BMW Canada has won a skirmish in its quest for $175 million in compensation from storage company Autoport for alleged damage to thousands of imported vehicles.
In a ruling, Ontario's Divisional Court ordered Autoport to foot the $10,000-a-day bill BMW says it's been paying to preserve the vehicles as litigation evidence.
The case arose after a brutal winter in February of 2015 during which, the German automaker alleges, 2,966 imported BMW and MINI models stored by Autoport in Halifax were unduly exposed to ice, water and salt. BMW argues the exposure created potential safety risks and recalled all the vehicles.
In a July 2015 recall notice, Transport Canada warned of a serious safety risk. Corrosion, the agency said, could lead to sudden engine shutdowns, steering problems or fires. The recall affected 10 different BMW models — including higher end X7 and i8s from three different model years — and seven 2015 MINI models.
BMW says it's impossible to determine the extent of any damage without destructive tests, and, as a result, none of the vehicles could be made roadworthy and sold. The automaker wants to destroy all of them.
The unproven suit, which alleges Autoport was negligent and breached its contract, seeks $175 million — the full value of the vehicles.
Autoport denies any liability. It argues BMW's claim is grossly exaggerated and the recall unreasonable. The storage company says none of 12 vehicles it has inspected showed any sign of damage, according to court documents.
BMW argues its claim does not turn on proving any particular vehicle was damaged and says it doesn't need the vehicles for the lawsuit. For its part, Autoport says it needs to examine the automobiles to mount a proper defence.
It also wants to see the results of inspections BMW has done, saying it doesn't know what specific investigations are required or whether examinations can be performed on only a small sample of the cars.
The automaker says it has been spending about $10,000 a day — roughly $3.5 million a year — to keep the vehicles at three sites in Canada. It wants Autoport to foot the bill.
The courts initially sided with BMW, but an appeal judge overturned the decision on the basis that the automaker, as plaintiff, was financially responsible for storing and preserving the litigation evidence. BMW appealed to Ontario's Divisional Court.
In agreeing with BMW, the Divisional Court panel said making Autoport pay for the storage gives it an economic incentive to preserve and test only as many automobiles as it actually needs for its defence.
"Placing the financial burden on the plaintiff would give the defendant an economic incentive to delay its testing and exaggerate the number of vehicles to be preserved," the panel said in its decision.
"Autoport's own experts can determine how many vehicles they need to preserve and test. Logic and the principle of proportionality suggest that it will be substantially fewer than the 2,500 vehicles currently in storage."
The appellate court ordered Autoport to pay for the storage to date. The company can also keep paying for the storage or take possession of the vehicles to do whatever tests it feels are needed, the court said.
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