Class action lawsuit against Treadz Auto gets go-ahead from judge

A Calgary judge has certified a $5-million, class-action lawsuit against a defunct vehicleconsignment company,Treadz Auto, whose owner defrauded clients out of more than $2 million.

As part of the decision,Court of Queen's Bench Justice Glenda Campbell dismissed the action against Service Alberta and the Alberta Motor Vehicle Industry Council (AMVIC), finding the two did not owe a duty of care to the plaintiffs.

Campbell's decision also offers new details about Treadz owner SeanO'Brien, including that he was granted a licence to sell cars despite AMVIC's knowledge that he had a criminal record for stealing cars 10 years earlier.

In 2018, O'Brien was sentenced to three years in prison after pleading guilty to criminal charges, admitting he defrauded Calgary car owners out of more than $2 million.

Campbell noted in her decision that the Treadzdefendants, which include O'Brien, "failed to respond to the action and have been noted in default."

• Treadz Auto owner pleads guilty to $2M vehicle consignment fraud
• Treadz Auto owner sentenced to 3 years in jail for defrauding customers

The lawsuit allegesTreadz did not pay owners whose vehicles were soldanddid not remove liens from the vehicles.

The plaintiffs namedAMVICas part of the suit, accusing the watchdog of failing toproperly investigate consumers' complaints against Treadz andnot compensatingthem adequately.

The lawsuit also named Service Alberta as a defendant, accusingthe provinceof failing to properly oversee AMVIC.

But Campbell dismissed the action against Service Alberta and AMVIC, finding there is no merit to allegations the two governing bodies are liable for regulatory negligence.

O'Brien initially faced 164 charges

Originally facing 164 fraud and theft charges,O'Brien pleaded guilty to two counts of fraud over $5,000.

Details of O'Brien's crimes come from an agreed statement of facts read aloud at his plea in September 2018.

• Treadz Auto's provincial business licence cancelled by regulator

Between 2011 and 2014, about 100 people signed contracts with Treadz Auto Group to sell their vehicles on consignment. Each paid$299.

But Treadz did not compensate the owners after the cars were sold to unsuspecting buyers. In many cases, those who consigned their cars did not own them outright, leaving victims who continued to pay for a vehicle they no longer owned.

The owner of the now-defunct company which was located on Fairmount Drive S.E. also re-registered dozens of vehicles in the company's name using fraudulent documents in order to secure a loan from a credit company for nearly $500,000, which was never repaid.

AMVIC grantslicence despite criminal history

O'Brien's lawyer said his clientoperated successfully and honestly for six years until a number of investors backed out. AfterO'Brien remortgaged his home, "the house of cards came falling down," said defence lawyerKaranpalAujla.

But O'Brien's criminal activity dates back to the 1990s.

In 2004, O'Brien was issued a licenceto sell cars. The licence was issuedby AMVIC, whichcan refuse to issue, suspend or cancel a licence if a person has a criminal record.

O'Brien, it turned out, had a criminal record dating back to 1993for what he described as "car theft-related charges."

Ten years before he would begin his car consignment company, O'Brien was sentenced to 18 months in jail.

Complaints ramp up in 2014

AMVIC staff also noted O'Brien had filed for bankruptcy in the past. Still, the agency granted and continued to renew O'Brien's licence.

Complaints against Treadz began to roll into AMVIC the same year it granted O'Brien his licence, according to Campbell's ruling.

But the complaints at that time averaged only one a year, and those that involvedfailure to pay the proceeds of consignment sales were quicklyresolved until 2014.

That year, the complaints began rolling into AMVIC, prompting several investigations, which ended with O'Brien's licence cancellationin August 2014.

Payouts not received

In that same year, thelawsuit'stwo named plaintiffs Andrea Scherle andStacy Rachkewich became involved with Treadz.

Scherle claims the consignment companysold her Dodge Ram but never gave her the money.

Treadz sold her Dodge Ram for $53,500, which should have paid off the financing owed to Scotiabank, but that never happened.

• Treadz Auto complaints greater than police realized

Scotiabank came after Scherle for $47,000. She was able to make a claim under AMVIC's compensationfund but that caps out at $25,000.

Rachkewich filed a complaint with AMVIC in 2014, allegingTreadz owed him nearly $20,000, the bulk of which was for aScotiabank financing buyout.

Now that the class-action lawsuit has been certified, a date for the trial will have to be set.