The Repair and Storage Liens Act (“RSLA”), allows repairers to claim a lien against a vehicle for unpaid repair and storage work. This is a powerful self-help remedy that repairers can use to get paid, but failure to follow the rules can mean serious consequences. A loan company found this out the hard way in a recent case coming out of the Ontario Small Claims Court.

The case involved a rental company, which had rented out a vehicle to a customer. The customer’s daughter somehow got hold of the vehicle during this time. Mysteriously, around the same time, the vehicle’s registration was transferred out of the name of the rental company!

The daughter had new tires and rims installed on the vehicle by a mechanic shop. The daughter worked with a loan company to finance the installation. The loan company entered into a loan agreement with the daughter and paid the mechanic shop directly. The mechanic shop released the vehicle to the daughter and the loan company registered a RSLA lien on the vehicle.

The rental company begun to look for the vehicle and finally recovered it. The police charged the daughter with theft. The loan company then tried to collect on their RSLA lien. The rental company contested the lien in court.

The court found that the loan company did not follow the proper procedure under the RSLA and ruled the lien was invalid. While the loan company had registered a non-possessory RSLA lien, the proper paperwork was missing to support it. The court said the mechanic shop should have registered the non-possessory lien and then assigned the lien to the loan company.

In fact, the court observed, in this case the mechanic shop did not have a legitimate non-possessory lien in the first place. While the daughter had signed an agreement with the loan company, the mechanic shop did not obtain a “signed acknowledgment of indebtness” from the daughter, which is required by the RSLA to support a valid lien.

The fact that the loan company had directly paid the mechanic shop for the work was also an issue. While the mechanic shop had prepared an invoice for the work, the evidence showed that invoice had been paid 4 days before the mechanic shop tried to claim a lien interest in the vehicle. In other words, there was no outstanding debt for the mechanic to claim a lien interest on and, in turn, no lien interest to assign.

This case serves as a reminder that process and paperwork matters. Repairers should also take caution before agreeing to perform work on vehicles when they are not certain that they are dealing with the owner of the vehicle or someone who has the vehicle with the owner’s permission.

Members interested in reading the full court decision can do so by following this link: https://www.canlii.org/en/on/onscsm/ doc/2024/2024canlii103672/2024canlii103672.html