City Water v. A.B.C. Recycling Ltd. Date:, 2011 BCPC 57

Citation: City Water v. A.B.C. Recycling Ltd. Date: 20110215 2011 BCPC 0057 File No: 10-30622 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: CITY WATER INTERNATIONAL INC. CLAIMANT AND: A.B.C. RECYCLING LTD. DEFENDANT REASONS FOR JUDGMENT OF HIS WORSHIP DONALD YULE Counsel for the Claimant: M. Riddell Counsel for the Defendant: D. Sue-A-Quan Place of Hearing: Vancouver , B.C.

Date of Hearing: January 26, 2011 Date of Judgment: February 15, 2011 Introduction [ 1 ] The Claimant sues for the sum of $1,917.60 plus taxes alleged to be due as rental and service payments for the period January 1 to December 31, 2008 for the rental of four water filtration units plus an additional $1,200.00 for the return of the units at the end of the rental contract. (The original Notice of Claim sought $300.00 for return of the units but the claim was permitted to be amended at the hearing to correspond with the evidence given.) [ 2 ] The Defendant asserts that nothing is owed on multiple grounds.

It says that the units never operated satisfactorily from the outset and there was a fundamental breach of the rental contract; alternatively there was a total failure of consideration; alternatively it gave written notice of cancellation by letter dated November 4, 2003 which brought an end to any extension of the original agreement. Background Facts

[ 3 ] The Defendant signed a written rental agreement and separate written service agreement dated November 12, 2002 for the rent and servicing of four water filtration units supplied by the Claimant. The units were installed on or about October 23, 2002 (i.e. before the execution of the rental and service agreements). The significant terms of the rental and service agreements are:

a) The agreements are for a five year term;

b) The agreements are non-cancellable for any reason;

c) The required quarterly payments are $479.40 plus taxes;

d) Clause 8 of the rental agreement provided that it would be automatically renewed for successive terms of one year unless the customer notified City Water in writing at least six months prior to the expiration of the contract to the effect that the renewal would not be entered into;

e) Clause 9 of the rental agreement provided that if either party elected not to proceed with the renewal period then the customer must at its own risk and expense immediately return the equipment to City Water at such location as City Water shall designate;

f) Section 6 of the service agreement provided that the customer shall pay City Water a removal service charge of $300.00 (subject to consumer price index) for each unit of equipment removed by City Water on expiration or termination of the rental and service agreements. Evidence of the Defendant [ 4 ] Mr. Odenwald gave evidence for the Defendant. In

summary, he stated that the filtration systems were demonstrably unsuitable for drinking within a week or two of the installation. This was evident by the colour of the water. The water lines for the system ran across his 10 acre site. The units were disconnected shortly after installation. City Water was promptly told that the units were unsuitable, that they had been disconnected, and City Water was requested to remove them many times. Very shortly after installation the Defendant received a notice from the CIT Group advising that the rental payments under the agreements had been assigned to CIT by City Water.

The Defendant made one or two payments under the rental agreement and then ceased to make further payments. The Defendant never had the water tested and never asked for City Water to try to correct the problem. The operations manager, Ron Ramsey principally dealt with the issue. In the result, the Defendant made no payments under the rental agreement for almost all of the five year term. For almost all of the five year term the units were not in use but remained on the Defendant’s premises awaiting removal. Although he had limited personal involvement in the matter, Mr.

Odenwald believes that City Water were unresponsive to the Defendant’s requests for removal of the units as unsatisfactory. [ 5 ] Because the Defendant was not making rental payments to CIT, CIT ultimately put their claim in the hands of a collection agency. It is not clear when the collection agency was first involved, but I conclude that it was probably around November 2003. At that time Mr.

Odenwald says that he sought legal advice and based on that advice he sent a letter dated November 4, 2003 to City Water advising that the units were totally inadequate and that the Defendant was treating the agreements as at an end. In November 2003 CIT sent demand letters to the Defendant claiming the entire amount due under the agreements. By letter dated November 13, 2003 to CIT, Mr. Odenwald requested that the units be removed from his premises.

Between November 2003 and the expiration of the rental and service agreements, service technicians from City Water periodically attended the Defendant’s premises but were reportedly told that the units did not require servicing because they had been disconnected and the Defendant wished City Water to remove them. Finally, in 2009, City Water took steps to collect the amounts now claimed in this action. The units were removed from the Defendant’s premises by City Water on June 8, 2009.

Evidence of the Claimant [ 6 ] The Claimant’s evidence is in the form of a customer log, service orders, and the viva voce evidence of two employees, Mr. Lopez and Mr. Rosales. The customer log is intended to record all communications with the customer. There are several relevant notes. On November 27, 2003 the customer is reported as refusing to pay CIT but City Water is waiting for the reason for the refusal. The next note, after a four year gap, is October 25, 2007 in which a City Water employee having attended the site reports no City Water equipment on site.

On January 8, 2008 the customer is reported as not happy with City Water and wanting to cancel. On September 15, 2008 there is a note that a cancellation letter dated August 27, 2008 letter has been received. On September 19, 2008 there is a note that the units were never installed and had been sitting in storage for the last three years. A note dated October 3, 2008 final bills the account for four “ lost ” units. In June 2009 the units are again reported to be available for pick up, and as noted City Water did retrieve the units on June 8, 2009. [ 7 ] City Water service records record the following:

a) On April 30, 2003 a technician serviced three of the four units, noting that one unit was completely shut off;

b) On April 1, 2005 a technician reports that the Defendant does not have the Plaintiff’s coolers;

c) On September 27, 2005 a technician reports no coolers on site and invited contact with Mr. Ramsey;

d) On July 5, 2006 a technician reports “these people have not had our coolers for over two years”;

e) On October 19, 2007 a technician notes that after talking to three people for more than 25 minutes, no one knew anything about City Water’s coolers and there was no equipment in location;

f) On December 4, 2008 a technician reported that the customer got rid of City Water equipment four years ago and again invited contact with Mr. Ramsey;

g) On June 8, 2009 Mr. Lopez attended and removed the filtration units. Mr. Lopez was the service technician who attended in October 2007 and December 2008. He verified the comments on his service order. Mr. Rosales gave evidence that CIT always advises City Water if a customer refuses to make payment. Although there was no documentation evidencing this communication in this case, Mr. Rosales was pretty sure that CIT would have told City Water about the situation at the Defendant’s premises. Because the Defendant did not make rental payments there was some refund agreed upon as between CIT and City Water.

Because City Water’s contracts are for five year terms, its customers want brand new equipment and City Water is not able to reuse old repossessed units. Discussion and Analysis [ 8 ] The claim for rent payments in 2008 arises in the first renewal period of the agreement. The question then is whether the agreement was automatically renewed. That question depends upon whether the letter dated November 4, 2003 was received by City Water. Counsel for City Water agreed that if that letter had been received, it was adequate notice to prevent renewal of the agreement.

Thus the question is whether on a balance of probabilities the letter was sent and received. I accept Mr. Odenwald’s evidence that the letter was sent. It is consistent with his having obtained legal advice around November 2003 and is also consistent with the evidence that CIT was pressing for payments. It is also consistent with City Water’s own log note in November 2003 of an oral communication that the customer was refusing to pay. [ 9 ] City Water argues that Mr.

Odenwald’s evidence was vague and general, contradicted by some of City Water’s records, and that accordingly City Water’s evidence should be preferred. I do accept that City Water’s employees attended at the Defendant’s premises and were told what they have recorded on the service orders. They were therefore given incorrect information by the Defendant’s staff, including by Mr. Ramsey if he was personally involved. Nevertheless the facts are that the Defendant never made any rent payments for almost all of the original five year term. CIT was aware of the non-payment of rent by the summer 2003.

The November 4, 2003 letter is correctly addressed to the address of City Water shown on the rental agreement. There is no evidence that the letter was returned to the Defendant as undeliverable. Mr. Rosales’ evidence was that CIT would communicate with City Water if a customer was refusing to make rent payments because of dissatisfaction with the equipment. This makes commonsense. Mr. Rosales was surprised that there was no correspondence between CIT and City Water.

That raises the prospect that there was other documentation with respect to this customer that has gone missing, is no longer available, and in any event has not been produced. Thus the absence of the November 4, 2003 letter in City Water’s current file is, in the circumstances, not particularly compelling evidence. I find that Mr. Odenwald was testifying as to his honest belief and inaccuracies in his evidence I attribute to his not being the person at the Defendant who is primarily involved in these matters and to the passage of time.

I nevertheless conclude that the November 4, 2003 letter was on a balance of probabilities sent and received, that

section 8 of the rental agreement was complied with such that there was no automatic renewal of the agreement. This disposes of the claim for rental payments. [ 10 ] As noted, I find the City Water service records to be accurate. This means that, contrary to Mr. Odenwald’s evidence, three of the four filtration units were still hooked up and operating in April 2003 when they were serviced by a City Water technician. I thus conclude that Mr. Odenwald is incorrect in his recollection of how immediately after the installation the units were found to be unsatisfactory and disconnected.

In these circumstances I am not satisfied that the Defendant has established a fundamental breach or total failure of consideration by City Water. [ 11 ] I find that the claim of $1,200.00 for removal service charges is proven.

Section 6 of the service agreement provides for such a per unit charge on expiration or termination of the agreements. The service agreement in

section 8 also provides that the equipment is valued at $3,000 per unit. Based on the evidence, these units had barely been used at all. They presumably had a value to City Water which ultimately went to the trouble of retrieving them.

Section 6 stipulates a flat charge of $300.00 per unit and accordingly the Claimant’s claim is allowed at $1,200.00. [ 12 ] Although the Claimant has succeeded in recovering a judgment, until the amendment was granted at the end of the hearing the claim for the removal service fee was a minor part of the claim. There has been some success by both parties. In the circumstances there will be no costs to either party. _________________________ Donald W. Yule, Q.C. Justice of the Peace