383501 Alberta Ltd., carrying on business as Val Brig Equipment Sales Plaintiff - v. -, 2012 ABQB 461

Court of Queen ’ s Bench of Alberta Citation: 383501 Alberta Ltd. (Val Brig Equipment Sales) v. Phoenix Co. Ltd., 2012 ABQB 461 Date: 20120719 Docket: 0503 19880 Registry: Edmonton Between: 383501 Alberta Ltd., carrying on business as Val Brig Equipment Sales Plaintiff - and - Phoenix Co. Ltd. Defendant Editorial Notice: On behalf of the Government of Alberta personal data identifiers have been removed from this unofficial electronic version of the judgement. _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice J.J.

Gill _______________________________________________________ _______________________________________________________ I. Introduction................................................................................................................ Page: 2 II. Issues.......................................................................................................................... Page: 2

III. Evidence of the Plaintiff.............................................................................................. Page: 2 IV. Evidence of the Defendant.......................................................................................... Page: 6 V. Analysis.................................................................................................................... Page: 10

(1) Did Mr. Kicksee have actual or ostensible authority to sign the Bill of Sale on behalf of the Defendant?........................................................ Page: 10

(2) If there was a breach of contract by the Defendant what damages arise from that breach?.................................................................................. Page: 13

(3) Has the Plaintiff mitigated its damages?........................................................ Page: 14

(4) Is the Plaintiff entitled to solicitor/client costs and the interest amount specified in the Bill of Sale?............................................................. Page: 16 VI.

Summary................................................................................................................... Page: 16

SCHEDULE A...................................................................................................................... Page: 18 I. Introduction [ 1 ] This case concerns the sale of an horizontal boring mill ( “ the Machine ” ). [ 2 ] The Plaintiff alleges that it entered into a contract to sell the Machine to the Defendant and that the Defendant failed to comply with the terms of the contract. The Defendant disputes these allegations. II. Issues

(1) Did Mr. Kicksee have actual or ostensible authority to sign the Bill of Sale on behalf of the Defendant?

(2) If there was a breach of contract by the Defendant, what damages arise from that breach?

(3) Has the Plaintiff mitigated its damages?

(4) Is the Plaintiff entitled to solicitor/client costs and the interest amount specified in the Bill of Sale?

III. Evidence of the Plaintiff [ 3 ] The Plaintiff called two witnesses: Mr. Laurence Berube and Mr. Phillip Kicksee. [ 4 ] Mr. Berube owns the Plaintiff Company which has been in business since 1988. The Plaintiff is in the business of buying and selling heavy trucks and equipment. In February of 2003 it bought the Machine for $107,000.00 with the plan of reselling it as soon as possible. The vendors represented that the Machine had been completely rebuilt. This was the first time Mr.

Berube had bought a boring mill. [ 5 ] The Machine was left in storage at the repair shop for 6 months, then moved to their yard in Edmonton. The Machine was stored outside on railway ties and covered with tarps. The smaller parts of the Machine which included bolts and fasteners were stored inside the Defendant ’ s shop. The Defendant ’ s mechanic would periodically lift the tarps and clean up and oil the Machine. He knew it was preferable to store it indoors, but he had no space in his shop. [ 6 ] Mr. Berube planned to resell the Machine and so he advertised the Machine for sale.

He kept in contact with the previous owner of the Machine (Mr. Sakic) who assisted him in his efforts resell it. When Mr. Berube received a call from a potential purchaser, he would use Mr. Sakic as a reference. [ 7 ] In early October 2003 while having lunch with Mr. Sakic, he received a call from Mr. Kicksee, who identified himself as the General Manager of the Defendant Company which was based in Ft. McMurray. Mr. Kicksee told him they needed a boring machine, and were interested in purchasing the Machine. Mr. Kicksee then had a lengthy conversation with Mr. Sakic about the condition the Machine. [ 8 ] Mr.

Berube and Mr. Kicksee subsequently had a few more calls and finally agreed on a price of $95,000.00, plus GST. Mr. Kicksee wanted a $5,000.00 hold back to make sure that the motors were running. Mr. Kicksee expressed some urgency to get the Machine as soon as possible as they needed it in Ft. McMurray [ 9 ] Mr. Kicksee told him that the purchase was approved and to prepare a Bill of Sale. [ 10 ] Mr. Berube then received a call from Mr. Rolph, who identified himself as the Controller of the Defendant. He also told him that the purchase was approved and to prepare and send a Bill of Sale. Mr.

Rolph said he would review it, discuss it with the owner Mr. Golosky and would advise Mr. Kicksee what to do. Mr. Berube spoke to Mr. Rolph at least three times, including on one occasion after he sent him the Bill of Sale. [ 11 ] Mr. Berube prepared a Bill of Sale (see

Schedule A), and faxed it to Mr. Rolph. He used a standard Bill of Sale. The purchaser was always welcome to inspect the Machine, but Mr. Kicksee seemed satisfied after speaking to Mr. Sakic. Mr. Berube made arrangements to have a crane available to load the Machine onto the truck that Mr. Kicksee would be sending to pick it up. [ 12 ] The next day, October 21 st , Mr. Berube received a call from Mr. Rolph, who said the deal was cancelled and that they would not be proceeding. Mr. Rolph told him if he had another purchaser, he should go ahead with that transaction. [ 13 ] In November of 2005, Mr. Berube retained counsel to send a Demand Letter in relation to this sale.

[ 14 ] Mr. Berube kept the Machine in his yard and continuously made efforts to resell it. He did not get any advice on storage or on how to sell it. [ 15 ] In April of 2007 he retained Ritchie Auctions at Nisku to sell it. The auction contract did not permit reserve bids. He expected to get $50,000.00 to $75,000.00, but ultimately only received $400.00 and netted $320.00 after Ritchie took their auction fee. [ 16 ] The next witness was Mr. Kicksee. He is 61 years old and retired.

He is a qualified tradesman holding several tickets including light and heavy duty mechanics and master electrician. [ 17 ] He started working in a large machine shop in the 1970s, operating large boring machines. In the early 80s he moved to Ft. McMurray and worked in machine shops for many years, operating and repairing boring mills. His experience includes 6 ½ years with Syncrude, where his job was to repair and maintain lathes and boring machines. [ 18 ] After he left Syncrude, he worked for the IBEW union. At the same time he did repair work for the Defendant and their related Companies.

He was often called in to fix their machinery, including a boring mill. [ 19 ] In October 2003, he was hired by the Defendant to manage the Defendant Company. His job title was Manager. He reported directly to the President of the company (Mr. Golosky). His responsibilities included hiring and supervising employees, scheduling materials and personnel and recommending the purchase of capital equipment. [ 20 ] The owner of the Defendant company, Mr. Golosky had an office in a building next door in Ft. McMurray. Mr. Rolph, the Controller of the Defendant, were located in Edmonton. Mr.

Golosky ’ s management style was to walk through the shop once or twice a day and talk to him and other employees. [ 21 ] In the Fall of 2005 Mr. Kicksee realised that the Defendant needed a larger boring mill in order to serve a customer. This customer had a large job which would overload their existing boring mill. He spoke to Mr. Golosky, who instructed him to look for a machine. A new one would cost about $500,000.00. He phoned many places but found it was very difficult to find the type of boring mill they needed.

He found one in the United States, but it would take too long to get it disassembled and shipped to Ft. McMurray. [ 22 ] He came across the Machine by way of an advertisement. In October, 2005 he contacted Mr. Berube to inquire about the Machine. Mr. Berube happened to be having lunch with the previous owner of the Machine (Mr. Sakic). Mr. Kicksee spoke to Mr. Sakic asking him, what he described as, precise questions about the condition of the Machine. He was impressed with the information he received from Mr. Sakic. [ 23 ] He told Mr. Berube that he would contact the owner to see what he could do.

He then called Mr. Golosky who told him that the Machine sounded good and to contact Mr. Rolph. [ 24 ] Mr. Kicksee did not inspect the Machine because the information he received from Mr. Sakic satisfied him as to the condition of the Machine. Mr. Kicksee described boring machines as big rugged machines which are hard to hurt. [ 25 ] Mr. Kicksee negotiated the price down to $95,000.00 from the asking price of $125,000.00.

He also negotiated a hold back of $5,000.00 for the purpose of inspecting the electrical motors to make sure they worked, because when equipment is stored outside dampness can damage the motors. [ 26 ] Mr. Golosky told him to go ahead and get the paperwork to Mr. Rolph.

[ 27 ] It was agreed that the Plaintiff would draft a Bill of Sale and send it to Mr. Rolph. Mr. Kicksee received an e-mail from Mr. Rolph, which was also copied to Mr. Golosky. The email had as its subject heading “ Boring Mill ” and attached a Bill of Sale dated October 2005. The e-mail stated as follows: “ Phil, could you please review the draft Bill of Sale to make sure it is consistent with the terms you negotiated with Lawrence. Thanks. If you have any comments or questions, please do not hesitate to contact me at (780) [...] - [...]. Regards Terry Rolph, C.A. ” [ 28 ] Mr. Kicksee spoke to Mr.

Rolph within 10 minutes of receiving this e-mail. He told Mr. Rolph that the Bill of Sale contained the deal that he and Mr. Berube had agreed upon. Mr. Rolph then told him to sign the Bill of Sale and return it to Mr. Berube. [ 29 ] Mr. Kicksee signed the Bill of Sale (Schedule

A) and sent it back to Mr. Berube. He then contacted a trucking company and arranged to have the Machine picked up. He understood Mr. Rolph would pay the purchase price and the Plaintiff would have a crane at the yard in order to load the Machine onto the truck. [ 30 ] Mr. Kicksee did not hear anything for a few days. Then Mr. Rolph sent him a document entitled “ Capital Budget Form ” and asked him to complete it in relation to the Machine. This was the first time he ever had to fill out this form. He considered it a formality and filled it out and sent it back. [ 31 ] Later he received a call from Mr.

Berube who told him the deal was on hold. He spoke to Mr. Rolph, who said that Mr. Golosky had had a problem with the deal. It was never explained to him what this problem was. [ 32 ] On October 25, 2007 Mr. Kicksee was in Edmonton on other business. He went over to the Plaintiff ’ s yard and looked at the Machine. He had no concerns about its condition. [ 33 ] Mr. Kicksee had been involved in other purchases of other capital equipment for the Defendant, including a CNC Lathe (with a value of $250,000), a truck and a forklift. In each case Mr. Golosky had given him the go-ahead to find the equipment.

He did the leg work, found the equipment and submitted the paperwork to Terry Rolph to arrange to pay for it. Then the equipment was purchased. He signed the Bill of Sales for the truck and the forklift but not for the Lathe. [ 34 ] Mr. Kicksee became quite frustrated as this contract had been cancelled with no explanation. Other things also took place at work, which added to his frustration, including some of his workers being moved to other shops. He was having great difficulty getting machinists and he felt Mr. Golosky was blocking him.

As a result he decided to resign and handed in his notice in November 2005. [ 35 ] Mr. Kicksee was asked to comment on statements made by the Defendant ’ s expert Mr. Smith. In a written report Mr. Smith expressed several concerns about the condition of the Machine, including the fact that it was disassembled. Mr. Kicksee did not share this concern. He noted that these machines have a lot of optional or extra equipment, which is not assembled until needed. Mr. Smith was also concerned about the condition of the glass measurement instruments and scales. Mr.

Kicksee was not concerned as the key components of the Machine were all in good condition. IV. Evidence of the Defendant [ 36 ] The Defendant called three witnesses: Mr. Terry Rolph, Mr. Golosky and Mr. Dan Smith. [ 37 ] Mr. Rolph received his CA designation in 1982. He practiced with a firm of Accountants until 2000 at which time he joined the Golosky Group of Companies as a Chief Financial Officer ( “ CFO ” ). As the CFO he reported to Mr. Golosky. The Defendant company was one of the Golosky Group of Companies.

[ 38 ] Mr. Rolph ’ s duties included preparing annual budgets, supervising administrative staff, reviewing internal financial statements, preparing financial statements and corporate tax returns and dealing with the auditors and the banks. [ 39 ] Each of the companies in the group had a Manager who were tasked to manage that individual corporation. Mr. Golosky ran the entire Group of Companies and was a “ hands on ” Manager who had regular meetings with all his Managers. Mr. Golosky and Mr. Kicksee had daily interaction. [ 40 ] Mr. Kicksee started as a Manager with the Defendant in 2003.

As Manager his duties included making recommendations in relation to the purchase of capital assets. Mr. Golosky and the Managers would consult with Mr. Rolph concerning capital acquisitions. Mr. Rolph provided advice on financial matters and where a proposed purchase fit within the Group of Companies. Mr. Golosky and Mr. Rolph would meet to discuss the implications of a purchase on the other Companies. [ 41 ] Mr. Rolph ’ s role was not to determine the need for the equipment. His job was to determine if the Company could afford the equipment. The question of need would be determined by Mr. Golosky, or Mr.

Kicksee. Mr. Golosky had the authority to instruct Mr. Kicksee to proceed with a purchase as he was the owner of the Company and he could do what he wanted. [ 42 ] Mr. Kicksee and the other Managers did not have the authority to buy capital assets, or to sign a Bill of Sale. Any Bills of Sale would be signed either by Mr. Golosky or Mr. Rolph. Mr. Kicksee did not sign any other Bills of Sale. [ 43 ] Mr. Rolph recalled that it was decided that a new boring mill was needed. Mr. Golosky told him that he had given Mr. Kicksee orders to go and find a boring mill. Mr.

Rolph was to get ready for an acquisition and to consider its suitability within the context of the Group of Companies. [ 44 ] On October the 19 th , or 20 th , Mr. Rolph got a call from Mr. Kicksee who reported that he had found a used boring Machine in Edmonton which might fit their needs. Mr. Kicksee told him a Bill of Sale would be coming. [ 45 ] Mr. Rolph received the Bill of Sale, reviewed it, scanned it and forwarded it to Mr. Kicksee and Mr. Golosky. [ 46 ] Mr. Rolph asked Mr. Kicksee to review the Bill of Sale to see if it was consistent with the deal that he had made with Mr. Berube. Mr.

Rolph expected that Mr. Golosky would have an opportunity to review it and that is why he copied it to him for his approval. He had no idea if Mr. Golosky had seen the Bill of Sale previously. [ 47 ] Mr. Rolph testified that what should have happened is that Mr. Kicksee would acknowledge that the terms in the Bill of Sale are as agreed and Mr. Golosky would approve it. Mr. Rolph would then sign it and sent it back to the vendor. Mr. Rolph would have never asked Mr. Kicksee to sign it. [ 48 ] Mr.

Rolph had a number of concerns in relation to the Bill of Sale: (1) the interest rate was unclear and problematic; (2) the Machine was being bought in an “ as is/where is ” condition;

(3) The Bill of Sale seemed to eliminate some rights that a purchaser has under the Sale of Goods Act ;

(4) The turnaround time on the sale was too short. October 20 th was a Thursday and the deal was to close only 2 days later on a Saturday; [ 49 ] Mr. Rolph did not raise any of these issues or concerns with Mr. Kicksee. He did not discuss the condition of the Machine with Mr. Kicksee. [ 50 ] In his e-mail to Mr. Kicksee he did not tell Mr. Kicksee to get back to him or what to do. [ 51 ] Mr. Rolph did not speak with Mr. Berube. He would have never said “ this deal is a go ” because he would not have had an opportunity to speak to Mr. Golosky by October 20th. Mr. Golosky needed to review the deal. [ 52 ] Mr.

Rolph did not give Mr. Kicksee approval to sign the Bill of Sale. If he had wanted to do that, he would have put it in the e-mail. [ 53 ] Mr. Rolph was also concerned that the Machine was in a disassembled state. He did not know if all the parts were there. No one had looked at the Machine, or inspected it to determine its condition. [ 54 ] On October 25 th Mr. Rolph spoke to Mr. Golosky who told him that the deal could not go ahead as no one had seen this Machine and the machine was apparently in a state of disassembly. Mr. Golosky was not sure if it was worth $95,000.00. He told Mr.

Rolph that he needed to do more due diligence. He instructed him to speak to Mr. Berube and to tell him they would consider purchasing it if they could inspect it. [ 55 ] Mr. Rolph spoke to Mr. Kicksee and told him that they would not be proceeding with the deal. At that time Mr. Kicksee said he had already signed the Bill of Sale and sent it back. Mr. Rolph was concerned as he believed that Mr. Kicksee had overstepped his authority. [ 56 ] On October 25 th , because he felt frustrated with Mr. Kicksee, he sent him a Capital Budget Form to fill out. In his e-mail to Mr.

Kicksee he wrote “ from this time forward ” Mr. Kicksee would have to complete a Capital Budget Form before acquiring any capital assets. [ 57 ] Some time after October 25 th he contacted Mr. Berube and told him that Mr. Kicksee had no authority to sign the Bill of Sale. He told Mr. Berube he was free to pursue any deals with other purchasers, and if they wanted a deal with the Defendant, they would have to go back to square one and hammer out more reasonable terms. [ 58 ] Mr. Rolph testified that the Defendant could afford to buy this Machine and that the price was not a problem.

A new one cost in the range of $300,000.00 to $350,000.00 and so $95,000.00 did not appear unreasonable. [ 59 ] On November 15, 2005 the Defendant received a Demand Letter from the Plaintiff ’ s lawyers. Mr. Golosky and Mr. Rolph decided that Mr. Kicksee had done damage to the Company and that his employment had to be terminated as he had overstepped his authority. He was not present when Mr. Kicksee was fired. There are no letters or other documentation criticizing Mr. Kicksee for exceeding his authority. [ 60 ] Mr. Golosky testified. He was the owner of the Defendant Company at the relevant time.

He has lived in Ft. McMurray all his life. He started his career as a welder and then went into business and over the years built a Group of Companies, which he has now sold. The Defendant Company was one of those Companies. Mr. Terry Rolph was the CFO. Mr. Kicksee was a Manager from 2003 to 2005.

[ 61 ] For capital asset acquisitions, all Managers were required to follow certain procedures. The Managers sourced the equipment, brought the information back, discussed it with him and Mr. Rolph. Mr. Rolph did the financial analysis on any proposed purchases and would then give the go-ahead to sign off on any purchase. Managers had no authority to sign contracts. Mr. Kicksee could negotiate a deal but needed to contact Mr. Rolph for the due diligence. [ 62 ] Mr. Golosky recalled that they needed a boring mill and he told Mr. Kicksee to shop around and find one and to send the information to Mr. Rolph.

He told Mr. Kicksee if everything is favourable, Mr. Rolph will approve it. [ 63 ] He does not remember the conversations with Mr. Kicksee. He does remember the Machine was to cost about $100,000.00. He does not remember if he was told the Machine was not assembled. He told Mr. Kicksee to arrange with Mr. Rolph to check the Bill of Sale. Mr. Rolph needed to carry out the due diligence before they could go ahead. [ 64 ] Later Mr. Rolph contacted him and Mr. Golosky decided not to go ahead with the purchase. He did not think it was a good deal and so he killed the deal. [ 65 ] Mr.

Golosky was not impressed when he found out later that the Bill of Sale had been signed by Mr. Kicksee. He had no authority to sign the Bill of Sale. [ 66 ] Mr. Golosky was surprised and unhappy when he received the Demand Letter from the Plaintiff ’ s lawyer because he had not agreed to buy the Machine. He met with Mr. Kicksee. He does not remember the exact words he used, but he gave Mr. Kicksee the option to resign or be fired. [ 67 ] The next witness was Mr. Smith. He is a part owner of a Company in Edmonton that sells and services machine tools.

At trial he was qualified as an expert in the purchase, supply and inspection of machine tools. Machine tools include boring mills. [ 68 ] He has a partsman journeyman ticket. He has inspected thousands of boring mills as they are common machines in the industry. In February of 2007 he went to the Plaintiff ’ s yard to inspect the Machine.

He thought it was odd that the Machine was stored outside as he assumed it would be assembled in a building. [ 69 ] The storage method seemed haphazard since it was disassembled he would have expected it to be stored and documented in a more organised way. [ 70 ] He carried out a visual inspection but did not test the Machine. The Machine looked pretty good and not too banged up. There were some cosmetic issues, but nothing critical to the operation of the Machine. For example, he noticed surface rust on some of the equipment, but that could be cleared off quite easily.

He was concerned that it was impossible to verify if the Machine was in working condition, or if all the parts of the Machine were present. [ 71 ] He was concerned about the measurement scales. They were sitting on top of the Machine with no protection. They are quite delicate. One does not need the scales to operate this Machine. [ 72 ] Storing equipment outside causes big problems as a result of moisture. Surfaces and bearings can rust. Moisture can also cause a problem for the electronics. [ 73 ] People do store equipment outside, but it reduces the value.

As a purchaser when he sees equipment sitting in a pile in a yard, he would not be interested.

[ 74 ] In his opinion, this Machine needed to be taken to the shop, powered up and tested. That would cost about $25,000.00 to $30,000.00 assuming all the parts were still there. If parts were missing the cost for reassembly could rise to between $50,000.00 and $80,000.00. [ 75 ] If the Machine was up and running, it would be worth about $75,000.00 to $100,000.00. However, in the state it was in, it would be a big gamble for any purchaser. It basically was just scrap iron with little or no value. V. Analysis

(1) Did Mr. Kicksee have actual or ostensible authority to sign the Bill of Sale on behalf of the Defendant? [ 76 ] The Plaintiff takes the position that Mr. Kicksee had actual authority to sign the Bill of Sale and therefore the Bill of Sale is binding on the Defendant. [ 77 ] The Defendant submits that Mr. Kicksee did not have any actual or ostensible authority and therefore the Bill of Sale is not binding. The Defendant submits that the Court has to take into account all of the surrounding circumstances to determine whether or not it was more likely or not that Mr.

Kicksee was given the actual authority to sign the Bill of Sale. Those surrounding circumstances include his job description, company policies and procedures and the evidence of the people involved in the approval process. [ 78 ] I conclude that Mr. Kicksee had actual authority to sign the Bill of Sale. The authority was given to him by Mr. Golosky the owner of the Defendant Company. He approved the purchase on the condition Mr. Rolph have an opportunity to review the proposed contract. Mr.

Rolph reviewed the contract, did not raise any concerns and confirmed that the Bill of Sale could be signed. [ 79 ] In coming to this conclusion I relied on the following:

(1) I believe Mr. Kicksee ’ s evidence. He impressed me as a very dedicated, responsible and knowledgeable employee who was committed to his employer. He was a very credible witness and gave his evidence in a straightforward and direct fashion. He had a clear recollection of the key events and conversations.

(2) Mr. Kicksee ’ s evidence is plausible. He had no reason to sign the Bill of Sale if he had not been given authority to do so. There was some suggestion by the Defendant that he signed it because he was enthusiastic and in a hurry to have this Machine in Ft. McMurray. While Mr. Kicksee had expressed a concern that the Machine was needed urgently in order to service a customer, I find it totally implausible that he would sign a Bill of Sale without permission, thereby putting himself and the Company at risk purely as a result of “ over enthusiasm ” . A much more plausible explanation is that after Mr.

Golosky had accepted that this Machine was needed, he encouraged Mr. Kicksee to go and find a machine and then he approved the purchase subject only Mr. Rolph reviewing the contract.

(3) Mr. Golosky ’ s memory of events is very weak. He basically did not remember any details of the conversations he had with Mr. Kicksee concerning the Machine, other than the price was about $100,000.00. Nor did he even recall the meeting where he supposedly fired Mr. Kicksee. Whenever there was a conflict between the evidence of Mr. Kicksee and Mr. Golosky, I prefer the evidence of Mr. Kicksee. I also find that Mr. Golosky ’ s evidence taken in its entirety is consistent with that of Mr. Kicksee. That is Mr. Golosky confirmed that a Machine was needed and he told Mr. Kicksee to go and find one.

Once he found that Machine, he then told Mr. Kicksee to run the contract by Mr. Rolph. At no time did Mr. Golosky tell Mr. Kicksee to not proceed with this purchase, nor did he suggest that Mr. Rolph had any other role than to check the paperwork and review the deal from a financial perspective.

(4) It was clear from the evidence that it was Mr. Golosky, not Mr. Rolph, who made the decisions in relation to capital acquisitions.

(4) It was clear from the evidence that it was Mr. Golosky, not Mr. Rolph, who made the decisions in relation to capital acquisitions. Mr. Rolph ’ s role was to review capital acquisitions from a financial perspective and make sure the paperwork was in order. From Mr. Kicksee ’ s experience this was the only role Mr. Rolph had carried out during previous capital purchases. Mr. Kicksee was responsible to check the condition of the Machine. He satisfied himself that the Machine was in satisfactory condition based on his conversation with the former owner of this Machine.

He had many years of experience in repairing these types of machines. His only concern was the condition of the electronics so he negotiated a hold back to cover any problems with those. Authority was given by Mr. Golosky to Mr. Kicksee to go ahead with the deal, subject only to Mr. Rolph reviewing it. Mr. Rolph reviewed it and did not raise any issues with Mr. Kicksee.

(5) Mr. Rolph ’ s memory of events is incomplete. I note in his examination for discovery he acknowledged he did not “ recall a lot of the details ” of the conversation with Mr. Kicksee on the 20 th of October during which Mr. Kicksee said he was told to sign the Bill of Sale and send it back. Where there was a conflict in the evidence between Mr. Rolph and Mr. Kicksee, I prefer the evidence of Mr. Kicksee as I found Mr. Rolph ’ s evidence was not plausible on several issues. For example, at trial Mr. Rolph described a number of concerns he had when he read the Bill of Sale.

These concerns related to the interest rate, the fact that the condition of the Machine was “ as is/where is ” , the turnaround time on the transaction (ie: two days ) and the fact that the purchaser was foregoing rights under the Sale of Goods Act . Surprisingly Mr. Rolph did not raise any of these concerns in his e-mail to Mr. Kicksee on October 20 th , or in any subsequent documentation. Most significantly he did not raise these concerns in his telephone conversation with Mr. Kicksee on October 20 th . Clearly this sale was being turned around quickly and one would have expected that if Mr.

Rolph had a concern about the closing date (on a Saturday just two days after Mr. Rolph first saw the Bill of Sale) he would have immediately raised that concern with Mr. Kicksee. His failure to do so, or to raise any of his other alleged concerns, greatly undermines his evidence and reinforces Mr. Kicksee ’ s evidence.

(6) In support of its position, the Defendant pointed to internal company policies and procedures relating to capital acquisitions. In particular, a purported requirement that a Capital Budget Form be filled out by a Manager before a capital acquisition could be approved. It is apparent from the evidence that this form was not a standard company policy used by the Defendant prior to October 20 th . Mr. Rolph testified that when he sent the Capital Budget Form to Mr. Kicksee on October 25 th (five days after the Bill of Sale had been signed by Mr. Kicksee) he advised Mr.

Kicksee “ from this time forward ” (emphasis added) he would have to complete a Capital Budget Form before acquiring any capital assets. [ 80 ] In

summary, I find that Mr. Kicksee had the authority to sign the Bill of Sale. As a result the Defendant entered into a binding contract to purchase the boring mill in accordance with the terms of the Bill of Sale.

(2) If there was a breach of contract by the Defendant what damages arise from that breach? [ 81 ] The Plaintiff submits that s. 49(2) of the Sale of Goods Act of Alberta applies. Section 49(2) states : “ Damages for non-acceptance

(2) The measure of damages shall be the estimated loss directly and naturally resulting in the ordinary course of events from the buyer ’ s breach of contract ” [ 82 ] The Defendant failed to pay the purchase price of $95,000.00, plus GST under the Bill of Sale. The Plaintiff claims damages amounting to this amount, less the amount of the net sale proceeds ($320) received from Ritchie Brothers. In addition, the Plaintiff seeks damages for storage fees of $16,638.50 arising from having to store the Machine from October 22, 2005 to September 7, 2007.

There is also a claim of $535.00 for the cost of replacing the tarps used to cover the Machine while in storage at the yard. [ 83 ] The Defendant submits that no damages have been proven as there is no reliable evidence that the Machine was operable, or was worth $95,000. Taking into account the uncertainty concerning the condition of the Machine and the evidence it was not saleable, the Defendant suggests that the Plaintiff would obtain a windfall if it obtained damages in the amount of $95,000.

[ 84 ] The Defendant ’ s arguments in relation to the value or condition of the Machine are irrelevant. This may have been an unwise or imprudent purchase by the Defendant, but the Defendant made a binding agreement to buy the Machine for $95,000.00, plus GST. This amount is the loss directly and naturally resulting from the Defendant ’ s breach of contract (subject to any set off or reduction for failure to mitigate). [ 85 ] In support of the claim for storage fees of $16,638.50, Mr.

Berube provided evidence that because the Machine was being stored in his yard he should be entitled to recover the amount that it would have charged to store equipment in his yard. For example, on occasion he charged $25.00 to $30.00 a day to store trucks in the yard. The Machine took up approximately the space of two trucks. He also testified that sometimes he charges no fees when he is storing a truck in his yard. [ 86 ] I am not satisfied that the Plaintiff has proven this claim for storage fees as the evidence was vague and unsubstantiated.

That claim is dismissed. [ 87 ] The claim for losses relating to the tarps was vague and unsubstantiated. That claim is also dismissed.

(3) Has the Plaintiff mitigated its damages? [ 88 ] The Defendant submits that the Plaintiff did not mitigate his losses. The onus is on the Defendant to prove a lack of mitigation, which the Defendant submits was achieved with Mr. Smith ’ s evidence. The onus then shifted to the Plaintiff to show what he has done in relation to mitigation. [ 89 ] The Defendant suggests that there was no evidence to back up the Plaintiff ’ s allegations that it actually took steps to mitigate.

No paperwork was provided showing advertisements or efforts to get this equipment into saleable shape. [ 90 ] The Defendant notes that their expert evidence showed that this equipment was kept in a very unattractive, non-saleable condition in the Plaintiff ’ s yard. By storing it outside, the Plaintiff had essentially resigned itself to obtaining scrap value only. The Defendant notes that the Plaintiff did not obtain expert advice to assist in selling the machine.

The Machine could have been moved into a shop, which would have improved the chances of selling it. [ 91 ] The Defendant suggests that a reasonable vendor would have done more than the Plaintiff. The fact that at the end of the day it only obtained $400 at Ritchie ’ s Auction proves that the Plaintiff ’ s actions were unreasonable. The Defendant submits that the decrease in value was caused totally by the Plaintiff ’ s inactions, not the Defendant ’ s actions. [ 92 ] The Plaintiff submits that it did what he could to sell the equipment. It advertised and used the trading magazines.

It submits this was an appropriate method to attempt to resell the Machine, considering it had been successful in selling the Machine previously using the same methods. [ 93 ] The Plaintiff submits it would have been not reasonable to spend up to $35,000.00 to get the Machine reassembled, with no buyers in sight. In any event, if it had done that, it would still have had to dismantle the Machine again at considerable expense to deliver it to a purchaser. [ 94 ] The Plaintiff also submits that selling the Machine through Ritchie ’ s Auction was a reasonable action. [ 95 ] In Proctor Crushing Inc. v.

Precision Surfacing Ltd. , 2004 ABQB 713 , Madam Justice Hughes summarized some of the applicable principles of mitigation. Starting at paragraph 110:

[110] The Courts have established guidelines to assist in determining whether a plaintiff ’ s efforts to mitigate were reasonable. In Costello at para. 42, the Alberta Court of Appeal, per Picard J.A., set out “ the essential rules governing the duty to mitigate ” , including: ... 3. The duty to mitigate does not invariably require action to be taken immediately upon breach. As the plaintiff need merely act reasonably in the circumstances, considerable delay may be permitted in some cases.... 4.

The plaintiff need not incur great expense or inconvenience in an attempt to stem the flow of losses resulting from the defendant ’ s breach.... 5. Nor need the plaintiff incur an unreasonable risk, or embark upon a speculative venture, in an attempt to mitigate her losses.... [ 96 ] The Defendant pointed to the evidence of Mr. Smith to support their position that the Plaintiff had not taken reasonable steps to mitigate. Mr.

Smith suggested that a Machine of this type was at best only worth between $75,000.00 to $100,000.00, but yet expected the Plaintiff to spend $25,000.00 to $35,000.00 to have it reassembled and put into what he considered to be a saleable condition. He also suggested that if parts were missing it could cost up to $75,000.00 to $80,000.00 to get it into saleable condition. He expected the Plaintiff to incur these costs with no firm sale in hand. [ 97 ] Mr. Smith also confirmed that after an assembled machine is sold, it would have to be taken apart and moved.

It is a reasonable assumption that taking it apart and moving it would result in substantial costs, some or all would be borne by the vendor thereby reducing the net sale proceeds. I found Mr. Smith ’ s evidence to be of little value. It was very speculative and impractical. [ 98 ] The Plaintiff had previously been successful in selling the Machine, despite it being in its yard for about two (2) years in a disassembled state. I note that the expert Mr. Smith acknowledged that some people do store things outside.

He also noted that the equipment looked “ pretty good ” and that other than cosmetic issues, he could see nothing wrong with the Machine. [ 99 ] Following the principles in Costello above, the Plaintiff was not required to take action immediately upon the breach, or incur a great expense and inconvenience to mitigate. [ 100 ] I find the Plaintiff ’ s actions of attempting to sell the machine using the same approach that had been previously successful was a reasonable first step in the mitigation process.

After about eighteen (18) months when that first step did not produce a sale, using Ritchie ’ s Auction was a reasonable second step. [ 101 ] Taking all the circumstances into account I find that the Plaintiff took reasonable steps to mitigate its losses and discharge its duty to mitigate.

(4) Is the Plaintiff entitled to solicitor/client costs and the interest amount specified in the Bill of Sale? [ 102 ] The Plaintiff also seeks solicitor/client costs and interest at eighteen (18) percent. These claims are based on paragraph 4 of the Bill of Sale which states as follows: “ The purchaser in the event of default indemnifies the vendor of all legal and court costs. Interest begins at 18 percent. ”

[ 103 ] As regards the claim for interest, I agree with the Defendant ’ s submissions that this clause is unenforceable for lack of certainty. It is vague and imprecise: when and how does this interest begin? Is it weekly, monthly, or yearly? [ 104 ] The same analysis applies to the claim for solicitor/client costs. The clause is imprecise and unenforceable. [ 105 ] As an alternative, the Plaintiff claims interest under the Judgement Interest Act, RSA 2000

Chapter J-1 and costs. VI.

Summary [ 106 ] I find there was an enforceable contract for the sale of the Machine. The Defendant breached the contract. [ 107 ] I award the Plaintiff the following:

(1) Damages in the amount of $94,680.00 plus GST;

(2) Interest under the Judgement Interest Act, RSA 2000

Chapter J-1 ; and

(3) Costs. [ 108 ] If the parties are unable to agree on costs they may speak to them with 90 days. Heard on the 27 th and 28 th days of June, 2012. Dated at the City of Edmonton, Alberta this 18 th day of July, 2012. J.J. Gill J.C.Q.B.A.

Appearances: Mr. Sean N. McAllister and (St. Arnaud McAllister & Bowie LLP) for the Plaintiff Mr. Geoffrey M. Hope and Ms. A. Danielle Bourgeois (Field LLP) for the Defendant

SCHEDULE A