2024 was not a good year for exporters who use nominees (otherwise known by some as agents, strawmen, or fake buyers) to buy cars for export out of Canada.

A buyer presents themselves as if they are a real consumer, buying a car (usually new) for personal use, the contract is signed by them, they pay the HST and the car goes in their name, but that’s where things get murky.

The car is then flipped by the buyer to an exporter waiting in the shadows (as they tend not to register the vehicle in their name or appear in the transaction) and for whom the buyer was really acting as an agent all along.

The nominee is paid a fee, the vehicle is exported for much more money overseas and the exporter claims the HST back from the CRA. All of this is handled by way of paperwork in the background that the selling dealer usually knows nothing about.

OMVIC has taken action to stamp this practice out, see this October 30, 2024 Export Guideline: https://tinyurl.com/3kwkrm74

Any person buying or selling a vehicle as part of a business exercise must be registered under the Motor Vehicle Dealers Act (MVDA). OMVIC may prosecute unregistered activity as ‘curbsiding’, as it is commonly called in the industry.

Meanwhile, there is an interesting case making its way through the Ontario courts. The case is called OMVIC v. Grey.

In this case, Richard and Tracy Grey are accused by OMVIC of allegedly buying vehicles from dealers in their own names, for export out of Canada. They are charged with 4 such instances of acting as a motor vehicle dealer when not registered to do so, contrary to s. 4 (1) (a) of the MVDA. In other words, they are each charged with 4 counts of curbsiding.

What is fascinating about this case, which began as an ordinary curbsider prosecution in the Ontario Court of Justice (OCJ), is that the Canadian Vehicle Exporter’s Association (CVEA) got involved. Their Executive Director, Damon Lyons, supplied affidavits in support of an Application to have the OMVIC charges stayed or dismissed or allowing the CVEA to intervene in the process.

Mr. Lyon’s affidavits were the main source of the evidence used in support of the Greys’ Application.

Justice Pollock said no to the CVEA on December 6th:“The charges in the OCJ are against the Greys, not the potential intervenors, who can independently seek their own appropriate remedies.”

The Justice went on to say:[53] “I am of the view that the Application should be dismissed as the issues raised ought to be advanced at first instance before the OCJ. There is no possibility of success in the Application in this Court at first instance. The remedy sought in the Application is premature, and therefore not available. The Application is also a collateral attack on the OCJ’s adjudicative authority and therefore an abuse of process. The application should therefore be dismissed.”

The Motion on the Application has been reported on CANLII, in full, here: https://tinyurl.com/n5k6ut6u

We asked Damon Lyons at the CVEA for comment on this case and their involvement. Mr. Lyons says:

“Since the 1980’s the use of Agency and nominees has allowed registered vehicle dealers, both the selling and buying dealers, across Ontario and Canada, to participate and grow their business in the international vehicle market while allaying fears of unwarranted punitive punishments from foreign-owned vehicle manufacturers.

Many of the OMVIC registered dealers currently using Agents/Nominees are used vehicle dealers, including members of the UCDA. For over 25 years OMVIC has accepted the use of Agents/Nominees when used by licensed OMVIC registered dealers. Further, the use of Agency is permitted and protected in the majority of other provinces as well as at the federal level. As such, in relation to the current ongoing litigation, upon request, the CVEA was asked to provide the Court with a historical context and perspective on the relationship between dealers, vehicle export, Agency, and OMVIC.”

The UCDA asked Mr. Lyons some follow up questions:

• Did your association pay for the lawyer to represent the Greys in their defence or in the Application brought to stay or dismiss the charges or the court costs ordered to be paid?
  Answer: “The CVEA has not, nor will it, pay any fees related to either of the two outstanding cases.”

Answers to the following questions were not provided as Mr. Lyons said “… it would be inappropriate to comment on these matters in this type of forum while the matter is still before the courts

• Since OMVIC sent its bulletin in October 2024, did you warn your members to cease the activities enjoined in it?
• Are you aware of, or do you acknowledge, any consumer harms represented by the use of nominees?
• Are you aware of Ontario law in the HTA and the MVDA requiring Export Dealers to register vehicles they buy into their name in Ontario?
• Where do get the figure of 95% of international exporters using Agency cited in your sworn affidavit?
• In your affidavit you acknowledge that OMVIC stated as early as 2001 that the use of nominees is illegal, did the CVEA ever communicate this to its members?
• You say in your affidavit that you are unaware of any provincial or federal law that makes the use of nominees illegal, and yet you acknowledge that you are aware of s. 4 (3) of the MVDA, is that not provincial law?
• The Greys argue that OMVIC is exercising its powers in the interests of manufacturers, which is against the rule of law. Your affidavit suggests you agree with this position and are of the belief that OMVIC is looking to limit the freedom to contract. Are exporters who use nominees, without notifying new car dealers of this, not depriving new car dealers of their right to make informed decisions regarding who they choose to contract with? In other words, does the practice of nominee buying not itself limit the freedom to contract of other dealers?

The UCDA believes the CVEA’s position fails to address concerns about the shrinking domestic supply of quality used vehicles, the risks posed to dealers who are unwittingly dragged into these type of transactions (OMVIC prosecution and manufacturer response), the consumers used as nominees who face lawsuits and prosecution by regulators, warranty concerns for buyers, and higher costs for used cars. Because the vehicle is often not registered into the export dealer’s name, this also offends both the Ontario Highway Traffic Act and the MVDA.

We are also looking into the position the Canada Revenue Agency takes with all this.

The UCDA certainly warned its members against these practices and has done so for years. Not because we are acting for manufacturers, but because we believe the practice is illegal and could lead our members into legal difficulties, as well as those who are used as fake buyers.

This is why, had the CVEA been successful in intervening in this case, the UCDA certainly would have sought the same access, to ensure the other side of the issue was heard, and understood, by the court.

Having said this, the case is far from over. The Greys have appealed the dismissal of their Application in Superior Court. The main case moves back to the OCJ where the provincial charges brought against the Greys is scheduled to be dealt with over several dates later in the year.

The UCDA will continue to monitor and report on this case as it makes its way through the court process.