Non-Possessory Lien (RSLA)

Repair and Storage Liens Act, R.S.O. 1990

1 (1) In this Act,

“repairer” means a person who makes a repair on the understanding that the person will be paid for the repair; (“réparateur”)

“storer” means a person who receives an article for storage or storage and repair on the understanding that the person will be paid for the storage or storage and repair, as the case may be. (“entreposeur”) R.S.O. 1990, c. R.25, s. 1 (1); 2014, c. 9, Sched. 4, s. 1.

3 (1) In the absence of a written agreement to the contrary, a repairer has a lien against an article that the repairer has repaired for an amount equal to one of the following, and the repairer may retain possession of the article until the amount is paid:

1. The amount that the person who requested the repair agreed to pay.

2. Where no such amount has been agreed upon, the fair value of the repair, determined in accordance with any applicable regulations.

3. Where only part of a repair is completed, the fair value of the part completed, determined in accordance with any applicable regulations. 2014, c. 9, Sched. 4, s. 2 (1).

(4) For the purposes of this Act, a repairer who commences the repair of an article that is not in the repairer’s 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. R.S.O. 1990, c. R.25, s. 3 (4).

(5) 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. R.S.O. 1990, c. R.25, s. 3 (5).

7 (1) 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 to which the lien claimant is entitled under Part I, 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.

(2) A non-possessory lien arises and takes effect when the lien claimant gives up possession of the article.

Connolly v. Advantagewon Inc., 2015 ONCA 709 (CanLII)

[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 appellant’s 2011 Nissan Titan (the “Vehicle”).

[22] First, although s. 1 of the RSLA includes within the definition of “repair” an “expenditure of money on…an 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 respondent’s 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.

[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 repairer’s 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 repairer’s 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 repairer’s 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.