2023 QCCA 800, 2023 QCCA 800

Rolls-Royce Motor Cars Québec c. Town & Country Chrysler Ltd. 2023 QCCA 800 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-030016-224 ( 500-17-093240-169 ) MINUTES OF HEARING DATE: June 16, 2023 CORAM: THE HONOURABLE ROBERT M. MAINVILLE, J.A. STÉPHANE SANSFAÇON, J.A. CHRISTINE BAUDOUIN, J.A. APPELLANT COUNSEL ROLLS-ROYCE MOTOR CARS QUÉBEC Mtre HARVEY EARL SHAFFER RESPONDENTS COUNSEL TOWN & COUNTRY CHRYSLER LTD . Mtre NICHOLAS RODRIGO Mtre JEREMY LIEBERMAN ( Davies Ward Phillips & Vineberg ) SEGAL MOTOCAR COMPANY INC.

Mtre ERIK PAUL MASSE ( Bélanger, Sauvé ) On appeal from a judgment rendered on March 14, 2022 by the Honourable André Roy of the Superior Court , District of Montreal . NATURE OF THE APPEAL: Sale – Obligations of the seller – Obligation of delivery – Pre-owned vehicle – Vintage car – Defect of consent – Error – Essential element – Year and model of the vehicle – Resolution of the sale. Clerk at the hearing : Chloé Côté-Sauvageau Courtroom: Antonio-Lamer

HEARING Continuation of the hearing held on June 12, 2023. Counsel were excused from appearing in Court. BY THE COURT: Judgment – see page 4. Chloé Côté-Sauvageau, Clerk at the hearing JUDGMENT [ 1 ] Respondent Town & Country Chrysler Ltd. (“ Town & Country ”) alleged that it purchased an authentic classic vehicle that turned out to be an elaborate fake.

It sought the annulment of the sale together with various damages from its vendor, the Appellant, Rolls-Royce Motor Cars Québec (“ Rolls-Royce ”), which denied the allegations and called in warranty its own vendor, Respondent Segal Motorcar Company Inc. (“ Segal Motorcar ”). [ 2 ] In a judgment dated March 14, 2022, [1] the Superior Court, district of Montreal (the Honourable Justice André Roy), granted in part Town & Country’s action and annulled the sale on two alternative grounds, the first being that Rolls-Royce had breached its obligation of delivery, and the second that Town & Country’s consent had been vitiated by error.

Justice Roy further awarded Town & Country $165,000 in damages for loss of profits, $10,491 in storage costs as well as $3,837 in expert fees, plus interest and the additional indemnity.

The action in warranty against Segal Motorcar was dismissed on the basis that, unlike Town & Country, Rolls-Royce knew it was purchasing a non-authentic classic vehicle. [ 3 ] Rolls-Royce appeals the judgment in respect of both the principal action and the action in warranty. *** [ 4 ] The context is as follows: On November 3, 2013, Segal Motorcar, a wholesale car dealership located in Concord, Ontario, successfully bid $162,500 for the acquisition of a 1969 Camaro ZL-1 auctioned by Collector Car Productions Inc. (“ CCP ”). ZL-1s were limited production race cars manufactured by General Motors in the year 1969.

They have since become highly coveted by car collectors, given that only 69 were ever produced. [ 5 ] The advertising material published by CCP and the bill of sale described the vehicle as a “rotisserie restored example” of the 48th 1969 Camaro ZL-1. According to uncontested expert testimony, a rotisserie restoration is one in which a vehicle is completely dismantled to its shell and restored with different components. [ 6 ] Segal Motorcar sold the vehicle to Rolls-Royce, a car dealership located in Montreal, Quebec, on February 1, 2014, for the price of $350,000.

The sale was concluded over the phone between Jeffrey Seigel and Rolls-Royce’s then representative, Kelly Strong, and subsequently recorded in a signed agreement. [2] Strong acknowledged at trial that he knew he was purchasing a rotisserie-restored vehicle. [3] [ 7 ] Town & Country acquired the vehicle from Rolls-Royce the very next day, February 2, 2014.

In fact, it was established that while Strong was discussing the purchase of the vehicle with Seigel, he was simultaneously brokering the sale with Town & Country’s president and his long-time friend, Brad Kyle, who agreed to purchase the vehicle for $395,000 before taxes, plus a $10,000 finder’s fee. [4] Kyle testified that Strong described the vehicle as the authentic 48th 1969 Camaro ZL-1 and promised to provide all necessary documentation to confirm authenticity, such as the original build sheet, order form and bill of sale.

Strong admitted at trial that he did represent the vehicle as being authentic. [5] [ 8 ] On February 5, 2014, Strong arranged for a third party to pick up the vehicle from Segal Motorcar and deliver it directly to Town & Country.

No authenticating documentation was delivered at that time, however. [ 9 ] From that day forward, Kyle reached out periodically to Strong about the missing documentation; his phone logs indicate that he called the latter on more than 150 occasions between March and September 2014. [6] [ 10 ] On October 21, 2014, Town & Country conditionally sold the vehicle to John Scotti Auto Ltd. (“ John Scotti ”) for

USD$500,000. [7] The contract described the vehicle as a “real 69 ZL1” together with its original build sheet, order form and bill of sale, which Kyle mentioned he was still in the process of obtaining from Rolls-Royce. A written condition of the sale was that the vehicle be inspected and authenticated by Jerry MacNeish, an expert in authenticating genuine Camaro ZL-1s. [ 11 ] Rolls-Royce shipped the vehicle to John Scotti shortly after the sale, where it was stored pending inspection and authentication.

Immediately upon seeing the vehicle, however, John Scotti expressed concerns and demanded that authenticating documents be sent forthwith, failing which it would cancel the sale. Despite his best efforts, Kyle never obtained any documentation from Strong that confirmed the vehicle’s authenticity. [ 12 ] John Scotti thus cancelled the sale soon thereafter and made the vehicle available for pick up.

At Kyle’s request, however, John Scotti agreed to keep the vehicle in its storage facility until it could be inspected and authenticated by MacNeish. [ 13 ] In an uncontradicted expert report prepared in September 2015, [8] MacNeish determined that the vehicle was not ZL-1 #48 nor even a ZL-1, but merely a “bad rebody” that fell within the “restored category”. The report further noted that the VIN number plate was a new production, that the trim tag was a reproduction and that the VIN located on the bottom side of the cowl area had been restamped to match the VIN of the original 48th Camaro ZL-1 built in 1969.

He estimated the vehicle’s value to be between USD$65,000 and USD$70,000. [ 14 ] Town & Country instituted its proceedings in March 2016. *** [ 15 ] Justice Roy granted the principal action in part, based on two alternative grounds, the first being that Rolls-Royce had breached its obligation to deliver the agreed-upon vehicle and the second being that Town & Country’s consent had been vitiated by error. [ 16 ] On the first ground, Justice Roy found that the contract of sale obliged Rolls-Royce to deliver an authentic 1969 Camaro ZL-1.

He further determined that Rolls-Royce had obliged itself to provide authenticating documentation, finding so despite Strong’s testimony to the contrary, which he dismissed as not credible. [ 17 ] In light of those findings, Justice Roy relied upon the uncontested expert report of MacNeish to conclude that Rolls-Royce had breached its obligation of delivery, and that this breach gave rise to the resolution of the sale pursuant to

article 1736 of the Civil Code of Quebec (“ CCQ ”). [ 18 ] Alternatively, Justice Roy agreed that Town & Country had made an error on an essential element of the contract, namely the authenticity of the vehicle and its value.

He further added that he would not have concluded said error to be inexcusable considering that, among other things, Strong was a trusted friend of Kyle who misrepresented the vehicle, pressured him into the sale and withheld key information until after the contract was formed, “[so as] to make sure that Kyle would not have time to do his own investigation into the vehicle” [9] . [ 19 ] As for damages, Justice Roy awarded Town & Country $165,000 for loss of profits resulting from the cancelled sale with John Scotti, $10,491 in storage costs as well as $3,837 in expert fees, plus interest and the additional indemnity. [ 20 ] Lastly, the action in warranty against Segal Motorcar was dismissed on the basis that Strong knew he was purchasing a non- authentic and restored vehicle, but represented otherwise to Kyle.

Indeed, this conclusion was predicated on what Justice Roy described as a “fundamental and essential difference” [10] in the circumstances surrounding both sales. More specifically, Justice Roy concluded that before signing the sale contract with Segal Motorcar, Strong received a video and the advertising material published by CCP, both of which described the vehicle as a “rotisserie restored example” [11] assembled with a reproduction engine and a reproduction trim tag.

In contrast, the same advertising material was sent to Kyle only after he had already agreed to purchase the vehicle. *** [ 21 ] Rolls-Royce raises no less than 7 grounds of appeal, most of which are arguments that were unsuccessfully pleaded at trial. Only a certain number of those grounds need be addressed. 1.

Did the trial judge err in law by failing to carefully examine the terms of the contract of sale, Exhibit P-5, and its legal ramifications? [ 22 ] The contract of sale between Rolls-Royce and Town & Country contained the following clause: “the sale is without any guarantee from the vendor and at the risks of the purchaser”.

Rolls-Royce’s position is, in short, that this clause excludes its liability with respect to the legal warranty and that Justice Roy failed to give it effect. [ 23 ] This position is untenable in law. [ 24 ] A seller has two principal obligations in a contract of sale: delivery and warranty. [12] Delivery is an obligation of result that entails not only making the thing sold and all its accessories available to the buyer, but also ensuring that said thing is strictly identical to what was agreed at the time of the sale . [13] Failure to do so is a breach of the seller’s obligation of delivery and may lead to the resolution of the sale ( art. 1736 CCQ), save proof of superior force or of

an act by the buyer. [ 25 ] The primary legal basis of Town & Country’s action relates to delivery, not warranty. Justice Roy made it abundantly clear in his reasons that a waiver of legal warranty could not justify Rolls-Royce’s failure to deliver the specific vehicle it had promised. The Court sees no error of law in that reasoning: the resolution of the sale pursuant to

article 1736 CCQ is well-founded, regardless of the waiver of warranty. 2. Did the trial judge commit a further error of law by awarding Town & Country GST charges in the amount of $19,750?

[ 26 ] Rolls-Royce argues that Town & Country will be unjustly enriched if it receives back the goods and services tax (“ GST ”) charges in the amount of $19,750, since it already benefitted from an Input Tax Credit for the same amount. Town & Country counters that there is no evidence that it benefitted from such tax credit and that in any event, any amount of GST restituted in its favour will have to be reported to the tax authorities, thus offsetting any potential unjust enrichment. [ 27 ] The Court agrees with Town & Country. [ 28 ] In accordance with

article 1606 para. 1 CCQ, “[a] contract which is resolved is deemed never to have existed; each party is, in such a case, bound to restore to the other the prestations he has already received”. In principle, and as decided by Justice Roy, the restitution of prestations includes the GST paid under a contract. [14] [ 29 ] While the second paragraph of

article 1699 CCQ gives the court the discretion to refuse restitution or, if it sees fit, to modify the scope or modalities of the restitution, that discretion must be exercised “sparingly” [15] and on the basis of full proof, the burden of which falls to the debtor of the restitution to show that the creditor of the restitution would otherwise enjoy an undue advantage. [16] [ 30 ] That said, Rolls-Royce has failed to demonstrate, other than by vague allegations, how the restitution of the GST would unjustly enrich Town & Country.

The arguments regarding the Input Tax Credit were not alleged at trial and no fresh evidence was adduced to support Rolls-Royce’s position. This ground of appeal is therefore dismissed. 3.

Did the trial judge commit a further error of law by awarding Town & Country damages for loss of profits, storage fees and expert costs? [ 31 ] A trial judge’s assessment of damages is an inherently factual exercise that commands a high degree of deference. [17] The Court cannot intervene simply because it would have awarded a different amount. [18] Absent an error of law or a manifestly incorrect award, appellate intervention on damages is limited to those cases where the award “is either so inordinately low or so inordinately high that it must be a wholly erroneous estimate of the damage”. [19] Similarly, the starting point for calculating the interest and the additional indemnity falls within a trial judge’s discretion. [20]

a) Loss of profits [ 32 ] Rolls-Royce maintains that Town & Country had no legal right to claim for loss of profits. Simply put, its position is that such claim is incompatible with the retroactive effects that come with the resolution or annulment of the sale of the vehicle. The Court agrees with Rolls-Royce’s primary argument albeit for different reasons. [ 33 ] Under

article 1611 para. 1 CCQ, “damages due to the creditor compensate the amount of the loss he has sustained and the profit of which he has been deprived”. Whether present or future, that damage is only compensable if it is certain, direct, and lawful and, in contractual matters, foreseeable at the time the obligation was contracted, save in cases of intentional or gross fault. [ 34 ] In the present case, Justice Roy concluded that the loss of profits sustained by Town & Country was open to compensation.

In particular, he found that Town & Country’s inability to resell an authentic #48 1969 Camaro ZL-1 to John Scotti was a “certain” result of Rolls-Royce’s failure to deliver it. [ 35 ] With all due respect for the judge’s view, this finding is manifestly incorrect given that the vehicle that was promised to Rolls- Royce, and subsequently promised to John Scotti, does not, in fact, exist.

Indeed, if it is true, as Town & Country alleged in its originating application, that it would have never paid $395,000 had it known the vehicle was not “the rare and desirable 48th Camaro ZL-1”, [21] then the same must be true for John Scotti and the conditionally offered price of USD$500,000. That sale was conditional on the vehicle being authenticated. The sale was never completed as a result of the failure to authenticate the vehicle.

From this viewpoint, Town & Country was never deprived of a profit that was “certain”. [ 36 ] The Court will therefore intervene to subtract the loss of profits from the damages awarded to Town & Country.

b) Storage and expert fee s [ 37 ] Rolls-Royce further challenges the damage award of $10,491 in storage fees and that of $3,837 for MacNeish’s expert fees: the former because Town & Country could have avoided storage fees if it had picked up the vehicle the moment John Scotti cancelled the sale in November 2014, and the latter because there is no evidence that Town & Country actually paid for MacNeish’s services. [ 38 ] The Court sees no reason to interfere with either award.

With respect to the storage fees, the amount awarded corresponds to the storage fees agreed-upon between Town & Country and John Scotti, that is a rate of $25 per day, for the period of October 2014 up until MacNeish inspected the vehicle and remitted his report.

This conclusion is reasonable given the circumstances and shows no reviewable error. [ 39 ] With respect to the expert fees, the evidence established that those were originally invoiced directly to Town & Country’s previous counsel. [22] Kyle testified that the same fees and expenses were subsequently invoiced to Town & Country by its then counsel and paid accordingly.

Rolls-Royce has failed to demonstrate a reviewable error in this regard. [ 40 ] Finally, the Court adds that there was no unreasonable exercise of discretion in starting the calculation of the interest and additional indemnity on the date of service of the originating application rather than at a later date, seeing as there is no evidence that Town & Country unduly delayed the proceedings. *** [ 41 ] In light of the foregoing, it is unnecessary to discuss the two grounds of appeal that deal with the inexcusable nature of Town &

Country’s error and its alleged implicit confirmation of the contract. Indeed, whether resolved or annulled, the contract between Rolls- Royce and Town & Country is deemed to have never existed and the latter is entitled to the return of the sale price plus GST. [ 42 ] In any event, had it been necessary to do so, the Court would have dismissed both grounds of appeal.

The excusable nature of Kyle’s error is supported by his relationship of trust with Strong, and there is no basis for interfering with that finding given the absence of a palpable and overriding error. [23] As to the question of confirmation of the contract, none of the arguments advanced by Rolls- Royce are indicative of a “certain and evident” [24] will on the part of Town & Country to confirm the contract, particularly when one considers that the cause of the nullity was confirmed by MacNeish in September 2015, only a few months prior to the institution of proceedings. [25] The fact that information on the vehicle could still be viewed on Town & Country’s website as of March 2016 is insufficient to conclude otherwise. 4.

Did the trial judge commit an error of law and fact by dismissing Rolls-Royce’s recourse in warranty against Segal Motorcar? [ 43 ] Despite the factual findings that Strong “could not have believed he was buying ‘car #48 of Gibb Camaros' and (…) could have no doubt that this vehicle was not authentic ”, [26] Rolls-Royce insists before this Court that its action in warranty against Segal Motorcar was erroneously dismissed. [ 44 ] There are two determinative reasons to confirm the dismissal of the action in warranty. [27] [ 45 ] First, Strong readily admitted at trial that he knew the vehicle was “rotisserie restored” before purchasing it from Segal Motorcar. [28] Even if we were to assume that Strong did not know at the time of the purchase that the VIN number had been forged or the extent of the forgery, he nonetheless knew that the car was not authentic or seriously doubted its authenticity and failed to inquire further. [ 46 ] Second, and perhaps most importantly, Strong sent an email to Rolls-Royce’s counsel on June 10, 2016, which read in part: [1] (…) Once again, I am firmly convinced that there is no way in hell, that Scotti wrote a check for the Camaro already knowing that the car was NON matching Numbers (which everybody Knew from the beginning)...

Town and Country Chrysler knew from the beginning that car was NON MATCHING numbers. [2] (…) [3] Important that you note, that all parties involved in the car right back to CC Productions, where clearly aware of the fact that the Camaro was NON-Matching Numbers, and this is also clearly stated in all of the advertising concerning the car. [29] (Reproduced verbatim ) [ 47 ] The content of this email is a complete bar to Rolls Royce’s position and further demonstrates that Strong possessed relevant information about the vehicle’s authenticity that was ultimately never passed on to Kyle.

Indeed, this is not what Strong represented to Kyle when he sold him the vehicle: Greetings Brad, Here is a list of the 50 ZL1 Camaro’s From Fred Gibb Chevrolet Your car is #48 of 69 A piece of automotive history Very best regards Your Bro Kelly. [30] (Reproduced verbatim) [ 48 ] This “ fundamental and essential difference” [31] between the two sales, as Justice Roy put it, amply justifies the dismissal of the action in warranty, and the Court sees no reason to intervene.

Perhaps a different conclusion might have been reached if Strong’s representations had accurately reflected those made to him by Segal Motorcar, but his patent misrepresentation and withholding of key information when contracting with Kyle leaves little to no doubt that he knew that the vehicle was not authentic or at least strongly doubted its authenticity. [ 49 ] Lastly, notwithstanding the mixed outcome of the appeal, the Appellant, who asserted no less than seven grounds of appeal calling into question most of the trial judge's findings of fact and law, will have to bear the legal costs on appeal.

FOR THESE REASONS, THE COURT : [ 50 ] grants the appeal in part for the sole purpose of replacing paragraph [180] of the conclusions with the following: [180] CONDEMNS the Defendant Rolls-Royce Motor cars Québec Limité to pay to the Plaintiff Town & Country Chrysler Ltd., damages in the amount of $10,491 plus interest at the legal rate and the additional indemnity provided for at

article 1619 of the Civil Code of Québec , calculated as of March 31, 2016, being the date of service of the originating Application to Introduce Proceedings; [ 51 ] THE WHOLE with legal costs against the Appellant.

ROBERT M. MAINVILLE, J.A. STÉPHANE SANSFAÇON, J.A. CHRISTINE BAUDOUIN, J.A.