Sirois v Centennial Pontiac Buick GMC Ltd and General Motors of Canada Ltd,
(1988), 89 NBR (2d) 244.
New Brunswick Court of Appeal
Hoyt, Ayles and Ryan, JJA
Reproduced with permission of Maritime Law Book Ltd.,
which claims copyright in the headnote and indexing.
Maritime Law Book Ltd. Summary
Sirois purchased a new car from Centennial. The car was returned twice in five weeks for an overheating engine. When Centennial could not guarantee it would not happen again, Sirois refused to accept the car. Sirois commenced an action under the Consumer Product Warranty and Liability Act to rescind her purchase on the ground of "major breach". Centennial added General Motors as a third party, seeking indemnity should it be found liable to Sirois.
The New Brunswick Court of Queen's Bench, Trial Division, in a judgment not reported in this series of reports, held that there was a major breach entitling Sirois to rescind her purchase. The court held that Centennial was entitled to full indemnity from General Motors. The court awarded Sirois solicitor and client costs against Centennial, with General Motors to indemnify Centennial for half of the costs. The court awarded Centennial solicitor and client costs against General Motors in the third party action. General Motors appealed.
The New Brunswick Court of Appeal allowed the appeal in part. The court affirmed that Centennial was entitled to full indemnity from General Motors for Sirois' judgment against it. The court held that Centennial was not entitled to solicitor and client costs against General Motors, but only costs under Scale 3 of Tariff "A". Similarly, [245] General Motors was liable to indemnify Centennial for only half of the costs that Sirois would be entitled to under Scale 3.
Sale of goods -- Major breach defined -- Sirois purchased a new car from a dealer -- Within a month the engine overheated, scoring the engine -- The engine was repaired, but overheated again in one week -- The dealer installed a new engine block, but would not guarantee the car would not overheat again -- The cause of the overheating appeared to be a warped pulley -- The New Brunswick Court of Appeal stated that there was evidence upon which the trial judge could find a "major breach" of the purchase and sale contract under the Consumer Product Warranty and Liability Act, which entitled Sirois to rescind the contract and receive damages under s. 15 of the Act.
Consumer Law -- Topic 1805
Sale of goods -- Breach -- Remedies of buyer -- Rescission -- [See Consumer Law -- Topic 1605].
Consumer Law -- Topic 1830
Sale of goods -- Breach -- Remedies of seller -- Indemnity from seller's supplier -- Sirois purchased a car from a dealer -- Sirois rescinded the contract for "major breach" after a warped pulley caused the engine to overheat -- The warped pulley resulted from defective manufacture by General Motors -- The New Brunswick Court of Appeal affirmed that the dealer suffered a "consumer loss" under s. 1(1) of the Consumer Product Warranty and Liability Act, therefore the dealer was entitled to be indemnified by General Motors for Sirois' judgment.
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Practice - Topic 7454
Costs -- Solicitor and client costs -- Entitlement to -- Improper, irresponsible or unconscionable conduct -- Sirois purchased a car from a dealer -- Sirois rescinded the contract for major breach -- Sirois was awarded solicitor and client costs against the dealer -- The dealer was successful in a third party action against General Motors for indemnity -- General Motors was ordered to pay half of Sirois' solicitor and client costs against the dealer and the dealer was awarded solicitor and client costs against General Motors in the third party action -- The New Brunswick Court of Appeal held that there was no blameworthy conduct by General Motors justifying an award of solicitor and client costs against it -- The court ordered that General Motors pay the dealer's costs on the basis of Scale 3 of Tariff "A" and pay half of Sirois' costs as if they were calculated under Scale 3.
Statutes Noticed:
Consumer Product Warranty and Liability Act, R.S.N.B. 1973, c. C-18.1, ss. 1(1), 15 [para. 5].
Rules of Court (N.B.), rule 59.01 (2)(c) [para. 9].
Authors and Works Noticed:
Orkin, The Law of Costs (2nd Ed. 1987), pp. 2-61 to 2-62 [para. 10].
Dore, Karl J., The Consumer Product Warranty and Liability Act (1982), 31 U.N.B.L.J. 161, p. 172 [para. 6].
Ivankovich, Ivan F., The Consumer Product Warranty and Liability Act (1983), 32 U.N.B.L.J. 123, p. 139 [para. 7].
Counsel
Dale T. Briggs and Cyril W. Johnston, for General Motors of Canada Limited;
Charles A. LeBlond, for the respondent Centennial Pontiac Buick GMC Ltd.;
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Norman J. Bosse, for the respondent Collette Sirois.
This appeal was heard on April 27, 1988, before Hoyt, Ayles and Ryan, JJ.A., of the New Brunswick Court of Appeal.
On May 10, 1988, Ryan, J.A., delivered the following judgment for the Court of Appeal.
[1] Ryan, J.A.: At trial a consumer, Collette Sirois of Saint John, was permitted to rescind her purchase of a 1984 Pontiac Fiero. She obtained judgment against the dealer, Centennial Pontiac Buick GMC Ltd. in the sum of $18,066.32 together with solicitor and client costs. In a third party action in the same lawsuit, Turnbull, J., held that the Centennial Pontiac was entitled under New Brunswick consumer legislation to indemnity for the full amount of the judgment against the manufacturer, General Motors of Canada Limited, together with solicitor and client costs in the third party proceeding and that General Motors was liable to pay one-half of the solicitor and client costs as between the consumer and Centennial Pontiac. General Motors has appealed the award with respect to indemnity and its liability to pay solicitor and client costs. Centennial Pontiac did not appeal the award of damages of the trial judge against it nor his finding that the consumer was entitled to solicitor and client costs from Centennial Pontiac.
FACTS
[2] The consumer, Collette Sirois, bought a new automobile from Centennial Pontiac. In less than a month the engine overheated causing scoring to the engine. She took it back to Centennial Pontiac. Certain repairs of substance were made to the engine by Centennial Pontiac after General Motors' customer service representative from Moncton was consulted. She operated the car for another week and it
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overheated again. This time a new engine block was installed but the consumer refused to accept the vehicle. The cause of the overheating appeared to be the result of a warp in a pulley which caused a belt to jump off its pulley. This made the engine overheat. The trial judge concluded:
"The defendant [dealer] and [General Motors] wanted [Collette Sirois] to take the car again. Mr. Stephen Downey, representing the defendant would not guarantee the plaintiff that it wouldn't happen again. There can be some semantics involved as to whether or not you can guarantee something, but I'm of the opinion that after the unsatisfactory performance of this car the plaintiff was entitled to a guarantee that if it happened a third time she could have her money back or have a new car, at her option. At that time she was a salesgirl earning $12,500.00 a year.
"I am of the opinion that under these circumstances this was a major breach of the contract of purchase and sale of the Consumer Product Warranty and Liability Act, R.S.N.B., 1973, c. C-18.1. The term 'major breach' is not a technical term or one that can be precisely defined at law. It connotes something less than a fundamental breach, and I believe the intent of the phrase is a breach that would lead an ordinary person to say, under all of the circumstances, 'that's very serious'. Pursuant to the terms of the Act the plaintiff is entitled to rescission."
[3] Most of the grounds of appeal advanced by General Motors attack the facts as found by the trial judge. Except for one finding where the trial judge erroneously concluded that the General Motors representative agreed that packed snow had caused the belt to jump the pulley the first time that the engine overheated, there was evidence [249] upon which the trial judge could decide as he did including, but without pinpointing, a "major breach" of the contract of purchase and sale. The trial judge's decision did not turn on this erroneous finding.
[4] General Motors' main grounds allege that the trial judge failed to find that Centennial Pontiac was negligent in not promptly discovering that the defective pulley was the cause of the loss. Consequently, submits General Motors, it as manufacturer, should not be called upon to indemnify its dealer. At the hearing on appeal, General Motors argued that at worst it should only be called upon to contribute and not to indemnify.
[5] The problem with the pulley resulted from a defect in the manufacture of the pulley, not something caused by the dealer, although the dealer's service department personnel failed initially to detect the reason why the belts came off the pulley. Without question, the consumer was entitled to rescind and receive her damages from Centennial Pontiac under s. 15 of the Act. But can the dealer recoup from the next in line, in this case, the manufacturer? The result hinges upon the definition of "consumer loss" under s. 1(1) of the Consumer Product Warranty and Liability Act:
"'consumer loss' means
(a) a loss that a person does not suffer in a business capacity; or
(b) a loss that a person suffers in a business capacity to the extent that it consists of liability that he or another person incurs for a loss that is not suffered in a business capacity;"
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The consumer loss sustained by the original buyer falls under subs. (a) and the loss sustained by the dealer falls under subs. (b).
[6] U.N.B. Law School Dean Karl J. Dore, Q.C., when he was Director of Consumer and Corporate Affairs for New Brunswick, gave an illustration of the vertical pass-it-on effect of a consumer loss in an article in (1982), 31 U.N.B.L.J. 161, at 172:
"A supplier can contract out of the Act's warranties or remedies vis-à-vis a business buyer (i.e. one who buys or holds himself out as buying in the course of a business). There is, however, one major exception. An agreement to contract out 'shall be ineffective with respect to any consumer loss for which the seller would be liable if no such agreement had been made'. 'Consumer loss' has been defined to include 'a loss that a person suffers in a business capacity to the extent that it consists of liability that he or another person incurs for a loss that is not suffered in a business capacity.'
"The exception is demonstrated in the following hypothetical. Suppose that a manufacturer sells chocolates to a wholesaler. The chocolates are inedible because of faulty manufacture, but no one knows this. The contract between the manufacturer and the wholesaler purports to contract out of the Act. The wholesaler sells the chocolates to a retailer and he also purports to contract out of the Act. The retailer in turn sells the chocolates to a consumer, who discovers that they are inedible. The retailer would be liable to the consumer, of course, regardless of any disclaimer. The retailer in turn could obtain indemnification from the wholesaler. The wholesaler's disclaimer would be ineffective because [251] the retailer's claim would fall within the definition of 'consumer loss'. The wholesaler in turn could obtain indemnification from the manufacturer. The manufacturer's disclaimer would be ineffective because the wholesaler's claim would also fall within the definition of 'consumer loss'.
"In giving the dealer non-excludable recourse rights against his own supplier, the Act adopts a policy to impose ultimate responsibility for consumer protection on the one who caused the problem in the first place, rather than stopping at the dealer's doorstep."
[7] Holding a similar view, Ivan F. Ivankovich, then Associate Professor, Department of Industrial and Legal Relations, University of Alberta in (1983), 32 U.N.B.L.J. 123, at p. 139 wrote:
"By a combination of the definition of 'consumer loss' and the inability of superordinate suppliers to contract out of liability to subordinate suppliers for these losses, the Act enables subordinate suppliers in the distribution chain, as a general rule, to be fully indemnified."
[8] Based upon the definition of "consumer loss" and its application to the facts found by the trial Judge, his decision on the question of indemnity to Centennial Pontiac is correct.
COSTS
[9] General Motors contends that the trial judge erred in awarding solicitor and client costs, throughout, under rule 59.01(2)(c) of the Rules of Court. Centennial Pontiac did not appeal the award of solicitor and client costs. General Motors cannot stretch its grounds of appeal to an area to which its own exposure to liability does not extend. General Motors is confined to argument on whether the trial judge [252] properly exercised his discretion in awarding solicitor and client costs (a) to Centennial Pontiac and (b) in ordering that General Motors reimburse Centennial Pontiac for one-half of the costs payable by it to the consumer. The trial judge held:
"I'm allowing solicitor-client costs because I do not believe the defendant honoured its obligation to the plaintiff, as it should have, and was more interested in seeing what it could recoup from the third party before it gave its undertaking to its consumer to stand behind the product it sold.
"The law in New Brunswick is that where a party is entitled to indemnity, it is entitled to complete indemnity, including solicitor-client costs. I will allow the defendant solicitor-client costs on the third party issue against the third party. As regard the solicitor-client costs payable by the defendant to the plaintiff I will only allow one half of those costs to be passed on to the third party."
[10] Solicitor and client costs are awarded in rare and exceptional cases where the actions of one of the parties are onerous as against another party. Orkin, The Law of Costs (2nd Ed. 1987), at pages 2-61 and 2-62 sets out the author's opinion along with a number of illustrations:
"Such orders are not to be made by way of damages, or on the view that the award of damages should reach the plaintiff intact, and are inappropriate where there has been no wrongdoing.
"An award of costs on the solicitor-
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and-client scale, it has been said, is ordered only in rare and exceptional cases to mark the court's disapproval of the conduct of a party in the litigation. Orders of this kind have been made where a litigant's conduct has been particularly blameworthy, for example, where there were allegations of fraud or impropriety either unproven or abandoned at trial; or wanton and scandalous charges; or allegations of perjury; or collusion; or where the responsible party perpetrated a fraud on the court, e.g., by preparing and presenting forged documents; or by filing a deliberately deceptive affidavit in support of an order without notice; or by concealing a document until trial and then relying on it; or prolonged the trial by engaging in obstructionist tactics; or brought motions without merit to exhaust an opponent's resources; or intentionally misled the court by giving false evidence as to material facts; or in contempt proceedings. Solicitor-and-client costs have been awarded to the successful party where an action was without any foundation in law, or where an appeal was considered to be without merit; and in a libel action where fault was admitted, only the amount of damages being contested; or where a carrier failed to admit liability for the contamination of food until shortly before trial, although it had been aware of the facts much earlier; or where defendant in a wrongful dismissal action pleaded just cause without basis for the plea; or in an action for indemnification by an insured against his insurer where the insurer, in refusing to settle a personal injury claim had not used reasonable care for the protection of its insured, acted in bad faith and the plaintiff ought not to have had to bring the action."
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[11] The trial judge erred in ordering General Motors to pay Centennial Pontiac's costs on a solicitor and client basis and to reimburse Centennial Pontiac one-half of the solicitor and client costs which it was ordered to pay to the consumer. There was nothing blameworthy in the conduct of General Motors. Under normal circumstances, litigants being sued have a right to insist that plaintiffs prove their cases. Defendants must not be penalized for exercising this right. Where the facts of the situation dictate, judges may apply the rules with appropriate disciplinary flexibility in three areas: fixing the amount involved; designating which of the five scales under Tariff "A" of rule 59 of the Rules of Court will be ordered; or by fixing the costs under rule 59.01(2)(a) or (b).
[12] In this case, there was nothing in the conduct of the defendants, nor of the case itself, which would give rise to an order for solicitor and client costs.
CONCLUSION
[13] I would dismiss the appeal against the award of indemnity. I would allow the appeal against the award of solicitor and client costs as between General Motors and Centennial Pontiac. Centennial Pontiac is entitled to its costs at trial in respect of its third party action on a party and party basis on an amount involved of $18,000.00 under Scale 3 of Tariff "A" and to be reimbursed for one-half of the costs which the plaintiff at trial would have been entitled to under Scale 3. Because of the divided success on appeal, as between General Motors and Centennial Pontiac, neither will be awarded costs. The respondent consumer is entitled to her costs on appeal of $1,000.00 as against the appellant, General Motors.
Appeal allowed in part.
Editor: Steven C. McMinniman