COURT FILE NO.: CV-21-01462

DATE: 2023-02-21

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Nordic Capital Corp. and 2137983 Ontario Inc. O/A Car Buyers of Canada

Plaintiffs

AND:

Durham Roads Maintenance, Steven Stevenson, Nicholas Stevenson, Royal Bank of Canada, et al.

Defendants

BEFORE: The Hon. Justice M. L. Lack

COUNSEL: Nadia Condotta, Counsel for the Plaintiffs

Gregory W. Bowden, Counsel for the Defendant, Royal Bank of Canada

HEARD: February 6, 2023

ENDORSEMENT

[1] The defendant, Royal Bank of Canada (“RBC”), is seeking summary judgment against the plaintiffs Nordic Capital Corporation and 2137983 Ontario Inc. O/A Car Buyers of Canada (collectively called “Nordic”) dismissing the claim against it and awarding it damages on its counterclaim for the tort of conversion. The motion was brought under r. 20 and r. 24.01(1)(b) of the Rules of Civil Procedure.

[2] The plaintiffs, Nordic, are in the business of buying, selling and financing vehicles. They purchased a number of vehicles from the defendants Durham Roads Maintenance (“Durham Roads”), Steve Stevenson and Nicholas Stevenson (“the Stevensons”). Among the vehicles purchased were a 2017 BMW, a 2019 Dodge Ram and a 2017 Audi. The three vehicles were subject to liens (arising from conditional sales agreements) in favour of RBC. The plaintiffs Nordic allege in the statement of claim that they were not aware of the liens when they purchased the vehicles. They also allege that the liens were not registered under the Personal Property Security Act (“PPSA”). They allege that Durham Roads and the Stevensons defrauded them by selling vehicles to them, as if they were free of liens.

[3] Many defendants were named in the statement of claim. As the statement of claim relates to RBC, the plaintiffs Nordic seek a declaration that the three vehicles are rightly owned by them, free and clear of any RBC lien. They seek an interim injunction restraining RBC from enforcing a lien against each of the three vehicles under the PPSA. They also seek judgment against RBC in an amount equal to the value of each vehicle over which RBC has a PPSA lien.

[4] The plaintiffs Nordic allege in the statement of claim that RBC did not register its liens against the three vehicles under the PPSA. They also allege that they conducted searches for liens and found that the vehicles were either clear of liens or subject to a buyout letter indicating the lien would be removed.

[5] RBC served the plaintiffs Nordic with a request to inspect documents. After inspecting documents, RBC delivered a statement of defence.

[6] The inspection of documents showed that, respecting the 2017 BMW, the plaintiffs Nordic did not conduct a search of the Ontario government PPSA register. Instead, they did a “Carfax” vehicle history, which did not show a lien. Later, they obtained a Used Car Dealers Association report, which clearly showed that RBC had registered a lien on September 25, 2020, under the PPSA. It showed the RBC lien was in first position and set out details of the lien. That report was dated November 20, 2020. The plaintiffs purchased the vehicle on November 19, 2020.

[7] The inspection of documents showed that, respecting the 2019 Dodge Ram, the plaintiffs Nordic did not conduct a search of the Ontario government PPSA register. Instead, they did a “Carfax” vehicle history, which did not show a lien. Later, they obtained a Used Car Dealers Association report, which clearly showed that RBC had registered a lien on February 21, 2019, under the PPSA. It showed the RBC lien was in first position and set out details of the lien. That report was dated October 22, 2020. The plaintiffs purchased the vehicle on October 22, 2020.

[8] The inspection of documents showed that, respecting the 2017 Audi, the plaintiffs Nordic did not conduct a search of the Ontario government PPSA register. Instead, they did a “Carfax” vehicle history, which did not show a lien. Later, they obtained a Used Car Dealers Association report, which clearly showed that RBC had registered a lien on June 12, 2020, under the PPSA. It showed the RBC lien was in first position and set out details of the lien. That report was dated November 16, 2020. The plaintiffs purchased the vehicle on November 17, 2020. The plaintiffs Nordic say that respecting the 2017 Audi, they relied on a letter they received from Durham Roads around the time of purchase that stated that RBC had no further interest in the vehicle. The letter was on RBC letterhead and purported to be signed by a “Vice President” of RBC. They did not verify the contents of the letter.

[9] The plaintiffs Nordic took a very different position on the hearing of the motion than in their statement of claim. They now concede that at all material times RBC did, in fact, have a lien against each of the three vehicles registered under the PPSA, which was first in priority to any interest Nordic ever had in each vehicle. They also concede that the letter that they received about the 2017 Audi, purporting to be from a Vice President of RBC, was a forgery.

[10] In light of the contents of the material that was produced by Nordic on the inspection of documents, and Nordic’s concessions on the hearing of the motion, there is no issue raised in the statement of claim against RBC, which requires a trial. The plaintiffs Nordic cannot succeed in their action against the defendant, RBC. The action is therefore dismissed against RBC under r. 20.04(2)(a).

RBC’s Counterclaim

[11] The contentious issue is whether RBC should be granted summary judgment on its counterclaim for damages against the defendants by counterclaim Nordic based on the tort of conversion of the three vehicles.

[12] RBC alleges in the counterclaim that Nordic knew or ought to have known that RBC had a security interest in the three vehicles, ranking in priority to their interests; that RBC had a right to possession of the vehicles; that Nordic intentionally deprived RBC of possession in a manner inconsistent with RBC’s rights, and that as a consequence RBC suffered damages.

[13] The evidence filed on the motion showed that after purchasing the three vehicles, Nordic sold the vehicles to third parties in the United States. What happened to the 2017 BMW is unknown, and RBC made no recovery on its lien on the vehicle. What happened to the 2019 Dodge Ram is unknown, and RBC made no recovery on its lien on the vehicle. The 2017 Audi was tracked down and repossessed by RBC and it made recovery on its lien, which will be discussed later.

Position of Nordic

[14] The defendants by counterclaim Nordic take the position that summary judgment should not be granted on the counterclaim. They say that they suffered damages just as RBC did, caused by Durham Roads’ and the Stevensons’ fraud. They say that they are not responsible for RBC’s damages; that RBC should be looking to Durham Roads and the Stevensons for their damages, and a trial is required to deal with the issue of who caused RBC’s damages.

[15] The defendants by counterclaim Nordic have not delivered a defence to the counterclaim. On the motion, they rely on the affidavit of Peter Gallos, a principal of Nordic Capital Corp. Mr. Gallos’ affidavit on the issue of fraud is simply not creditable. What is set out in his affidavit about the alleged fraud varies considerably, from what was pleaded in the statement of claim.

[16] In the statement of claim, it was alleged that after Nordic purchased the vehicles, the vendor, Durham Roads, fraudulently re-sold each and the “new buyer” applied for financing. The RBC lien was registered after Nordic purchased. That, of course, would explain why a PPSA search would not disclose the lien at the time of Nordic’s purchase. However, we now know that each of RBC’s PPSA liens was registered before Nordic purchased the vehicle covered by it.

[17] In the affidavit, the allegation of fraud has changed. Mr. Gallos alleges that Durham Roads sold the vehicles twice. It had the “new buyer” apply for financing through RBC. RBC advanced the purchase price and registered its lien under the PPSA. Then, Durham Roads sold the vehicle to Nordic. On this version of events, each lien was registered under the PPSA before Nordic purchased the vehicle covered by it.

[18] There is no issue that RBC advanced funds on the vehicles, received security and registered proper notice. The only unchanged allegation of fraud is simply that Durham Roads did not tell Nordic about the liens when Nordic purchased the vehicles. However, the liens were registered under the PPSA by the time of purchases. That is notice to the world. It is not believable that experienced, professional auto traders like Nordic would fail to do a proper PPSA search. Moreover, the evidence from the inspection of documents shows that Nordic actually knew that each of the three vehicles was subject to a lien in favour of RBC at the time of purchase or within a day of it. Nordic chose to ignore it. In these circumstances, Nordic’s allegations of fraud by Durham Roads are irrelevant to RBC’s claims against Nordic based on conversion.

The Tort of Conversion

[19] The essential elements of the tort of conversion are:

[1] The plaintiff has a possessory interest in personal property.

[2] The personal property is identifiable or specific.

[3] The defendant intentionally commits a wrongful act in respect of the property inconsistent with the plaintiff’s right of possession.

See: DaimlerChrysler Canada Inc. v. Associated Bailiffs & Co., 2005 CarswellOnt 3007 at para. 9.

[20] In the present case, it has been established that RBC had a right to possess each of the three vehicles. Its right is set out in the conditional sale contract, which provides that RBC holds title to and ownership of the vehicle until payment in full. The terms of the agreement include that the vehicle is not to be sold or moved out of Canada. Upon default in any terms of the agreement, RBC has a right to possession. Notice of the agreement was duly registered under the PPSA.

[21] The vehicles were clearly identified in the particulars of the registration under the PPSA.

[22] The defendants by counterclaim Nordic committed the wrongful of acts of taking title to the vehicles, removing the vehicles from Canada and selling them in disregard of RBC’s lien. Their acts were intentional. Their knowledge can be inferred from the fact that they had actual notice of RBC’s prior liens. They are in the business of buying and selling vehicles. They have to know the significance of a lien, and a conditional sales agreement. They did not act through mistake or accident or ignorance.

[23] The tort of conversation has been made out in the circumstances. It is a strict liability tort. A trial is not required to decide the issue.

Damages

[24] The position of Nordic is that proof of RBC’s damages is an issue for trial.

[25] In determining damages for the tort of conversion, the law as a fiction treats a conversion as resulting in a “forced sale” of the plaintiff’s chattel, requiring the defendant to pay the market value of the goods at the time of conversion. See: BMW Canada Inc. v. Mirzai, 2018 ONSC 180 at para. 26.

[26] The affidavit of Kim Fitzgerald, a collections associate with RBC, establishes that on March 4, 2022, the total amount owing on the security agreement on the BMW with accrued interest was $92,558.61. RBC never made any recovery of that amount and interest continues to accrue. On the material before me, title to the vehicle was transferred to Nordic on November 19, 2020. The transfer contravened the terms of the conditional sales agreement. Nordic admits that it shipped the three vehicles to the United States to sell them. Nordic does not say when, but Mr. Gallos said in his affidavit that Nordic did so before it learned of Durham Roads’ and the Stevensons’ fraud. This is not creditable because knowledge of the liens from the report was almost contemporaneous with the transfer. In the circumstances, I find that the conversation date is on or about November 19, 2020. RBC has produced expert evidence that the vehicle was worth $70,400 on November 9, 2020. There is no contrary evidence. I accept that figure of $70,400 as the market value of the vehicle at the time of conversion.

[27] The affidavit of Kim Fitzgerald establishes that on March 4, 2022, the total amount owing on the security agreement on the 2019 Dodge Ram with accrued interest was $96,575.18. RBC never made any recovery of that amount and interest continues to accrue. On the material before me, title to the vehicle was transferred to Nordic on October 22, 2020. For reasons analogous to those set out in the preceding paragraph, I find that the conversion date was on or about that time. RBC has produced expert evidence that the vehicle was worth $43,150 on September 28, 2020. There is no contrary evidence. I accept that figure of $43,150 as the market value of the vehicle at the time of conversion.

[28] The affidavit of Kim Fitzgerald establishes that the 2017 Audi was located, and the vehicle was sold, and RBC made a recovery of the amount outstanding on its lien on December 2, 2021, in the amount $48,225. However, RBC was required to pay expenses in connection with the recovery and sale. It paid $3,133.43 for brokerage fees and $16,163.22 for recovery fees, including bailiff charges and storage charges. The date Nordic purchased the vehicle was November 17, 2020. I have not been provided with an appraised value as at that date. It strikes me as an academic figure because recovery was made and there is no reason to doubt that the sale and pay-out was bona fide. The only issue is whether RBC is entitled to be reimbursed by Nordic for its expenses of $19,296.55.

[29] On March 4, 2022, $18,936.16 was left owing on the security agreement including accrued interest. This was the amount that remained owing after the expenses of recovery and sale were paid and charged to the account. The recovery and sale expenses were incurred by RBC in mitigating its damages. RBC is entitled to recover its mitigation expenses to a maximum of what remained owing on the debt on December 2, 2021, after applying the amount recovered, but deducting the expenses. I was not provided with a figure, but I calculate it to be approximately $18,700, given that the interest included in the March 4, 2022 figure was calculated at the rate of 5.89 per cent.

[30] I find that RBC has proved its damages. A trial is not required on the issue of damages.

[31] Accordingly, I grant judgment to RBC against the defendants by counterclaim Nordic for the tort of conversion in the amount $70,400 for the BMW; $43,150 for the 2019 Dodge Ram and $18,700 for the 2017 Audi. The total is $132,250.

Costs

[32] RBC also claims its costs of the motion and underlying action. A bill of costs was provided by counsel for RBC at the conclusion of the hearing. The amount shown on a partial indemnity basis is $12,609.82 inclusive of HST and disbursements; and on a full indemnity basis is $18,117.64. While the issues in the action and motion were not complex, the plaintiffs’ pleadings left many factual components undisclosed, which RBC’s counsel had to investigate. Counsel for RBC has billed his time at a rate significantly below that charged by counsel of his experience and competence. All of the time charged is accounted for and was necessarily expended to defend the action and pursue the counterclaim and provide a complete picture on the motion. Counsel fee for the motion was estimated and is very modest. Nordic and Car Buyers failed to pursue their action diligently. They took a position that was contrary to well-settled law. RBC has been totally successful. I find that $13,000 all in, is an appropriate amount to award for costs of the action and the motion. That amount would have been well within the reasonable expectations of the unsuccessful parties who have been represented by counsel throughout.

Conclusion

[33] For these reasons:

i. The claim brought by Nordic Capital Corp. and 2137983 Ontario Inc. O/A Car Buyers of Canada against Royal Bank of Canada is dismissed.

ii. Nordic Capital Corp. and 2137983 Ontario Inc. O/A Car Buyers of Canada shall pay Royal Bank of Canada damages for conversion in the amount of $132,250 together with prejudgment interest under the Courts of Justice Act on that amount from June 8, 2021 to February 21, 2023.

iii. Nordic Capital Corp. and 2137983 Ontario Inc. O/A Car Buyers of Canada shall pay Royal Bank of Canada its costs of the action fixed at $13,000, all in.

iv. This judgment and the costs shall bear post-judgment interest under the Courts of Justice Act from the date of judgment.

M. L. Lack, Judge

Date: February 21, 2023