Hoban Construction Ltd. v. SMS Equipment Ltd., 2018 BCPC 261

Citation: Hoban Construction Ltd. v. SMS Equipment Ltd. 2018 BCPC 261 Date: 20180524 File No: 17-1646 Registry: Williams Lake IN THE PROVINCIAL COURT OF BRITISH COLUMBIA SMALL CLAIMS BETWEEN: HOBAN CONSTRUCTION LTD. CLAIMANT AND: SMS EQUIPMENT INC. DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE P. D. WHYTE Appearing for the Claimant: Mr. W. Hoban Counsel for the Defendant: Mr. Currie-Roberts Place of Hearing: Williams Lake , B.C. Date of Hearing: March 29, 2018 Date of Judgment: May 24, 2018 [ 1 ] This is an application to dismiss a claim in advance of trial. It is, in essence, an application for

summary judgment. The applicant is SMS Equipment Inc . (“ SMS ”), the defendant in small claims action WIL-PC-171646. The respondent is Hoban Construction

Ltd. (“ HCL ”), the claimant in the small claims action. [ 2 ] HCL claims that, on or about August 31, 2015, it purchased a ripper shank for $18,498.51 from SMS. I understand a ripper shank to be a bull dozer attachment that is typically used to break up hard soil or for furrowing cultivated soil. Although the agreement was reached with SMS’s Kamloops location, the ripper shank was provided by SMS’s Williams Lake branch, which explains why the litigation was initiated in this jurisdiction. [ 3 ] Three days after purchase, the ripper shank broke.

HCL claims the ripper shank had a hairline fracture, and therefore was defective. SMS takes the position that the ripper shank was misused, and was not covered by warranty. HCL’s claim is for the replacement cost of the ripper shank, costs associated with the delivery of the equipment, and lost production and machine downtime costs. The total amount of the claim is $34,998.51. [ 4 ] SMS submits that HCL has no standing to bring its claim, because the ripper shank was not sold to HCL. Rather, it was sold to Hoban Equipment Ltd . (“HEL”), an entirely different corporate entity.

SMS has a consent judgment in the amount of $145,936.32 against HEL which remains outstanding; it submits that the claim by HCL is an attempt to circumvent the judgment and collect on behalf of HEL. [ 5 ] These matters were canvassed at a settlement conference on February 5, 2018.

During the Settlement Conference, SMS tendered the instant application to have HCL’s claim dismissed as being without reasonable grounds, pursuant to Small Claims Rule 7(14)(i). [ 6 ] The settlement conference judge adjourned the matter for a one hour hearing to determine the disposition of SMS’s application for dismissal pursuant to Rule 7(14)(i)(i), that it is without reasonable grounds. SMS furnished an alternative to its position on the date of the application: HCL’s claim is an abuse of process pursuant to Rule 7(14)(i)(iii).

In either case, it is submitted that the claim ought to be dismissed. [ 7 ] SMS was represented at this application by their counsel, Mr. Currie-Roberts. Mr. William Hoban, a director of HCL, appeared for the respondent. [ 8 ] SMS tendered two affidavits in support of its application: the affidavit of Margaret Armani, credit manager, dated January 9, 2018; and the affidavit of Jennifer Serion, legal administrative assistant, dated February 19, 2018.

Each affidavit had several exhibits that described the circumstances surrounding this dispute. [ 9 ] The court heard submissions by both counsel for the applicant, and the respondent company. The following is my decision regarding SMS’s application to dismiss the claim. FACTS [ 10 ] The parties agree that on or about August 31, 2015, a ripper shank was purchased from SMS for $18,498.51. A Parts Invoice, found at Exhibit “B” of the affidavit of Ms. Armani, shows a shank listed for a price of $16,516.52. The total purchase price, inclusive of GST and PST, was $18,498.51.

According to the Parts Invoice, the shank purchase was billed to HEL, with an address of 2501 48 th Avenue, Vernon, B.C. [ 11 ] A July 5, 2012 Application for Credit, found at Exhibit “A” of the affidavit of Ms. Armani, shows HEL as the applicant. That document is signed by Penny Hoban, who identified herself as “CEO/SECRETARY” of HEL. ISSUES [ 12 ] The issue in this application is whether the ripper shank was sold to HCL, as the claimant submits, or to HEL, as the defendant submits. [ 13 ] This matter was not heard strictly within the confines of a settlement conference.

Rather, the settlement conference judge determined the appropriate forum for the application was before the court. [ 14 ] Rule 7(14)(

i) of the Small Claims Rules provides that: (14) at a settlement conference, a judge may do one or more of the following: (

i) dismiss a claim, counterclaim, reply or third party notice if, after discussion with the parties and reviewing the filed documents, a judge determines that it (

i) is without reasonable grounds, (ii) discloses no triable issue, or (iii) is frivolous or an abuse of the court’s process [ 15 ] In Lura v. Jazz Forest Products

(2004) Ltd. , 2014 BCPC 14 , Skilnick, J. canvassed the availability of a

summary judgment in the provincial court. In particular, at paragraph 8, the court stated: [8] The Small Claims Rules do not contain a provision allowing an application for

summary judgement on written materials, similar to that contained in Rule 18A of the Supreme Court Rules. In Barroetavena v. Schmidt [1994] B.C.J. No. 1593 , the late Chief Judge Stansfield of this court, (who was not yet Chief Judge at the time), held that Rule 16 (6) (

o) was not intended to be used to support an application for

summary judgement and that such applications should be brought before a settlement conference judge. He wrote:

The defendant really is bringing the equivalent of a Supreme Court Rule 18A

summary trial application…[I]t is in my view important that we discourage interlocutory proceedings other than at the Settlement Conference. Rule 16 exists for a purpose, and there are matters which of necessity must be addressed under that Rule, but in my respectful view Judges of this Court should interpret and apply Rule 16 ("applications") narrowly, and Rule 7 ("settlement conferences") broadly.

In that way counsel as well as lay litigants will recognize they can economically and efficiently pursue their interests in this forum through what has been referred to as the "one-stop shopping" process of the Settlement Conference, and we can preserve the "simple procedure"… [T]he equivalent of a Rule 18A application at the Settlement Conference may be possible since the October 1, 1993 amendment to Rule 7 which clarified the jurisdiction to make final decisions at the Settlement Conference and added a process for requiring Affidavits to be fled.

In the result I dismiss the defendant's application. [ 16 ] In my view, a broad

interpretation of this application as an extension of the settlement conference is appropriate. Both parties attended the settlement conference, and no objections were tendered to the application being heard. [ 17 ] I am satisfied that the application is appropriately brought under Rule 7(14)(i). It is, in my view, consistent with the “just, speedy, inexpensive and simple” resolution of disputes, described in

section 2 as the purpose of the Small Claims Act R.S.B.C. 1996, C. 430. [ 18 ] Having determined it has been appropriately tendered, I focus next upon the nature of application. The disposition appears to turn on a single issue: to whom did SMS sell the ripper shank? [ 19 ] SMS referenced the Parts Invoice and Application for Credit in support of their submission that HEL purchased the ripper shank.

As HCL was not a party to the sales agreement, it argued that HCL had no standing to bring a claim against SMS. [ 20 ] HCL submitted that the company name was filled out in error on the Parts Invoice and Credit Application. Instead of HEL, the documents should have referenced HCL. Mr. Hoban submitted that the ripper shank was purchased by HCL for a particular contract with the British Columbia Provincial government, a construction project involving improvements to the Highway No. 3 Corridor at Saturday Creek (the “Saturday Creek Project”). In support of his submission, Mr.

Hoban produced a June 19, 2014 letter addressed to HCL from Shad Siddeeq, Acting Manager, Financial Services and Provincial Contracts. The letter confirms that HCL’s bid for the Saturday Creek Project was accepted, and provides some details of the project. Mr. Hoban submitted that the letter was proof that the ripper shank was purchased

a) for a specific purpose; and

b) by HCL, not HEL. ANALYSIS [ 21 ] A particularly confusing aspect of this dispute is the striking similarity between Hoban Construction Ltd. and Hoban Equipment Ltd . [ 22 ] According to BC Company Summaries found at Exhibit “C” of the Affidavit of Jennifer Serion, HEL and HCL:

a) have the same registered and records offices; and

b) have identical directors (Clayton, Adam and Penny Hoban). [ 23 ] HEL was incorporated on December 20, 1966; HCL was incorporated on May 20, 1988. [ 24 ] SMS tendered, as part of their application, a copy of a May 30, 2017 Supreme Court of British Columbia Consent Judgment Order against HEL, in favour of SMS (the “Consent Judgment”).

The Consent Judgment, found at Exhibit “C” of the affidavit of Margaret Armani, is for $145,936.32, inclusive of interest. [ 25 ] The applicant submitted that, to the date of its application, HEL had paid none of this outstanding balance owed on the Consent Judgment. [ 26 ] It is submitted by SMS that HEL could not make a claim against SMS because of the outstanding judgment. The current claim by HCL is thus an attempt to do an “end run” around the Consent Judgment against HEL.

Such a tactic is, according to SMS, an abuse of the court’s process, and ought to result in a dismissal of the claim. [ 27 ] This argument has some traction. However, when combined with the fact that the sales and credit documents clearly stipulate that SMS sold the ripper to HEL, the argument is compelling. [ 28 ] It is difficult for this court to accept that a director of one company would allow another company, for which that person also serves as a director, to enter into a commercial agreement without

a) noticing the error; or

b) taking steps to immediately correct it.

Indeed, the respondent was unable to point to any communication between HEL and SMS that supported its contention that the Parts Invoice improperly reflected HEL as the purchaser of the ripper shank. [ 29 ] In my view, it is incumbent upon a director who has the authority to act for Company A to ensure that, by so doing, he or she is not binding Company B in error when entering into such an agreement. [ 30 ] However, the most significant evidence in support of the applicant’s position, in my view, comes from the Supreme Court Reply filed by HEL in response to SMS’s Notice of Civil Claim. [ 31 ] Following default of payment by HEL, SMS initiated a Notice of Civil Claim in the Supreme Court of British Columbia.

Claim no. VLS-S-S-167569, filed August 19, 2016, is found at Exhibit “A” of the affidavit of Jennifer Serion (the “Notice of Civil Claim”). SMS, as plaintiff in that action, claimed that it provided goods to HEL between July 2014 and January 2015 totaling $86,133.46, for which it received no payment.

[ 32 ] It is HEL’s Reply to the Notice of Civil Claim, filed September 20, 2016 (found at Exhibit “B” of the affidavit of Jennier Serion), that is of particular import for the current application. Aside from denying the substance of the claim, the Reply, at paragraph 4, reads as follows: 4. In further breach of the Agreement, the Plaintiff supplied the Defendant with parts that were defective including but not limited to a ripper shank which broke after nominal use . ( emphasis added ) [ 33 ] Neither party suggested more than one ripper shank was sold by SMS.

Rather, it is to whom it was sold that is in dispute. [ 34 ] The Reply appears to be a clear acknowledgment by HEL that it purchased the ripper shank, and not HCL. [ 35 ] Mr. Hoban was asked to explain how it was that HEL referenced the purchase of the ripper shank in the Reply, when his position was that HCL had purchased it. His response was that the Reply, much like the Credit Agreement and Sales Invoice, was drafted in error. [ 36 ] In support of his position, Mr. Hoban produced what was described as an internal financial document entitled “Vendor Invoices - Hoban Construction Ltd. (the “HCL Invoice”).

The top line of this document purports to show an August 31, 2015 purchase by HCL of an item for $18,498.51, with an attached invoice number of PQ2209996 . Mr. Hoban submitted this as proof that the item in question was the ripper shank sold by SMS. [ 37 ] I have concerns regarding this document, as follows: [ 38 ] Firstly, it is an internal document, not a document produced as part of the sale. [ 39 ] Secondly, it shows a date, at the bottom of the page, as January 23, 2018. This may well be the date upon which it was printed.

In the circumstances, I find it difficult to rely upon a document printed less than two weeks in advance of the settlement conference. [ 40 ] Thirdly, the invoice number for the item listed as costing $18,498.51 does not match the invoice number on the Parts Invoice. That latter document indicates the invoice number for the ripper shank sale was PSI/70556561 . [ 41 ] I ultimately reject the Vendor Invoices document as proof that HCL purchased the ripper shank from SMS.

DECISION [ 42 ] I am of the view that the evidence tendered in this application clearly shows that the ripper shank in question was purchased by HEL, not HCL. As such, HCL was not, and is not, a party to the agreement, and has no standing to bring the claim against SMS. [ 43 ] I conclude that the claim is without reasonable grounds, as described in Rule 7(14)(

i) of the Small Claims Rules , nor does it disclose a triable issue. HCL has no standing to bring the claim. Given my decision, it is unnecessary to determine whether HCL’s claim is an abuse of process.

SUMMARY [ 44 ] HCL’s claim against SMS is dismissed pursuant to Rule 7(14)(

i) of the Small Claims Rules . ______________________ P. D. Whyte Provincial Court Judge