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CONSUMER AGREEMENTS - Leases of goods - Disclosure obligations

Wednesday, April 08, 2020 @ 9:18 AM  

Appeal by the defendant, Durham Drug Store, from summary judgment granted in favour of the plaintiff, MacQuarie Equipment Finance. Durham Drug Store operated a pharmacy. A business arrangement with Medview contemplated Medview supplying a telemedicine studio in the pharmacy that would provide remote medical services to the public. Their agreement contained an early termination provision. Medview arranged for Leasecorp, an equipment lease broker, to lease the necessary telemedicine equipment to Durham. There was conflicting evidence as to whether MacQuarie was identified as the lessor. Durham’s principal signed the equipment lease agreement presented by Medview, naming MacQuarie as the other party. Durham made payments under the lease for almost one year. It stopped after learning Medview failed to disclose it lacked the required regulatory approvals for its services. It subsequently surfaced that Medview had defrauded several pharmacies by having them purchase telemedicine equipment. MacQuarie sued Durham seeking payment of $90,000 owed under the lease. Durham took the position that its contract was with Medview rather than MacQuarie. Summary judgment was granted in favour of MacQuarie on the basis that the lease was signed by Durham’s principal, and thus enforceable against Durham. Durham appealed.

HELD: Appeal allowed. In the unusual circumstances of the case, Durham Drug Store had a right to terminate the lease and return the leased equipment to Macquarie upon the default of Medview. The evidence supported the finding that MacQuarie and Leasecorp had no knowledge or involvement in any alleged fraud by Medview. The motion judge was entitled to find that the evidence was insufficient to establish that the lease agreement was unconscionable. However, the inclusion of a non-cancellation provision in the equipment lease was inconsistent with the early termination provision in the agreement with Medview. The non-cancellation provision should have been brought to the attention of Durham’s principal and explained to her prior to execution. That failure of communication rendered the lease unenforceable. Upon Medview’s default, Durham was entitled to terminate the lease and return the equipment to MacQuarie, as it purported to do.

MacQuarie Equipment Finance (Canada) Ltd. v. 2326695 Ontario Ltd. (c.o.b. Durham Drug Store), [2020] O.J. No. 720, Ontario Court of Appeal, J.C. MacPherson, R.J. Sharpe and M. Jamal JJ.A., February 20, 2020. Digest No. TLD-April62020007