law: it too is entitled to deference in this court. There is no requirement that an “article” brought in for “repair” be operable for the Act to apply to it. Indeed, such a requirement would be inconsistent with the underlying purpose of the Act: many cars and trucks brought in for repair are incapable of operation, and that is the reason they have been brought in for repair.

[14] The RSLA does not distinguish between “repair” of an existing article and “manufacture” of a new article. It is not necessary or desirable to construe the Act bearing this distinction in mind. The Act is remedial in nature and should be given broad and liberal effect to achieve its purpose. The Associate Justice’s application of the Act to the facts, as reasonably he found them to be, was in keeping with a practical and purposive application of the RSLA.

[15] The Associate Justice rejected the argument that the RSLA should be interpreted in light of distinctions drawn in federal legislation between “parts” used in manufacture and “repair” of an article under the RSLA. I agree with his conclusion on this point. The federal regulatory regime exists for an entirely different purpose than does the RSLA, and there is no need to construe the two regimes together. If Parliament wishes to regulate the current circumstance, where a party is entitled to recover a vehicle from a repairman, it is open to Parliament to do so. For example, it would be open to Parliament, one would expect, to require that a vehicle that was uncertified be delivered to someone authorized to complete the outstanding work on the vehicle and certify it. No provision to this effect was brought to the attention of the Associate Justice or to this court.

[16] This conclusion disposes of the first two grounds of appeal. The third, fourth and fifth grounds of appeal relate to the categorization of the Argosy under federal manufacturing regulations. The Associate Justice addressed this issue only briefly, as follows:

Doyle also submitted that the RSLA does not apply to the Argosy because Transport Canada considers it a new vehicle manufactured by Doyle, rather than a repaired article. However, the definition of “repair” in the RSLA operates independent of how a glider kit might be characterized under another statute or regulation. While a glider kit in itself may not constitute a new vehicle for the purpose of the legislation under which it was imported, the “application of labour, skill or materials” to it still amounts to “altering, improving or restoring its properties” such as to constitute repair of the article under the RSLA. (Decision, para. 35)

[17] Doyle’s evidence was that it had been advised by Transport Canada that the incomplete Argosy must be exported back to the USA or destroyed. The Associate Justice rejected this argument as “essentially a distraction” from the issue before him, which concerned interpretation and application of the RSLA (Decision, para. 45). I agree with this characterization. The issue before the Associate Justice was whether he should strike Doyle’s Notice of Objection under the RSLA. The question of whether federal law precludes Doyle from releasing the Argosy to SCC Autosport does not assist Doyle with its Notice of Objection.

[18] Second, Doyle relies on this argument to oppose the remedy sought by SCC Autosport (return of the Argosy). That objection cannot succeed for multiple reasons. First, the RSLA is a complete code, and is not subject to federal regulatory laws. If it is thought that the effect of an order made under the RSLA would be contrary to federal law, then constitutional issues could arise – none of which have been raised properly in this matter. Further, it would be for federal authorities to make the argument that a private remedy available under Ontario law conflicts with federal regulatory legislation. Transport Canada could have sought to intervene in this proceeding to make this argument, or Doyle could have named them in connection with a constitutional argument about division of powers and paramountcy of federal law. Instead, Doyle asks the court to rely upon hearsay evidence about the position of Transport Canada and an argument that applicable federal law nullifies the application of provincial law. Finally, the federal legislation does not appear to preclude the transfer of an article pursuant to an order made by the court under the RSLA: Doyle has no choice in the matter, is not compelled to apply a safety mark to the Argosy, and pursuant to the order of the Associate Justice, SCC Autosport is responsible for rendering the vehicle roadworthy and obtaining necessary certifications. Doyle is not “releasing” the Argosy; it is complying with a court order, and in the alternative the Argosy is being seized by the Sheriff.

[19] Doyle argues that the Associate Justice erred in finding that Doyle acknowledged the application of the RSLA before changing its position. I do not need to address this issue in light of my conclusions on the balance of the issues on this appeal. I do note, however, that Doyle’s initial position that it would transfer the Argosy to another firm to complete the customization upon payment of what it was owed does seem to fly in the face of its arguments about the impact of the federal regulatory regime. I also note that the effect of Doyle’s arguments before the Associate Justice and before this court seem to be that SCC Autosport could not recover its property unless it paid Doyle whatever Doyle required to finish the customization job. SCC Autosport had already paid considerable sums in respect to the Argosy, and the alternative to paying what Doyle demanded to finish the work – according to Doyle – was destruction of the Argosy and loss of SCC Autosport’s considerable investment in it. This position is less than compelling – the phrase “commercially unreasonable” comes to mind – and it would take far more than hearsay evidence respecting the federal regulator’s concerns to persuade a court to adopt it.

[20] The appellant also argued that the Associate Justice exceeded his jurisdiction by making an order “relating to the liberty of a subject”. This argument goes that if the order is carried out, persons associated with the appellant could be liable to prosecution, conviction for which could result in a jail sentence. This argument is devoid of merit. The appellant and its personnel cannot be jailed for complying with a court order.

[21] Finally, I agree with SCC Autosport that potential disputes respecting liability for import duties is not a basis to interfere with the Associate Justice’s decision. Doyle did not satisfy the Associate Justice that it has incurred or is liable for such charges and no lien can attach as a result.

[22] The appeal is dismissed with costs of $15,000, inclusive, payable by Doyle to SCC Autosport within thirty days.

“D.L. Corbett J.”

December 23, 2021