Make Sure You Get It Right
The Repair and Storage Liens Act (“RSLA”) is a great option to ensure you are paid for your repair or storage work. If you carefully follow all of the rules under the RSLA, you can ultimately sell the vehicle to get what you are owed.
We have written about the different types of RSLA liens (possessory vs. non-possessory) and the steps that need to be followed in order to claim and act on a lien in the past. However, a recent case in the Ontario Divisional Court, makes it clear that some are still struggling to understand the process.
A customer was involved in a car accident. A tow truck company came to the scene and had the customer sign a contract for the tow and storage of the vehicle. The contract made it clear that if the customer did not pay their bill, the tow truck company would keep and sell the vehicle as they saw fit. When it came time to pay the towing company’s bill, the customer was surprised to see that the tow truck company was charging a $2500 “cancellation fee”.
The customer, and their insurance company, refused to pay this cancellation fee. The tow truck company claimed a possessory lien on the vehicle and refused to release it to the customer. The customer, through their insurance company, took steps to formally challenge the tow truck company’s lien under the RSLA and paid the amount claimed into court.
The tow truck company did not take any formal steps to challenge the amount of money that the customer paid into court. Normally, this would require the tow truck company to release possession of the vehicle and prove its case in court.
The tow truck company instead proceeded to sell the vehicle without any notice to their customer as required by the RSLA and apparently ignored the court process (never a good idea). The tow truck company failed to send a letter by registered mail informing the customer that they were planning to sell the vehicle as required. Instead, the tow truck company sent an email to the customer with only their original signed contract as an attachment.
The tow truck company also failed to give the customer back any remaining money, from the sale of the vehicle, after the tow truck company had taken their share of what they claimed to be owed under their tow and storage bill.
The customer took the tow truck company to Small Claims Court and disputed their lien. The Small Claims Court took the tow truck company’s side. The Small Claims Court found that the email satisfied the notice requirements and that the terms of the contract allowed the tow truck company to sell the vehicle and keep all of the money.
The customer appealed this decision to Divisional Court. The Divisional Court disagreed with the Small Claims Court and instead sided with the customer. The Divisional Court made it clear that the Small Claims Court misinterpreted the RSLA. The RSLA has very clear rules that must be followed to claim and act on a lien. You must provide clear notice of the sale. This can be done by sending a registered letter, to the customer, owners, and lienholders. Simply emailing the customer a copy of the original contract, with little to no context, is not enough.
The Divisional Court also made it clear that you cannot ‘contract-out’ of the RSLA. If you sell a vehicle using the RSLA process, you can only keep the money that you are owed to cover your repair or storage bill.
Any remaining money must go back to the customer, lienholders, and other interested parties. You must return the remaining money even if you have a clause in your contract that says otherwise. This is because contract law cannot change the process, or the rights of the customer, under the RSLA.
Even judges can get the RSLA process wrong; contact the UCDA to make sure you get it right.
Members can contact the Legal Department by telephone at (416) 231-2600 or toll-free at 1-800-268-2598.
Members interested in reading the full Divisional Court decision can do so by following this link: https://tinyurl.com/3rd2nvvn