Gregorio v. Intrans-Corp. et al.
[Indexed as: Gregorio v. Intrans-Corp.]
18 O.R. (3d) 527
 O.J. No. 1063
Action No. C12842
Court of Appeal for Ontario,
Goodman, Doherty and Laskin JJ.A.
May 19, 1994
Contract — Exemption clauses — Sale of goods — First notice of clause limiting liability for economic losses taking place after signing but before performance of contract — Exemption clause not enforceable.
Corporations — Piercing corporate veil — Trial judge erring in treating wholly owned subsidiary as alter ego of parent corporation.
Sale of goods — Obligations of seller — Statutory conditions — Exemption clauses — First notice of clause limiting liability for economic losses taking place after signing but before performance of contract — Exemption clause not enforceable — Sale of Goods Act, R.S.O. 1990, c. S.1, s. 15.
In 1994, G purchased a truck from I Corp., a dealer, which had purchased the truck from P (Can.), a distributor. P (Can.) was the wholly owned subsidiary of P Inc., the manufacturer. P (Can.) passed on the order for the truck to its parent, and it did not inspect the truck before its delivery to I. Corp. The truck did not perform properly, the principal problems being vibrations and an improperly aligned frame. In an action by G against I Corp. and P (Can.), the trial judge held that I Corp. was liable under s. 15, paras 1 and 2 of the Sale of Goods Act, and that P (Can.), as the alter ego of the manufacturer P Inc., was liable for negligence in manufacturing the truck and in failing to inspect the truck before delivery. G was awarded damages assessed at $38,135.35. These damages included economic losses, which the trial judge allowed despite a written warranty which excluded recovery for economic loss. The trial judge held that the warranty did not apply because it had not been brought to G’s attention until after the making of the contract of purchase. Finally, the trial judge held that P (Can.) should indemnify I Corp. for all save $5,345 of the judgment for which portion of the judgment I Corp. was solely responsible. Both defendants appealed and G cross-appealed on the issue of damages.
Held, P (Can.)’s appeal against G should be allowed; I Corp.’ s appeal, P (Can.)’s appeal against I Corp., and G’s cross-appeal should be dismissed.
On the issue of the defendants’ liability to G, the grounds of appeal that the trial judge had erred in admitting evidence, had erred in concluding that the warranty was not drawn to G’s attention until after the making of the contract, and had erred in finding liability under the Sale of Goods Act were not made out. The evidence showed that G acknowledged the limitation clause only after the contract had been made. Absent a variation or modification of the contract that is supported by new consideration, notice of a clause limiting liability after a contract is made but before it is performed does not make the clause effective. Further, even if the notice of the warranty had been timely, then, as a matter of contract interpretation, it did not exclude the statutory conditions of fitness for a purpose and of merchantable quality. There is a difference between implied warranties and implied conditions and at best the warranty here was ambiguous as to whether it excluded conditions and thus the rule of contra proferentem would apply and G’s claim would not be affected by the warranty.
The trial judge, however, did err in finding liability on a theory of alter ego. Generally, a subsidiary, even a wholly owned subsidiary, will not be found to be the alter ego of its parent unless the subsidiary is under the complete control of the parent and nothing more than a conduit used by the parent to avoid liability. The alter ego principle is applied to prevent conduct akin to fraud that would otherwise unjustly deprive claimants of their rights. The evidence did not justify the application of the alter ego principle.
There was a basis for holding P (Can.) responsible for indemnifying I Corp. The Sale of Goods Act applied to I Corp.’s purchase of the truck from P (Can.). The findings that I Corp. was liable to G permitted the conclusion that P (Can.) was also liable to I Corp., which was entitled to receive a truck free of defects for delivery to its customer. It did not get what it bargained for, and P (Can.) must bear the ultimate responsibility for damages suffered by G.
Finally, there were no reasons to interfere with the trial judge’s assessment of damages.
Cases referred to
Aluminum Co. of Canada v. Toronto (City),  S.C.R. 267,  3 D.L.R. 609; Canada Life Assurance Co. v. Canadian Imperial Bank of Commerce (1974), 3 O.R. (2d) 70, 44 D.L.R. (3d) 486 (C.A.); Chabot v. Ford Motor Co. of Canada (1982), 39 O.R. (2d) 162, 138 D.L.R. (3d) 417, 19 B.L.R. 147, 22 C.C.L.T. 185 (H.C.J.); Hunter Engineering Co. v. Syncrude Canada Ltd.,  1 S.C.R. 426, 57 D.L.R. (4th) 321, 35 B.C.L.R. (2d) 145,  3 W.W.R. 385, 92 N.R. 1; Kasler v. Slavouski,  1 K.B. 78, 96 L.J.K.B. 850, 137 L.T. 641; Kelly v. Mack Canada Inc. (1988), 66 O.R. (2d) 68, 53 D.L.R. (4th) 476, 30 O.A.C. 161 (C.A.); Maughan v. International Harvester Co. of Canada (1980), 112 D.L.R. (3d) 243, 38 N.S.R. (2d) 101, 69 A.P.R. 101 (C.A.); Pauley Petroleum Inc. v. Continental Oil Co., 239 A.2d 629 (Del.); Phillips v. Ford Motor Co. of Canada Ltd.,  2 O.R. 714, 12 D.L.R. (3d) 28 (H.C.J.) [revd  2 O.R. 637, 19 D.L.R. (3d) 641 (C.A.)]; Trigg v. M1 Movers International Transport Services Ltd. (1991), 4 O.R. (3d) 562, 84 D.L.R. (4th) 504, 2 B.L.R. (2d) 246 (C.A.)
Statutes referred to
Sale of Goods Act, R.S.O. 1990, c. S.1, ss. 1(1), 15, paras. 1, 2 Authorities referred to Fleming, The Law of Torts, 7th ed. (1988), pp. 476-77 Fridman, Sale of Goods in Canada, 3rd ed. (1986), pp. 199-201
APPEAL from a judgment awarding the plaintiff $38,135.35 for the defendant’s liability under s. 15, paras. 1 and 2 of the Sale of Goods Act, R.S.O. 1990, c. S.1.
Craig R. Colraine, for appellant, Paccar of Canada Ltd.
M. Scott Watson, for appellant, Intrans-Corp.
Jeffrey C. Silver, for respondent, George Gregorio. The judgment of the court was delivered by LASKIN J.A.: — Both the defendant Intrans-Corp. (“Intrans”) and the defendant Paccar Canada Ltd. (“Paccar”) appeal the judgment of Hoilett J. dated July 9, 1992, awarding the plaintiff George Gregorio (“Gregorio”) damages in the amount of $38,135.35. Gregorio cross-appealed on damages. The main issues in this court were the liability of Intrans and of Paccar to Gregorio, the liability of Paccar to indemnify Intrans and the amount of damages.
A. Background Facts
These appeals concern a truck which did not perform properly. The respondent Gregorio purchased the truck in 1984 from the appellant Intrans, a dealer, for $100,000. Intrans had ordered the truck from the appellant Paccar, also known as Peterbilt of Canada, which is a wholly owned subsidiary of Paccar Inc., an American company that manufactured the truck. The manufacturer was not sued in this action.
Gregorio, who was a truck driver, had acquired the vehicle in order to transport goods over long distances. Almost from the day he started driving it, Gregorio experienced problems with the truck. These problems — the principal ones were excessive vibrations and improper alignment of the frame
— seemed incapable of being repaired despite numerous efforts by both appellants to do so. In late 1987 Gregorio sued for rescission or damages. He continued to drive the truck, however, until 1991 when he sold it. No evidence was led at trial as to the sale price.
The trial judge held that while the evidence fell short of establishing a fundamental breach of contract, it did establish that the performance of the truck “fell short of the reasonable expectations of the parties”. He imposed liability on the appellant Intrans under s. 15, paras. 1 and 2 of the Sale of Goods Act, R.S.O. 1990, c. S.1.
He also held that the manufacturer was negligent both in manufacturing the truck and in failing to inspect it properly prior to delivery. Although the appellant Paccar did not manufacture the truck, the trial judge imposed liability on it because, in his view, Paccar was the Canadian alter ego of the manufacturer and should not be insulated from liability.
In imposing liability, the trial judge held that the appellants were not entitled to rely upon a written warranty executed by Gregorio which would have excluded recovery for economic loss, because the warranty was not brought to Gregorio’s attention until after the consummation of the contract of purchase and sale.
The trial judge awarded Gregorio damages under three categories:
(i) damages for downtime assessed at $9,690, of which one-half ($4,845) was to be attributed to a defective painting job;
(ii) out-of-pocket expenses assessed at $4,195.35 together with the nominal amount of $500 for depreciation in the value of the truck due to an unworkmanlike job of repainting;
(iii) loss of income (“load and trip reduction”) assessed at $23,750, for a total award of $38,135.35.
He held that Gregorio was entitled to the sum of $32,790.35 against both appellants jointly and severally and to the sum of $5,345 (depreciation and downtime due to the defective painting job) against Intrans alone, together with interest on both amounts. Finally, the trial judge held that Intrans was entitled to be indemnified by Paccar for that portion of the judgment for which they were found jointly and severally liable. The portion of the award for which Intrans alone was found liable is not in issue on these appeals.
B. The Appeals by Intrans and Paccar on the Issue of Liability to Gregorio
Both appellants attack the finding of liability against them on the ground that the trial judge erred in admitting certain evidence of whether the truck was defective and on the ground that he erred in failing to give effect to the limitation clauses in the warranty signed by Gregorio. Paccar also argued that the trial judge’s finding of liability on the basis of alter ego was neither pleaded by the respondent nor supported by the evidence.
(a) Improper admission of evidence
The appellants make two arguments:
(i) the trial judge wrongly permitted Gregorio’s witness Donovan to give expert evidence on manufacturer’s negligence when he was not qualified to do so and, in any event, permitted Donovan to give opinion evidence on a document (a chassis inspection report) that was not referred to in his written report; and,
(ii) the trial judge wrongly admitted and relied upon the opinion letter of one Williams who test-drove the truck in 1985. Since Williams was not called, the appellants submitted that the letter was hearsay evidence which did not meet the requirements for its admission of reliability and necessity.
In my view the trial judge was correct in permitting Donovan to testify as an expert. The attack on his qualifications went to the weight of his opinion rather than providing a basis for excluding it altogether. Further, as was evident from his cross-examination, the additional document on which Donovan testified did not affect his original opinion contained in his report.
As to Williams’ written opinion letter, while the trial judge would have been wrong to rely upon it for the truth of its contents, the transcript indicates that he recognized the hearsay nature of the letter when Gregorio’s counsel sought to tender it in evidence. The trial judge does refer to the letter in his reasons but even apart from the letter there was ample properly admissible evidence from which he could reasonably conclude that the truck was defective. Therefore this ground of appeal fails.
(b) The warranty
The Peterbilt of Canada warranty which is signed by each appellant provides, in part: PETERBILT WARRANTY
Except for engines, automatic transmissions, tires, tubes, wheels and trade accessories which are warranted directly to you by their manufacturer, Peterbilt of Canada warrants directly to you that the Peterbilt vehicle described below will be free from defects in material and workmanship appearing under normal use and service. This warranty
applies only to you, the original purchaser.
Your sole and exclusive remedy against Peterbilt and the Selling Peterbilt Dealer, arising from your purchase and use of the vehicle is limited to repair and replacement of defective materials or workmanship through authorized Peterbilt dealers to the extent of Peterbilt’s obligations under the cost sharing warranty schedule on the back of this agreement. The time limits in the warranty schedule begin on the date of delivery as shown below. Time and mileage limits apply to the time and mileage when your vehicle is brought into an authorized Peterbilt dealer for correction of the warrantable defect.
WARRANTY DISCLAIMER AND LIMITATIONS OF PETERBILT’S LIABILITY
Except for the above warranty, Peterbilt and Selling Dealer make no other express or implied warranties and NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
It is agreed that Peterbilt and the Selling Peterbilt Dealer shall not be liable for incidental and consequential damages including, but not limited to loss of income; damage to vehicle, attachments, trailers and cargo; towing expenses; attorney’s fees and the liability you may have in respect to any other person.
To the extent any provision of this warranty contravenes the law of any jurisdiction, such provision shall be inapplicable in such jurisdiction, and the remainder of the Warranty shall not be affected thereby.
TIME LIMIT ON COMMENCING LEGAL ACTION
It is agreed that you have one year from accrual of the cause of action to commence any legal action arising from your purchase or use of the vehicle, or be barred forever.
The warranty also contains the following typed acknowledgement:
ON THE DATE OF SALE I HAVE READ THE ABOVE WARRANTY AGREEMENT AND UNDERSTAND AND ACCEPT ITS TERMS AND ACKNOWLEDGE RECEIPT OF A COPY OF THIS AGREEMENT.
and under it Gregorio’s signature.
The date of August 2, 1984 is typed in on the warranty in two places, one beside the date of delivery and the other beside the date of sale. There is no dispute on the evidence that Gregorio paid for the truck on August 2, 1984, and picked it up from Intrans the following day, August 3, 1984.
If the limitation clauses in the warranty are applicable, then either Gregorio’s claim would be barred by the one-year limitation period or recovery would be precluded by the exclusion for economic loss. On this branch of the appeal the issue is whether the limitation clauses form part of the contract of sale. In Trigg v. M1 Movers International Transport Services Ltd. (1991), 4 O.R. (3d) 562, 84 D.L.R. (4th) 504, this court stated that a limitation clause is not imported into a contract unless the party relying upon it has taken reasonable steps to bring it to the other party’s attention at the time of or prior to the making of the contract. Gregorio first complained about the truck on August 7, 1984, and in his reasons the trial judge observed that,
It was on the occasion of that August 7th visit, according to the plaintiff, that the Peterbilt warranty . . . was first brought to his attention by one Ms. Simmons who gave him a copy and told him to read it.
Later, in his reasons, the trial judge said:
I find as a fact that it was only after the consummation of the contract of purchase and sale, that that warranty was brought to the attention of the plaintiff.
The appellants argue that the trial judge failed to give effect to the evidence of Gregorio on his examination for discovery which was put to him in cross-examination at trial, and in which he admitted reading and signing the warranty on August 2, 1984. If, in order to take advantage of the limitation clauses, the appellants had only to show that Gregorio was given notice of the terms of the warranty on August 2, rather than August 7, I would be inclined to give effect to their position.
Gregorio’s counsel, however, relying on the Trigg case, argued that the limitation clauses did not provide a defence for the appellants because these clauses were not brought to the respondent’s attention before or on the date the contract was made. That date, his counsel submitted, was either May 12, 1984, when Gregorio signed a customer purchase order or July 3, 1984, when he obtained the financing necessary to complete the purchase of the truck. I agree with this submission. The May 12 purchase order, which was prepared by Mr. MacDonald, a salesman for Intrans, and signed by Gregorio, provided in part:
The undersigned [Gregorio] hereinafter called “The purchaser” hereby orders from the “vendor” the equipment described below and agrees to pay therefore the full purchase price shown immediately the unit(s) are ready for delivery upon the terms and conditions herein specified.
While the purchase order itself does not disclose when Intrans accepted the order, Gregorio’s evidence was that he “bought the truck” from MacDonald, and the parties as well as the trial judge conducted the proceedings on the basis that the May 12 document was an “agreement” subject to financing. No witness suggested otherwise. Thus, in my opinion, on May 12, 1984, the parties entered into a contract for the purchase and sale of the truck, conditional only upon bank financing, which condition was removed on July 3 when the bank confirmed it would finance Gregorio’s purchase. The appellants, on their own evidence, did not give Gregorio notice of the terms of the warranty until August 2, which was well after the date the contract was made. Therefore the appellants are precluded from relying upon the limitation clauses to defeat Gregorio’s claim. Timely notification of these clauses is especially important where they purport, as they do in this case, to extinguish or limit common law rights.
To have succeeded on this issue, the appellants would have had to show that there was a variation of the contract after it was made or that they could rely upon the limitation clauses as long as Gregorio was given notice of them prior to the performance of the contract. In this case there was no additional consideration that would support a proper variation or modification of the contract.
Consequently Gregorio’s acknowledgement and signature on the warranty did not import the limitation clauses into the contract of purchase and sale.
Absent a proper variation, this court in Trigg, supra, rejected the proposition that notice of a limitation clause given after a contract is made but before it is performed, is effective. Tarnopolsky J.A., who delivered the judgment of the court, said at pp. 567-68:
The question remains, however, whether notice may be given, and the party’s assent obtained, after the contract is signed, but before it is performed.
(b) Timing of notice
Once the issue is framed so that the adequacy of the notice determines whether the clause was imported into the agreement, then the timing of the notice becomes crucial. Essentially, a term cannot be included in an agreement unless it was contemplated at the time that the agreement was concluded, or was added thereto by a proper variation or modification. As stated in Cheshire, Fifoot and Furmston: The Law of Contract, 11th ed. by M.P. Furmston (London: Butterworths, 1986), at p. 152:
The time when the notice is alleged to have been given is of great importance. No excluding or limiting term will avail the party seeking its protection unless it has been brought adequately to the attention of the other party before the contract is made. A belated notice is valueless.
The trial judge’s use of the phrase “consummation of the contract” may have been unfortunate since it may have suggested that the relevant date for effective notice was the date that the truck was paid for and delivered rather than the date the contract was made. His conclusion, however, that the warranty “may not operate to diminish the plaintiff’s right” is unassailable. Accordingly, this ground of appeal also fails.
(c) Application of s. 15, paras. 1 and 2 of the Sale of Goods Act
The trial judge concluded that Intrans was in breach of the statutory conditions of fitness for a purpose and merchantable quality in s. 15, paras. 1 and 2 of the Sale of Goods Act. These sections provide:
15. Subject to this Act and any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:
1. Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description that it is in the course of the seller’s business to supply (whether the seller is the manufacturer or not), there is an implied condition that the goods will be reasonably fit for such purpose, but in the case of a contract for the sale of a specified article under its patent or other trade name there is no implied condition as to its fitness for any particular purpose.
2. Where goods are bought by description from a seller who deals in goods of that description (whether the seller is the manufacturer or not), there is an implied condition that the goods will be of merchantable quality, but if the buyer has examined the goods, there is no implied condition as regards defects that such examination ought to have revealed.
Section 1(1), the definition section, states that a “contract of sale” includes an agreement to sell as well as a sale.
In this court, Intrans argued that Gregorio failed to make known to Intrans the particular purpose for which the truck was required or that he was relying upon Intrans’ skill and judgment and thus he could not bring himself within the statutory provisions. The trial judge found, however, that Gregorio expressly communicated to Intrans the particular purpose for which the truck was required and, even if he had not, Intrans would be fixed with that knowledge by necessary implication. There was evidence to support these findings and evidence to support the trial judge’ s conclusion that Intrans was liable for breach of its obligations under the Sale of Goods Act. The appellants have not persuaded me that it was unreasonable for the trial judge to rely upon this evidence. Accordingly,
Intrans’ appeal on liability must fail.
Further, I would uphold the trial judge’s finding of Intrans’ liability under the Sale of Goods Act, even if Gregorio had received timely notification of the warranty. The express terms of the Peterbilt warranty do not exclude the statutory conditions of fitness for a purpose and merchantable quality in s. 15. There is a difference between a breach of warranty and a breach of condition. Words that exclude only implied warranties do not also exclude implied conditions. Although a vendor may exclude the implied conditions contained in the Sale of Goods Act, he must use explicit language to do so: see Chabot v. Ford Motor Co. of Canada (1982), 39 O.R. (2d) 162, 138 D.L.R. (3d) 417 (H.C.J.), approved in Hunter Engineering Co. v. Syncrude Canada Ltd.,  1 S.C.R. 426 at pp. 449-50, 57 D.L.R. (4th) 321. At best, from Intrans’ perspective, the warranty is ambiguous as to whether it excludes the statutory conditions, in which case the rule of contra proferentem would apply. Accordingly, even if the warranty applies Gregorio still has a claim against Intrans for breach of the implied conditions in s. 15.
Then the question is whether Intrans could still rely upon the one-year limitation period stipulated in the warranty to defeat Gregorio’s claim under s. 15. I do not think that it could. The warranty seeks to limit Gregorio’s remedy “arising from your purchase and use of the vehicle” and “repair or replacement of defective materials or workmanship”. In my view the time limitation clause should be read as applying only to that remedy since it is the only remedy the dealer intended to provide to Gregorio. But as Gregorio has a claim (for breach of s. 15) which is outside the express terms of the warranty, the one-year limitation clause would not apply to that claim. Again any doubt must be resolved against Intrans.
(d) The position of Paccar
Paccar’s role in the events in issue may be summarized as follows: it accepted an order from Intrans for the truck which it sent on to its American parent; it provided the warranty to the plaintiff; and it subsequently became involved in attempts to repair the truck. Paccar did not manufacture the truck nor did it have an opportunity to inspect the truck since the vehicle was driven from the United States directly to the dealer. Paccar’s field manager testified at trial that the company was a Canadian distributor of Peterbilt trucks and was responsible for warranting, selling, and servicing these vehicles in Canada. In my view, these facts do not support the trial judge’s finding of liability on a theory of alter ego, which in this case I take to mean treating Paccar as the manufacturer for the purpose of fixing it with liability to the respondent in negligence. Generally, a subsidiary, even a wholly owned subsidiary, will not be found to be the alter ego of its parent unless the subsidiary is under the complete control of the parent and is nothing more than a conduit used by the parent to avoid liability. The alter ego principle is applied to prevent conduct akin to fraud that would otherwise unjustly deprive claimants of their rights: see Pauley Petroleum Inc. v. Continental Oil Co., 239 A.2d 629 (Del.), Canada Life Assurance Co. v. Canadian Imperial Bank of Commerce (1974), 3 O.R. (2d) 70, 44 D.L.R. (3d) 486 (C.A.), and Aluminum Co. of Canada v. Toronto (City),  S.C.R. 267,  3 D.L.R. 609.
In the case before us the evidence as to the relationship between Paccar and its parent does not justify the application of the alter ego principle. I observe as well that the parties could not have been misled as to which company manufactured the truck. The facts of this case are quite different from the facts in Phillips v. Ford Motor Co. of Canada Ltd.,  2 O.R. 714, 12 D.L.R. (3d) 28 (H.C.J.), where the court held both Ford of the United States and Ford of Canada liable for a defectively designed and manufactured Lincoln automobile and from the facts in Chabot v. Ford Motor Co. of Canada, supra, where the trial judge treated both Ford Canada and Ford U.S. as the manufacturer because neither would disclose which company made the car in question.
In this court both counsel for Intrans and counsel for Gregorio sought to support the trial judge’s finding of liability against Paccar on a different basis, negligence as a distributor. Counsel for Paccar submitted that this argument was not open to Gregorio because it had not been pleaded and Paccar would be prejudiced if the court were now to consider it. I do not need to determine the question of prejudice arising from the pleadings because in my view Gregorio cannot succeed in fixing Paccar with a distributor’s liability. A distributor does, of course, have affirmative duties of care to the ultimate consumer of a product. Thus, a distributor can be liable for the careless handling of a product and for the failure to warn of dangers in a product that he knows about or by inspection reasonably ought to know about: see, for example, J.G. Fleming, The Law of Torts, 7th ed. (1988), at pp. 476-77.
In this case Paccar did not act as a distributor as that term is ordinarily used. Paccar never had physical possession of the truck and thus had no opportunity to inspect it. It did not know about the truck’s defects prior to delivery to Gregorio. Since the truck never passed through Paccar’s hands and since it had no reason to believe the truck would malfunction, it cannot be held accountable to the respondent for failing to detect the manufacturing defects found by the trial judge.
Does Gregorio then have any claim against Paccar? The warranty given by Paccar does not exclude a claim against it for damages for negligence but I do not think that there is any evidentiary basis for making a finding of negligence in favour of Gregorio. At best Gregorio has a claim against Paccar on the warranty itself but that claim is limited to what is expressly warranted. See the judgment of this court in Kelly v. Mack Canada Inc. (1988), 66 O.R. (2d) 68, 53 D.L.R. (4th) 476, and the judgment of the Nova Scotia Court of Appeal in Maughan v. International Harvester Co. of Canada (1980), 112 D.L.R. (3d) 243, 38 N.S.R. (2d) 101.
While some of the out-of-pocket expenses claimed by Gregorio might fall within the terms of the warranty, I am not able to make that finding on the record before the court or on the submissions of counsel.
Accordingly, Paccar’s appeal against Gregorio succeeds and Gregorio’s action against Paccar is dismissed.
C. Paccar’s Liability to Indemnify Intrans
Although I have found that Paccar is not liable to Gregorio, it may still be liable, as the trial judge held, to indemnify Intrans. Paccar argues that if the appellants could not rely upon the limitation clauses in the warranty to defeat the respondent’s claim because they were not brought to Gregorio’s attention in a timely manner, that is Intrans’ fault and as a result Paccar should not have to indemnify the dealer. In his reasons the trial judge found:
The failure, therefore, of Intrans to give timely notice of the warranty to the plaintiff arguably has operated to the prejudice of Paccar; except for the conclusions I have reached.
I am of the view that Paccar cannot avoid liability to Intrans on the basis that it was prejudiced by Intrans’ conduct for two reasons. First, as I have stated, the terms of the Peterbilt warranty would not have precluded liability under the Sale of Goods Act even if Gregorio had received timely notification of them. Second, the evidence at trial indicates that it was Paccar’s standard policy that its dealers ensure that when a buyer picks up a truck the buyer is given the warranty and is made aware of its terms. The application of the standard policy in this case would require that the warranty be brought to Gregorio’s attention on August 2 or 3, 1984. On the view I have taken of this case, notice on the 2nd or 3rd of August would be of no assistance either to Intrans or, for that matter, to Paccar in disputing liability to Gregorio.
Is there a basis for holding Paccar responsible for indemnifying Intrans for Gregorio’s losses? The trial judge’s finding that Paccar was responsible seemed to flow from his finding of what amounted to Paccar’s manufacturer’s liability. While I do not think that is a proper basis for holding Paccar responsible, I am of the opinion that the trial judge’s conclusion can be supported on the basis of s. 15 of the Sale of Goods Act: see Kasler v. Slavouski,  1 K.B. 78, 96 L.J.K.B. 850.
Intrans’ purchase of the truck from Paccar is a contract of sale to which the statute applies. Absent any enforceable exempting provisions — and none were brought to our attention — the trial judge’s findings that permitted him to conclude that Intrans was in breach of its Sale of Goods Act obligations to Gregorio permit me to conclude that Paccar was in breach of its Sale of Goods Act obligations to Intrans.
Counsel for Paccar acknowledged the applicability of the Sale of Goods Act to his client but submitted that the sale of the truck was the “sale of a specified article under its patent or other trade name” so as to make the statutory conditions inapplicable. The above-quoted exception applies only to the condition as to fitness for a purpose in s. 15, para. 1, not to the condition as to merchantable quality in s. 15 para. 2 and, in any event, the Intrans-Paccar sale documents do not indicate that the sale of the truck was a sale under a patent or trade name. The purpose of the quoted exception is to make the statutory condition inapplicable in sales where the buyer is not relying upon the seller’s skill or judgment which is not the situation in the case before us: see Fridman, Sale of Goods in Canada, 3rd ed. (1986), pp. 199-201. Intrans was entitled to receive a truck free of defects for delivery to its customer. It did not get what it bargained for. Paccar, the company from whom
Intrans ordered the truck, must bear the ultimate responsibility for the damages incurred by Gregorio. Thus Paccar’s appeal against Intrans fails.
On appeal, the appellants sought to reduce the damages awarded by the trial judge, while the respondent sought to increase them. The appellants’ principal argument in support of a reduction was that the respondent failed to mitigate his losses by refusing to accept Intrans’ offer in late 1985 of a new truck in exchange for the problem-ridden one and $40,000. Gregorio had considered the proposal unreasonable and had rejected it. The trial judge concluded, correctly in my view, that Gregorio could do so without breaching his duty to mitigate as the Intrans proposal required him to assume a substantial financial burden.
Counsel for Gregorio argued for an increase in damages in two areas. First, he submitted that Gregorio was entitled to more than a nominal amount for the admittedly defective painting job and for the damages done to the truck when it was sandblasted. Second, he submitted that the trial judge undervalued the loss of income claim.
The trial judge awarded the nominal sum of $500 for the depreciation in the value of the truck because of what he called the unworkmanlike job of repainting, including sandblasting. While Gregorio obtained quotations to repair the damage done by the sandblasting and to paint the truck none of this work was ever undertaken and no evidence was led to substantiate any resulting depreciation in the value of the truck. Accordingly, I am of the opinion that the trial judge was correct in awarding only a nominal sum.
The trial judge carefully considered the respondent’s loss of income claim. He recognized that the formula argued upon him by the respondent would yield a higher award, but he quite properly took into account the respondent’s actual record of miles driven and income earned while driving the truck, both of which compared favourably to the figures that had been forecast. As the trial judge also observed, the respondent did not call any evidence of the miles driven and income earned by other transport drivers engaged in similar work. Given these facts I see no reason to interfere with the award of damages made at trial and Gregorio’s cross-appeal is therefore dismissed.
In the result, Intrans’ appeal against Gregorio is dismissed; Paccar’s appeal against Gregorio is allowed but Paccar’s appeal against Intrans is dismissed. Gregorio’s cross-appeal is dismissed. The parties shall have the opportunity to make written submissions on the issue of costs. I ask that these submissions be delivered within one week.
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