



COURT OF APPEAL FOR ONTARIO

CITATION: Connolly v. Advantagewon Inc., 2015 ONCA 709

DATE: 20151023

DOCKET: C60059

Feldman, Juriansz and Brown JJ.A.

BETWEEN

Kevin Connolly

Applicant

(Appellant)

and

Advantagewon Inc.

Respondent

(Respondent)

Paul Gemmink, for the appellant

Ali Chahbar, for the respondent

Heard: September 28, 2015

On appeal from the judgment of Justice Peter A. Douglas
    of the Superior Court of Justice, dated January 29, 2015.

Brown J.A.:

I.

Overview

[1]

The appellant, Kevin Connolly, appeals from the judgment of Douglas J.
    which declared that the respondent, Advantagewon Inc., was entitled to a
    non-possessory lien under Part II of the
Repair and Storage Liens Act
,
    R.S.O. 1990, c. R. 25 (
RSLA
), in respect of the appellants 2011
    Nissan Titan (the Vehicle).

[2]

In July 2013, the appellant purchased low profile rims and tires for his
    Vehicle from Xclusive Performance Group (Xclusive). To finance the purchase,
    the appellant entered into an agreement with the respondent for a loan in the
    amount of $4,124.21.

[3]

Three documents evidenced the transaction: (i) a July 3, 2013 invoice
    from Xclusive to the appellant (the Invoice); (ii) a June 28, 2013
    Advantagewon Loan Application and Preapproval Document signed by the appellant (the
    Loan Application); and, (iii) a July 2, 2013 Advantagewon Contractual Repair
    Agreement purportedly signed by Xclusive and the appellant (the Contractual
    Repair Agreement). The Loan Application and Contractual Repair Agreement
    identified Xclusive as the repairer, and further disclosed that Xclusive
    intended to assign any of its lien rights in the Vehicle.

[4]

The Loan Application suggested that Xclusive intended to assign any lien
    rights to the respondent.  By contrast, the Contractual Repair Agreement
    indicated that Stephan Bernier and Lorraine Berube were the assignees and, in
    August 2013, a claim for lien under the
RSLA
was registered, on behalf
    of Bernier and Berube.  In the result, that differing identification of
    assignees in the transaction documentation was of little practical significance
    because, by Assignment of Debt and Lien dated May 23, 2014, Bernier and Berube
    assigned to the respondent any entitlement to the debt owed by the appellant,
    including any and all rights arising from the
Repair and Storage Liens Act
.

[5]

After entering into the transaction, the appellant promptly defaulted on
    his monthly payment obligations under the Loan Agreement, and the respondent
    attempted to seize the Vehicle based on a purported non-possessory lien under
    the
RSLA
. The appellant thereupon commenced an application seeking a
    declaration that the respondent does not have a lien under the
RSLA
in
    respect of the Vehicle.

[6]

The application judge declared that the respondent is entitled to a
    non-possessory lien in the Vehicle under Part II of the
RSLA
.

[7]

This appeal involves two main issues:


(i)

The appellant submits that the application judges conclusion that the
    respondent has a non-possessory lien in the Vehicle was based on a palpable and
    overriding error in finding that Xclusive had installed the rims and tires on
    the Vehicle;


(ii)

The respondent submits that in the event this court finds the
    application judge made such an error, it nevertheless is entitled to a
    non-possessory lien by reason of the terms of its contract with the appellant
    or by operation of the deemed possession provisions of s. 3(4) of the
RSLA
.

II.

Did Xclusive install the rims and tires on the Vehicle?

[8]

Section 3(1) in Part I of the
RSLA
provides, in part, that a
    repairer has a lien against an article that the repairer has repairedand the
    repairer may retain possession of the article until the amount is paid.  Part
    II of the
RSLA
concerns non-possessory liens.  In that Part, s. 7(1)
    provides, in part, that a lien claimant who is entitled to a lien under Part I
    (Possessory Liens) against an article, and who gives up possession of the
    article without having been paid the full amount of the lien has, in place of
    the possessory lien, a non-possessory lien against the article for the amount
    of the lien claimed under Part I that remains unpaid.

[9]

In concluding that the respondent was entitled to a non-possessory lien
    on the Vehicle under the
RSLA
, the application judge stated that the
    respondent had advanced funds to a third-party who performed the installation
    work for the tires and rims. The appellant submits that the application judge
    made a palpable and overriding error of fact in finding that the third-party,
    Xclusive, had performed the installation work. It submits that Xclusive never
    repaired the Vehicle or even possessed it.

[10]

I
    accept the appellants submission.

[11]

Although
    the Xclusive Invoice for the sale of the rims and tires described them as
    mounted and balanced, the appellant deposed that neither Xclusive nor the
    respondent had installed the new rims and tires on his Vehicle. Instead, he had
    installed them on the Vehicle after their purchase. The appellant also filed a
    chain of emails between himself and Xclusive in which Xclusive had stated that
    on these deals we don[]t install them [p]hysical[l]y as we[]re not set up
    for that. The respondent did not file any evidence from Xclusive.  The
    evidence before the application judge therefore established that that neither
    Xclusive nor the respondent had possessed the Vehicle or installed the rims and
    tires on the Vehicle. Consequently, the application judge erred in finding that
    Xclusive had performed the installation work.

[12]

At
    common law, when a worker applied skill, labour or money to the repair or
    improvement of personal property, with the authority of the owner, a lien
    attached to the personal property and continued in existence so long as the
    personal property remained in the lien claimants possession:
Royal A.
    Vaillancourt Co. Ltd. v. Trans Canada Credit Corporation Ltd.
, [1963] 1
    O.R. 411 (C.A.), at p. 413. Section 52 of the former
Mechanics Lien Act
,
    R.S.O. 1980, c. 261, recognized the lien created at common law and gave the
    lienholder the right to sell the personal property upon compliance with the
    conditions set out in the section:
Vaillancourt
, at p. 414.

[13]

With
    its enactment in 1989, the
RSLA
created a new legislative regime for
    repairers liens: S.O. 1989, c. 17.  Part I of the
RSLA
is entitled,
    Possessory Liens.  In that Part, s. 3(1) codifies the common law right to a
    lien by providing that a repairer has a lien against an article that the
    repairer has repaired and the repairer may retain possession of the article
    until the amount is paid.

[14]

In
    the present case, Xclusive sold the rims and tires to the appellant without
    installing them or taking possession of the Vehicle; the respondent financed
    their purchase. Neither had possession of the Vehicle at any time.  The usual conditions
    necessary to create a Part I possessory lien against the Vehicle did not arise.

[15]

Usually
    such circumstances would be fatal to a claimants entitlement to a
    non-possessory lien under the
RSLA
because such entitlement depends on
    the claimant first having the right to a possessory lien. Section 7(1) of the
RSLA
provides that a non-possessory lien arises where a lien claimant who is
    entitled to a lien under Part I (Possessory Liens) against an articlegives up
    possession of the article without having been paid the full amount of the lien
    to which the lien claimant is entitled under Part I.

[16]

To
    overcome the fact that neither it nor Xclusive ever possessed the Vehicle, the
    respondent advances two arguments to support its claim to a non-possessory lien
    in the circumstances: (i) the appellant granted Xclusive such a lien by contract;
    and, (ii) Xclusive had deemed possession of the Vehicle under s. 3(4) of the
RSLA
thereby enabling it to obtain a non-possessory lien.

III.

Did a non-possessory lien arise under contract?

[17]

The
    respondent submits that a lien on the Vehicle in favour of Xclusive was created
    by the Contractual Repair Agreement, one term of which states:

Lien  Applicant acknowledges his or her total indebtedness and
    understands and agrees that the Repairer has a repairers lien against the
    Vehicle described above pursuant to the Repair and Storage Liens Act Ontario,
    for the total amount which the Applicant has agreed to pay for the repair
    described in Repairers Invoice 00021200, plus associated fees, totalling
    $5,633 as further detailed below.

Xclusive had issued the Invoice to the appellant for
    the tires and rims.

[18]

I
    do not accept the respondents submission.

[19]

A
    lien under Parts I and II of the
RSLA
arises by operation of statute,
    not by contract. For a valid lien to arise, a lien claimant must satisfy the
    requirements of the
RSLA
.

[20]

Xclusive
    did not satisfy these requirements. For a possessory lien to arise against an
    article, a person must have repaired the article:
RSLA
, s. 3(1).  The
    definition of repair in s. 1 of the
RSLA
includes 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. However,
    Xclusive did not expend any money on, nor did it apply any labour, skill or
    materials to the Vehicle.  Xclusive simply sold tires and rims to the
    appellant, who later attached them to his Vehicle.  Accordingly, Xclusive did
    not make a repair to the Vehicle within the meaning of the Act. As a result,
    no possessory or non-possessory repairers lien arose in favour of Xclusive
    which it could assign to the respondent.

[21]

On
    its part, the respondent submits that it satisfied the
RSLA

s
requirements,
    pointing to the application judges conclusion that because it had financed the
    appellants purchase of the tires and rims, the R[espondent] has made an
    expenditure of money, and this expenditure is linked to the repair in that it
    financed the installation of tires and rims.  I do not accept that
    submission.

[22]

First,
    although s. 1 of the
RSLA
includes within the definition of repair
    an expenditure of money onan article for the purpose of altering, improving
    or restoring its properties, the Loan Application and Contractual Repair
    Agreement did not treat the respondent as the repairer in whose favour a lien
    was created.  They treated Xclusive as the repairer.  If no lien arose in
    favour of Xclusive, the respondent had no lien it could take by assignment.

[23]

Second,
    the respondents submission blurs the distinction between liens that may arise
    under the
RSLA
and security interests which can be taken in personal
    property under the
Personal Property Security Act
, R.S.O. 1990, c.
    P.10 (
PPSA
).  Whereas possession of the personal property to which a
    lien attaches plays a key role under the
RSLA
, under the
PPSA
a person can take a security interest in personal property which it never
    possessed.

[24]

The
    respondent financed the appellants purchase of personal property  i.e. the
    tires and rims. It did not conduct a repair on the Vehicle.  A person who
    finances the acquisition of personal property may take an interest in that
    personal property, or in other personal property, to secure payment of the debt
    obligation, and may perfect its security interest in accordance with the
    provisions of the
PPSA
.  The evidence disclosed that the respondent did
    just that, registering a security interest in the Vehicle under the
PPSA
on behalf of Bernier and Berube.   However, at the hearing, counsel advised
    that the
PPSA
registration had lapsed.  Having failed to protect the registered
    security interest under the
PPSA
in the Vehicle, the respondent lost
    its statutory rights to seize and sell the Vehicle upon the appellants default
    on the loan.

IV.

Did Xclusive have deemed possession of the Vehicle under
RSLA
s. 3(4)?

[25]

In
    oral argument, the respondent advanced a second basis for its claim to a
    non-possessory lien.  It submitted that the assignor of the lien, Xclusive, was
    entitled to a Part I possessory lien by reason of the deemed possession
    provision contained in s. 3(4) of the
RSLA
. That sub-section reads:

3(4). For the purposes of this Act, a repairer who commences
    the repair of an article that is not in the repairers actual possession shall
    be deemed to have gained possession of the article when the repair is commenced
    and shall be deemed to have given up possession when the repair is completed or
    abandoned.

[26]

Xclusives
    Invoice to the appellant described the product sold as rims mounted and
    balanced with a set oftires.  The respondent contends that mounted and
    balanced referred to placing the tires on the rims.  Even though Xclusive did
    not install the rims and tires on the Vehicle, the respondent submits that by mounting
    and balancing the tires on the rims, Xclusive commenced a repair on the Vehicle
    and, by virtue of
RSLA
s. 3(4), was deemed to have gained possession
    of the Vehicle.

[27]

I
    do not accept this submission.  First, it is difficult to accept the
    respondents contention that the reference in Xclusives Invoice to mounting
    and balancing referred to placing the tires on the rims, when the respondent
    did not file any evidence from Xclusive to explain the Invoices language.  In
    any event, the email exchange between the appellant and Xclusive disclosed that
    Xclusive did not intend to repair the Vehicle.  In an email the appellant had
    asked: [J]ust wondering are you guys going to mount them or am just picking
    them up?  To which Xclusive responded: [O]n these deals we don[]t install
    them [p]hysical[l]y as we[]re not set up for that. That response indicates that
    Xclusive did not intend to apply any labour, skill or materials to the Vehicle
    in satisfaction of the RSLAs definition of repair.

[28]

Second,
    s. 3(4) must be read together with s. 3(5) of the
RSLA
which provides:

A repairer who, under subsection (4), is deemed to
    have possession of an article may remove the article
from the premises on
    which the repair is made
. [Emphasis added.]

[29]

When
RSLA
s. 3(4) and 3(5) are read together, they appear to address a
    situation where a repairer makes a repair to an article at a location away from
    the repairers premises, and the article remains in the actual possession of the
    person entitled to it.  In those circumstances, s. 3(4) deems the repairer to
    have gained possession of the article when the repair is commenced, and then
    deems the repairer to have given up possession when the repair is completed or
    abandoned. By deeming the repairer to have gained possession of an article despite
    the repairers lack of actual possession, s. 3(4) enables the repairer to
    obtain a possessory lien.  When the deemed possession ends, the repairer may
    either remove the article from the premises on which the repair is made under
    s. 3(5) or register a non-possessory lien under Part II of the
RSLA
.

[30]

This
    interpretation of the purpose of ss. 3(4) and 3(5) finds support in the legislative
    history of the
RSLA
.  In 1985, the Ministry of the Attorney General
    issued a Discussion Paper on Repair and Storage Liens, which contained a
    draft
RSLA
.  That draft proposed the scheme of possessory and
    non-possessory liens that ultimately was enacted by the
RSLA
. 
    However, the draft did not propose any provision similar to
RSLA
ss.
    3(4) or 3(5).

[31]

Later
    that year, Arthur Close wrote a Commentary on the Discussion Paper which
    appeared in (1985), 10 Canadian Business Law Journal 359.  In the course of
    discussing the limitations of the proposed legal framework for a scheme of
    non-possessory liens, the author observed, at p. 364:

The second observation that might be made about s. 7(1) is that
    in order to claim a non-possessory lien, the lien claimant must once have had a
    possessory lien. This is a serious limitation on the scope of Part II. There
    are many situations in which work will be carried out on the premises of the
    owner. An example is where a piece of heavy equipment breaks down at a remote
    work site and it is wholly impractical to relocate it to the repairer's
    premises. It is doubtful whether the person who performs repairs at a place
    which is under the effective control of the owner of the property being
    repaired can ever be said to have possession of the property sufficient to
    support a lien. Yet to deny him a non-possessory lien creates a wholly
    artificial distinction between work which is lienable and work which is not,
    depending on the essentially irrelevant issue of where the repairs are made.

[32]

When
    the
RSLA
was enacted in 1989, it included ss. 3(4) and 3(5).  That
    legislative history suggests that the deemed possession created by s. 3(4) is
    designed to protect a repairer who repairs an article at a location other than
    the repairers premises.

[33]

While
    it is not necessary for the purposes of this appeal to interpret definitively
    s. 3(4) of the
RSLA
, in my view it is clear that s. 3(4) has no
    application to the facts of this case, in which the lien claimant was a vendor
    of personal property who never applied any labour, skill or materials to the
    article against which a lien is claimed.

V.

Disposition

[34]

For
    the reasons given, I would allow the appeal, set aside the judgment, and grant
    an order declaring that no lien on the Vehicle arose under the
RSLA
.

[35]

The
    parties have agreed that the successful party on the appeal is entitled to
    costs in the amount of $6,000, all inclusive.  I would order the respondent to
    pay the appellant that amount.  As to the costs of the proceeding below, I
    would order the respondent to pay the appellant costs of the application in the
    amount of $2,000, all inclusive.

Released: October 23, 2015 (KF)

David
    Brown J.A.

I
    agree K. Feldman J.A.

I
    agree R.G. Juriansz J.A.


