Housewise v. Pine House Date:, 2014 BCPC 414

Citation: Housewise v. Pine House Date: 20140305 2014 BCPC 414 File No: 13-46188 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA Small Claims BETWEEN: HOUSEWISE CONSTRUCTION LTD. dba SEGAL DISPOSAL CLAIMANT AND: PINE HOUSE BAKERY (VICTORIA DRIVE) LTD. DEFENDANT REASONS FOR JUDGMENT OF HIS WORSHIP L.A. KAHN Appearing for the Claimant: Samuel Au Appearing for the Defendant: Stephen Ng

Place of Hearing: Vancouver, B.C. Date of Hearing: February 5, 2014 Date of Judgment: March 5, 2014 [1] This matter concerns a customer service agreement for waste removal services between the parties dated December 15, 2011. Samuel Au (“Mr. Au”), a representative of Housewise Construction Ltd. dba Segal Disposal (“Segal”), and Stephen Ng (“Mr. Ng”), theowner of Pine House Bakery (Victoria Drive) Ltd. (“Pine House”), signed a customer service agreement. [2] It is important to note that at the time, Mr.

Ng told Segal that Pine House had an existing contract with Northwest WasteSystems Inc. (“Northwest”) which did not expire until September 30, 2013. [3] On or about July 11, 2013, Mr. Ng signed a letter to Northwest, prepared by Mr. Au, to advise of the cancellation of the serviceagreement effective October 1, 2013. Also, the parties signed the customer service agreement, Mr. Ng also signed, on behalf of PineHouse, an attachment, the terms of which said the following: I am aware that my current vendor upon receipt of my cancellation letter will approach me.

I am also aware that there may be attemptsby my current vendor to breach my Agreement with Segal Disposal. Inducements may include the offer of a reduced monthly ratesubject to the approval of a new Agreement or an extension of the existing Agreement. I am aware of the right to re-negotiate clause (ifpresent) and have exercised my right under the current vendor’s agreement to cancel their services.

I have been informed that the serviceagreement I have signed with Segal Disposal will commence upon the expiry of my current hauler’s agreement. [4] After July 2013, Pine House renewed the contract with Northwest, which matched the Segal contract, or provided a lessexpensive rate. [5] Mr. Ng told the Court that he did not receive a copy of the documents that he signed with Segal, and only became aware ofthese documents when the Claimant’s Trial Statement was delivered to him by Mr. Au. During cross-examination, Mr. Au elicited fromMr.

Ng that he has owned Pine House for 5 years, and for 30 years previously, he had been in the automobile business. [6] Under cross-examination, Mr. Ng said that he did not remember the contents of the documents he had signed, except for thecost of waste removal in the customer service agreement. He said that the remainder of the documents were blank when he signedthem. Also, Mr.

Ng said that in his 30 years in the automobile business, it was commonplace, at least as I understood it, for partiesbuying and selling cars to sign documents in blank. [7] Pine House notified Segal on July 11, 2013 that they did not want service effective October 1, 2013.

Segal sent Pine House aletter dated August 1, 2013 to advise that Pine House could either honour their agreement with Segal or, if Pine House terminated theagreement with Segal, Segal requested 9 months rent as damages. [8] Having received no reply to Segal’s letter, Segal delivered the bins to Pine House early on October 1, 2013, but as no onewould accept the bins, the delivery was not completed and Segal did not leave the bins. Discussion [9] In my opinion, it is not a defence for Pine House to say it did not realize the importance of the obligation that had been createdby that contract.

Pine House knew, and presumably Northwest should have informed Pine House, about the jeopardy it may face if thecontract with Segal was terminated. [10] Segal did not accept the termination. However, Segal did not seek only liquidated damages in the amount claimed in their August 1, 2013 letter, but in addition, claimed the cost for the delivery of the bins on August 1st. [11] Mr. Au, on behalf of Segal, referred me to two cases. One is my decision dated December 7, 2012 in Northwest WasteSolutions Inc. v. Yue Rong Guan, 2012 BCPC 449 . I stated in paragraph 11, 18 and 19, as follows: [11] Mr.

Jachimowicz says that the Claimant is entitled to liquidated damages for the full 12 months of the contract. During hissubmissions, Mr. Jachimowicz said that Northwest had not delivered a bin. However, Guan advised me that Northwest delivered a binand took it away. As Mr. Jachimowicz was proceeding on the basis that no bin was delivered, I do not consider whether or not the binwas delivered has any importance to the amount of damages. [18] I draw a distinction between the Super Save Disposal Inc. v. Northwest Waste Solutions et al and the case at bar. In Super SaveDisposal Inc. v.

Northwest Waste Solutions et al, I found that Northwest Waste Solutions Inc. was seeking new business. There was anissue in that case whether or not there was an inducement to breach an existing contract between Craftsman Millwork & Design Ltd. andSuper Save Disposal Inc. In the case at bar, there was no inducement. Mr.

Guan was the impetus for the Northwest contract. [19] I have determined, as noted above, that the liquidated damages clause is a penalty, and not a genuine pre-estimate of damagesthat arose from the salesman’s time, the administration of the contract, any expense incurred by Northwest, and the expectation of profitfrom the rental of the bin as contemplated by the contract. However, taking into account the above factor, it is reasonable that theClaimant recover 4 months rent as damages. [12] In Housewise Construction Ltd. v.

Mordechai Cohen-Urieli et al, December 5, 2013, BCPC, my colleague, AdjudicatorNordlinger, referred to the Northwest Waste Solutions Inc. v. Yue Rong Guan and said, as follows:

[23] However, the facts in Northwest Waste Solutions Inc. v. Yue Rong Guan , dba Yuk Shan Farm & Housewives Construction Ltd., dba Segal Disposal , a decision of his Worship L.A. Kahn, is similar on its facts. Northwest solicited the business of the Defendant who had a contract with Segal Disposal. Northwest and the Defendant entered into a one-year term agreement. Segal Disposal received notice of termination from the Defendant and renegotiated the agreement with the Defendant. The Defendant then terminated the agreement with Northwest. His Worship L.A.

Kahn found that the Defendant “knew what he wanted, that is, reduced costs for the disposal services and shrewdly accomplished his goal.” Liquidated damages of four months were awarded. The contractual liquidated damages are not set out in the decision, but His Worship Kahn found that they were not a genuine pre-estimate of damage. [24] In this case, the Defendants raised the issue of misrepresentation by Mr. Au on behalf of the Claimant that he would terminate the BFI agreement without cost to the Defendants.

The Defendants, in their Trial Statement, allege that they relied on his representation and were induced to enter the contract thereby. [25] I have considered carefully the evidence of both parties and prefer the evidence of Mr. Au on behalf of the Claimant. His evidence, given in a straightforward manner, was supported by the wording of the written agreement under Special Instructions. The evidence far from satisfied me that there was any change to that wording after signing. Mr.

Cohen was unable to produce any contrary evidence. … [27] Of particular assistance was Housewise Construction Ltd. dba Segal Disposal v. Sun Sushi Restaurant Ltd. in which His Worship Yule referred to Super Save Disposal Inc. v. Blazin Auto Ltd. and Daily Sun Investment Co. Ltd., 2011 BCSC 1784 in which the principles to be relied upon in considering a liquidated damages claim are set out, as follows: 1. The inquiry must be a case-specific assessment; 2. The issue must be decided upon the terms of the contract and inherent circumstances of the particular contract; 3.

The characterization of the liquidated damages clause as such or as a penalty in the language of the contract is not conclusive; 4. Judicial interference with liquidated damages provisions will be justified if enforcement of the term results in payment of a sum which is extravagant and unconscionable in comparison with the greatest loss that could conceivably be proved to have followed from the breach; 5.

A liquidated damages provision is more likely to be enforced where the claim approximates the amount to which the Claimant would otherwise have been entitled according to the principles of general contract law; 6. The onus of establishing that a stipulated sum is a penalty rather than a genuine pre-estimate of damages that the parties have agreed in advance will be sustained in the event of a breach of the contract, rests on the party against whom the stipulated sum is claimed; and 7.

If the provision is found to constitute an unenforceable penalty, the plaintiff must prove its damages in the ordinary way and the defendant is entitled to advance the position that the plaintiff ought reasonably to have taken certain mitigating steps. [28] I accept, as did His Worship Yule, that disposal bin cases differ from commercial signage cases in that disposal bins are generic and would not attract the same type of difficulty in relation to mitigation as a custom-made sign.

I also accept the following factors as important from His Worship Yule’s decision: The length of the contract, the length of the term remaining on the contract when the breach occurs, whether the breach occurred during a renewal period automatically engaged by the customer’s failure to give the required notice of termination, and the precise terms of the liquidated damages clause are among the factors that a court may determine to take into account in deciding in a particular case whether the clause is a genuine pre-estimate of damages or a penalty.” (Quoting His Worship Roberts in BFI Canada Inc. v.

Persia Food Products Inc., 2010 BCPC 308 in the above paragraph). [29] In considering the factors relating to liquidated damages, I consider that the agreement in this case, a one-year term renewable for five-year terms. The notice period was not more than 120 days and not less than 90 days prior to any renewal date. The agreement was entered into at the instance of the Defendants, who approached the Claimant. I have found already that the Defendants knew or ought to have known of the term of the BFI agreement. Mr.

Cohen’s approach to the Claimant was to obtain a better rate, which he was able to do, both from the Claimant and ultimately from BFI. In the words of His Worship Kahn, “he knew what he wanted, that is reduced costs for the disposal services, and shrewdly accomplished his goal.” The Defendants have the onus of proving that the liquidated damages rise to the level of a penalty other than a genuine pre-estimate of damages. They have adduced no evidence with regard to this issue. I have no evidence before me as to what the genuine pre-estimate of damages would be.

Under general contract law, damages for breach of contract would be the lost income stream, here for the 12-month term. Here, the Claimant seeks less, nine months. The notice period pursuant to the agreement is 90 days. The Defendants have not satisfied me that the liquidated damages amount in the agreement of nine months in the circumstances of this case is extravagant and unconscionable in comparison with the greatest loss that could follow from the breach. I therefore allow the claim for the liquidated damages in the amount of $1,134.00. Credibility [ 13 ] I do not accept the evidence of Mr.

Ng where it differs with Mr. Au with respect to the completion of the documents. I accept Mr. Au’s evidence that the documents were completed. It is too convenient for Mr. Ng to say that he did not know anything about the terms of the contract, but yet acknowledged that his signature was on all the forms that were signed and completed. [ 14 ] As is alluded from the cases referred to above, the waste removal service companies seek to gain market share from each other. I find that Mr.

Ng, on behalf of the Defendant, entered into a contract with Segal to reduce its waste removal costs, and when Northwest matched or reduced the cost as compared to the Segal contract, Mr. Ng elected to renew with Northwest.

[ 15 ] I find the Defendant has breached the contract with Segal. Damages [ 16 ] I am not prepared to award Segal costs for the delivery of the bins. In my opinion, it was unnecessary to do so. Segal had received written notification from the Defendant that it was not going to honour the contract.

Therefore, there was no reason for the bins to be delivered for Segal to claim damages for breach of contract. [ 17 ] The issue, therefore, is whether or not Segal is entitled to liquidated damages in the sum of $2,031.75, which is 9 months as set out in Segal’s August 1, 2013 letter to Pine House. [ 18 ] In this case, I am persuaded that the claim for liquidated damages is not a penalty. I agree with the comments of my colleague, Adjudicator Nordlinger in the Housewise Construction Ltd. v. Mordechai Cohen-Urieli et al case. [ 19 ] I note that Mr.

Au did not explain the amount owing on the unpaid balance in line A of the Notice of Claim of $791.70; whereas in his Trial Statement, the portion of damages other than liquidated damages is specified at $493.50. Therefore, I am not prepared to award damages for this portion of the claim. [ 20 ] Accordingly, I award Segal the following: Liquidated damages $2,031.75 Company Search $30.00 Filing Fees $100.00 Services Fees $80.00 Total $2,241.75 [ 21 ] The Claimant is also entitled to pre-judgment interest from July 11, 2013 until March 5, 2014. __________________________ Lawrence A. Kahn