In Hafeez v. Sunaric, a 2015 appeal decision of Perell J, the issue of whether a contract can be enforced for property damage against an at fault driver, given that we have a NoFault system in Ontario, is examined. In this case, the parties were involved in a motor vehicle accident in a parking lot. The Small Claims Court Judge dismissed the action:

  1. The agreement was unenforceable for want of consideration;
  2. The agreement was barred by s. 263 of the Insurance Act

Mr. Hafeez owned an insured BMW. Mr. Sunaric owned an insured Mercedes. On November 22nd, 2009, there was a collision in the parking lot between these two vehicles. Mr. Sunaric admitted fault for the accident and afterwards, they signed the following agreement:

I, Radomi Sunaric R/O [address] [driver’s licence] had parked my car Mercedes … at the parking lot of No Frills at Bloor St. W. between Keele St. and Runnymede. As I wanted to go out of the parking lot at about 6:10 p.m. on 22/11/2009 I was reversing my car and struck a BMW … which was duly parked in the central lane of the parking lot. My car badly hit the BMW damaging front and front left corner. It was absolutely my fault. There was no one in the BMW. I accept all my fault and all the consequences I am responsible for. I will pay him $15,000 minus insurance payment.

Perell J found that the critical part of the note was the sentence, “I will pay him $15,000.00 minus insurance payment”.

A few months later, Mr. Hafeez had an assessment of his vehicle and the BMW was assessed at $13,500.00. Over a year later, after having the Ombudsman involved of his insurer, Mr. Hafeez was paid $6,500.00 by his insurer for the damage to his vehicle. Mr. Hafeez did not appeal the decision because he had missed the 1 year limitation period.

On November 18th, 2011, Mr. Hafeez issued a Statement of Claim against Mr. Sunaric claiming the difference between the $6,500.00 and the $15,000.00 which was claimed to be the value of the BMW. Mr. Sunaric was served and then noted in Default and a Default Judgment assessment was scheduled before Justice Godfrey. Justice Godfrey did not find the agreement enforceable because it did not provide for any consideration, such as if Mr. Hafeez had agreed not to submit a claim to his insurer, resulting in Mr. Sunaric not reporting the matter to his insurer, and not having his insurance premiums raised.

There was also reliance on s. 263 of the Insurance Act which deals with Direct Compensation for Property Damage in accidents involving two or more insured automobiles. This section basically holds that an insured’s only right of action is their own insurer.

In terms of whetherthere was a want of consideration regarding the contract, Perell J found that that the consideration that Mr. Sunaric received was that Mr. Hafeez limited his claim to $15,000.00.

In terms of s. 263, it was found that the property loss compensation introduced precluded tort claims, but that claims in contract are not precluded. The exception for claims in contract is found in s. 263(5)(a.1) which states:

(a.1) an insured has no right of action against a person under an agreement, other than a contract of automobile insurance, in respect of damages to the insured’s automobile or its contents or loss of use, except to the extent that the person is at fault or negligent in respect of those damages or that loss;

There have been situations where s. 263(5)(a.1) has been applied to situations where the defendant agrees by an oral contract to pay for the damage to the Plaintiff’s vehicle, without the parties resorting to their insurance, as has been noted by Justice Juriansz in Clarendon National Insurance v. Candow. Perell J. found that there was no reason to interpret the exception for contracts in a restricted way. Furthermore, in McClinton v. Estien, a 2003 decision of the Ontario Small Claims Court, Deputy Judge Kilian held that for the contract to be enforceable, it must meet 2 conditions:

  1. There must be an agreement for the damage, content, and loss of use; and
  2. The agreement must be between the Plaintiff and the person at fault of negligent

Since these two conditions were met in this case, and for the reasons set out above, Mr. Hafeez was awarded judgment in the amount of $8,500.00.

So, if you are ever involved in a motor vehicle accident, be careful about what you sign at the scene of the accident in terms of admitting fault and agreeing to pay for property loss.