Super Save Dispotal Inc. v. Makhija Holdings Inc. Date:, 2011 BCPC 249

Citation: Super Save Dispotal Inc. v. Makhija Holdings Inc. Date: 20110926 2011 BCPC 0249 File No: 1033163 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: SUPER SAVE DISPOSAL INC. CLAIMANT AND: MAKHIJA HOLDINGS INC. DEFENDANT REASONS FOR JUDGMENT OF HER WORSHIP KAREN F. NORDLINGER Counsel for the Claimant: James R. Kitsul Counsel for the Defendant: No one appeared Place of Hearing: Vancouver, B.C.

Date of Hearing: July 6, 2011 Date of Judgment: September 26, 2011 [ 1 ] The Claimant’s claim is for $813.09, including service charges, for services relating to a waste disposal bin at the Defendant’s business. The Claimant also claims liquidated damages in the amount of $60 per month for a 12 month period plus GST, for a total of $756 and judgment interest pursuant to the Court Order Interest Act from the date of the judgment, and, if granted, costs of $180. [ 2 ] The matter came before me on Wednesday, July 6, 2011 for the simplified trial of the matter. The Claimant was present and represented by counsel.

No one appeared for the Defendant and the matter proceeded as a default hearing. [ 3 ] At the conclusion of the Claimant’s evidence, I asked for submissions relating to His Worship Roberts’ case of B.F.I. Canada Inc. v. Persia Food Products Inc . 2010 BCPC 308 (CanLII) , 2010 BCPC 0308 dated December 2, 2010. Ultimately, written submissions were ordered and these reasons are a result of those written submissions. [ 4 ] The Claimant entered into a written service agreement with the Defendant for waste disposal services to be effective September 15, 2008.

The agreement was for a one-year term, and included automatic one-year renewals. The Defendant’s service had been suspended on August 24, 2009 for non-payment and the Defendant purported to cancel the service on or about August 31, 2009. [ 5 ] Pursuant to paragraph 3 of the agreement, the agreement automatically renewed at the end of each one-year term, but could be terminated by the customer by not less than 60 days’ written notice prior to the end of the one-year period.

It could also be terminated by the Claimant upon not less than 30 days’ prior written notice to the Defendant. [ 6 ] The Claimant accepted the Defendant’s repudiation of the agreement by its non-payment and its purported termination of the agreement, and removed its bin on September 29, 2009. The Claimant submits that there were 12 months remaining on the renewed term of the agreement. The monthly billing for waste services under the agreement was $60 per month plus applicable GST.

Pursuant to paragraph 11 of the agreement, the Claimant claims liquidated damages of $922.30 reflecting “the sum of the amount due to contractor

for the balance of the term remaining on this contract.” [ 7 ] In B.F.I. Canada Inc. v. Persia Food Products Inc . , His Worship Roberts found that a notice provision in an agreement similar to the one in the case before me, although not identical, was not reasonable. It allowed for a cancellation of the contract between a minimum of three months to a maximum of six months before the termination of the term. The term in that case was five years. His Worship Roberts found that notice requirement to be unreasonable, given the length of the term of the agreement of 60 months.

He went on to find that the liquidated damages arising from the failure to adhere to the notice period to be “a threat, something held over the other party in terrorem” (borrowing from Fridman, The Law of Contract, Fifth Edition, at 770). He went on to state: “The three months’ notice, this is, 90 days before the end of the specified current term, identifies the greatest loss that could possibly follow from a breach. In other words, the claimant operating a waste disposal business needs no more than three months’ notice in order to try and replace the customer.

A claim for damages based upon the multiple of the number of months remaining in a four or five year contract, where the right to terminate is confined to the end of such lengthy term is, again to borrow from Fridman, ‘extravagant and unconscionable in amount in comparison with the greatest loss that could possibly follow from the breach.’” [ 8 ] He dismissed the claim for liquidated damages on the basis that the claim was a penalty and therefore unenforceable. [ 9 ] Claimant’s counsel has referred me to a number of cases is his thorough submission, including 32262 B.C. Ltd. v.

Cryer Holdings Ltd. 1996 CarswellBC 1957 (B.C.S.C.) . In Cryer , in which a sign had been created and leased to the defendant’s business, Mr. Justice Errico, in paragraph 8, stated: “There is no issue that the sign itself is of little or no value to the plaintiff or anyone else. It was made to be unique to the defendant’s business.

If the plaintiff was claiming for damages without a claim for liquidated damages, it would be entitled to claim for the stream of income lost arising from the breach, plus any other damages that may have arisen from other covenants in the agreements less the value of what they had retaken.

In these circumstances, it cannot be said that the claim for liquidated damages pursuant to the contract, being the balance of these payments, is not a genuine pre-estimate of damage.” [ 10 ] The Claimant submits that the ratio of the Cryer decision is that a liquidated damages claim is meant to compensate for the stream of lost income over the balance of the term of the agreement, and that such compensation is a genuine pre-estimate of damage. [ 11 ] The Claimant also refers to 32262 B.C. Ltd. v. Companions Restaurant Inc. 1995 CanLII 354 (BC SC) , 1995 17 B.L.R. (2d) 227 (B.C.S.C.) .

Again, this was a sign case with a lengthy lease of 72 months. Chief Justice Esson rejected the defence that the liquidated damages amount to a penalty and stated: “It would be a practical impossibility to determine the actual costs related to any particular contract and it would be wrong in principle to do so. The loss to the Plaintiff is essentially the loss of the stream of income from the monthly lease payments and thus the damages were liquidated damages rather than a penalty.” [ 12 ] In Alwest Neon Signs Ltd. v.

Henze (1990) 1989 ABCA 304 (CanLII) , 105 A.R. 343 (Alta.C.A.) , Bracco, J.A. finds at paragraph 5 that: “The appellant does not dispute the unique nature of the signs and that they are of no value to the respondent. However, the appellant contends that the respondent should only be entitled to the cost of manufacturing the signs and a reasonable profit.

To follow that suggestion would have the effect of rewriting the contracts, which expressly set out the items taken into consideration in determining liquidated damages.” [ 13 ] Again, damages were found to be liquidated and not a penalty. [ 14 ] The difficulty I have with these cases is that they relate to signage which was unique to the customer/defendant. The Claimant would have no market for the sign, presumably, with other customers. That is not the case with waste disposal units. They are not particularly unique and, one would think, are a necessity of most businesses.

As His Worship Roberts pointed out, the length of notice provided for in the contract gives some indication of how quickly the claimant in this business could re-lease the storage bin. [ 15 ] In 32262 B.C. Ltd. v. See-Rite Optical Ltd. 1998 ABCA 89 (CanLII) , [1998] 9 W.W.R. 442 (Alta. C.A.) , Hunt, J.A. refers to the Langille v. Keneric Tractor Sales Ltd. (1988) 1987 CanLII 29 (SCC) , 43 D.L.R. (4 th ) 171 (S.C.C.) case, and at paragraph 16 points out the damages flowing from a chattel lease should be calculated in accordance with general contract principles, citing Langille v. Keneric Tractor Sales Ltd. .

The Supreme Court of Canada, in Langille , went on to find that: “The award should put the plaintiff in the position he would have been in had the defendant fully performed his contractual obligations. Less, perhaps, a discount because the remaining payments were being made earlier and a reduction to reflect back that the appellant would have no further costs associated with maintaining the sign once it was removed.” [ 16 ] Again, that was a sign case. [ 17 ] If the usual contract rules are to apply to the compensation by way of damages for breach of contract, mitigation is one of those rules.

It is not necessary to prove mitigation where a matter is governed by liquidated damages. However, in assessing whether or not the liquidated damages claim is bona fide or, instead, a penalty, in my view, the availability of mitigation is a factor to be considered. In the above-noted sign cases, the uniqueness of the sign and value to the customer was clearly a factor the courts considered in coming to the conclusion that the liquidated damages were appropriate. It would have been difficult for the Claimant to have mitigated the loss, given that circumstance.

That is not the case with the services of the disposal company before me. His Worship Roberts alluded to this factor when he found that the notice provision provided evidence of the amount of time a claimant would require to release the disposal unit. [ 18 ] In my view, liquidated damages based on payment for 12 months after termination on a 12 month contract in circumstances where the greatest notice is 60 days (30 days for the Claimant) may rise to the level of a threat to perform the contract.

[ 19 ] The Claimant has referred me, however, to Reasons for Judgment of the Honourable Judge Hicks in Super Save Disposal Inc. v. Rat Rod Kustoms Ltd. et al , March 30, 2010, wherein the same issue arose in four cases in which the claimant was Super Save Disposal. Those matters came on as default hearings and, at paragraphs 7 and 8 of that decision, the Court stated: “It is clear to me, based on the evidence that has been provided, that these clauses are an effort to identify what would otherwise be damages which would be difficult to define if called upon to establish them in each individual case.

I am satisfied that they are an attempt within reason, and certainly within reason in terms of the positions being taken by the claimant in each of these cases, to provide a reasonable pre-estimate of the damages, including specifically the loss of stream of income should an agreement be terminated. There is some distinction to be drawn between the provision of a service for the providing of a bin and the removal of debris, garbage and a situation in which a unique sign is provided and for which there is no other use.

But in these circumstances, in the absence of a defendant before the court to provide evidence as to why I should treat the situation differently, and bearing in mind what I have stated previously, that the obligation rests on the defendant to demonstrate that a provision is a penalty, I am satisfied in each of these cases that the claimant has established that these acceleration clauses attempt reasonably to pre-estimate these damages. They are not penalties, they are not so gross as to be beyond what would be a reasonable attempt to establish what would otherwise be difficult damages to calculate.

These are business contracts, all of the contracts are signed, there is nothing on the face of the contract that would lead me to conclude that the parties did not wish to enter into agreements which included these clauses.

In all the circumstances, I have concluded that they are enforceable.” [ 20 ] Unfortunately, with the length of the term of the contract or notice, the acceleration clauses in issue were set out in that decision and it is impossible to tell if the factual underpinnings are the same. [ 21 ] In the present case, the Defendant did not appear and was not present to make submissions with regard to whether or not the contract provisions for liquidated damages amount to a penalty.

While I have grave concern that a contract with a term of 12 months that imposes a 12 month liquidated damages provision in the event of a default may rise to the level of oppression, that would result in a finding of a penalty, having not heard from the Defendant. I am reluctant to make that finding. [ 22 ] I order the payment of $813.09 for past service and liquidated damages in the amount of $922.32 and interest in accordance with the Court Order Interest Act , plus $180 costs. _______________________ Karen F. Nordlinger, Q.C. Adjudicator